Monday, June 4, 2012

The State of Canada’s Cities and Communities 2012

Last weekend, the Federation of Canadian Municipalities hosted their 75th Annual Conference and local Langley politicians like Kim Richter were live tweeting at the conference. On Friday, the FCM released a report called "The State of Canada's City and Communities".

The FCM found that the downloading of services from the federal government to provincial governments and the downloading of services from provincial governments to local governments, hurt local governments the most.

"Federal government expenditures in constant dollars per capita have been declining, while their revenues have been increasing. Provincial/territorial government expenditures have been increasing at almost the same rate as their revenues. However, both federal and provincial government revenues fell in 2009. Municipal government expenditures have been increasing at a faster rate than their revenues over the past 20 years."

Selected Municipal Government Expenditures per Capita, Canada, 1988–2008, Constant (1988) Dollars
Federal, Provincial and Municipal Government Expenditures Per Capita, 1989–2009, In Constant (1988) Dollars

The FCM also found that local governments have been forced to pick up the ball on affordable housing, policing, and the environment which senior levels of government have neglected over the years. It is not surprising that affordable housing and protective services have become the fastest growing items in local government budgets which impacts the ability of local governments to provide traditional service like water, sewer, transportation, transit, and recreation services.

I've always been a big supporter of local government as I believe that it is best equipped to respond to the needs of citizens and is the most accountable level of government. I also believe that senior levels of government play an important role and after years of downloading services to local government, must provide funding and some broad policy objectives to local government. One the topic of funding, the report contains a section on property tax and why it shouldn't be the only source of taxation for the local government.

It is the lack of diversity in the local tax regime that is the issue. Only when governments have a diverse set of tax tools can all the positive performance criteria be brought into play. In other words, it is important to recognize the benefits that accrue from a diversity of tax tools and revenue levers. The singular and heavy reliance of Canada’s local governments on the property tax, coupled with the fiscal challenges they face—particularly infrastructure—constitute a powerful argument for employing a range of tax tools and revenue levers, allowing the disadvantages of the property tax to be offset by other tax sources.

A stable senior government funding program for local governments has been an issue for several decades though the FCM recognizes that the federal government has been returning tax revenue back to communities at a higher rate than in the past. The challenge is that many of these programs run out in the next few years and there appears to be no new plans on the horizon to continue to invest in communities. As more and more Canadian live in urban areas, it will be interesting to see if both provincial and federal governments will continue to pay attention to local funding challenges.

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