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Canada's cities all grown up

Author: Walter Robinson 2001/03/13
At last week's Ottawa Partnership (TOP) breakfast, Rod Bryden, TOP co-chair and President and CEO of World Heart Corporation, was "in the zone" or "on the money." He displayed a great command of Ottawa's money (and tax) generating potential and his message for the other two orders of government (the province and the feds) was, to keep with this monetary them, "show us the money."

During last winter's debate on the future of the NHL in Canada, it is no secret that Mr. Bryden and I fundamentally disagreed on whether this was a public policy or private business question. However, I was struck by his passion for the issue and the manner in which he skillfully articulated his points. These communications skills were on display once again last week at the TOP breakfast.

Aided by a simple, yet effective PowerPoint presentation, Mr. Bryden effortlessly and engagingly breezed through some 23 slides in as many minutes to provide a high-level overview of a TOP-commissioned KPMG study that conveys three simple messages.

First, Ottawa's growth is dynamic, nation leading and appropriately spread across seven competitive clusters or industry groupings. Second, this growth could implode upon itself if appropriate public and private infrastructure investments and long range capital planning is note seen as a priority. Finally, and most importantly, this need for infrastructure funding is immediate.

Thankfully, he eschewed the irrational whining and temper tantrum tactics currently en vogue at city hall. Instead, Mr. Bryden calmly and respectfully conveyed a compelling sense of urgency for infrastructure funding. And he noted that this sense of urgency is pushing up against a limited and perhaps closing window of opportunity.

The study shows that Ottawa's boom has resulted in an extra $747 million in various tax revenues for other levels of government while the City itself has netted a mere $77 or 9.3% of this revenue growth. However, when it comes to funding infrastructure to accommodate and sustain this growth, Ottawa is left holding the bag to build roads, schools, hospitals, libraries, arenas, etc.While the city should definitely pay its share and seek private sector counterparts in public-private deals, the higher orders of government must come to the table.

But how did we arrive at this tenuous juncture where Ottawa (not to mention most Canadian cities) are begging for cash to build needed infrastructure? History provides some clues.

In Baldwin's Upper Canada Act (1849), cities (or local authorities as they were then known) were relegated to such "monumental" tasks like regulating public drunkenness or controlling parades of poultry. This status was re-affirmed in the British North America Act of 1867.

But at the time of Confederation less than one in six Canadians lived in cities. Today - 134 years later - over 84% of us live in urban regions. And the economic output of Canada's five major cities (Toronto, Montreal, Vancouver, Ottawa and Calgary) accounts for a staggering 58% of our GDP. Toronto alone is estimated to drive some 45% of Ontario's GDP and a whopping 26% of Canada's GDP.

Municipal governments now consume/purchase over $40 billion annually in goods and services. Academic literature teems with studies pointing to the world's urban regions as the locus for the 21st century globalization of commerce, culture and social cohesion.

Yet, our cities are still seen in law and in the upper-tier (read: Parliament Hill and the provincial capitals) mindset as doormats to be stepped on or as guinea pigs to be amalgamated, divided, or played off against each other, depending on the prevailing ideology of senior governments or the public policy fad du jour.

Given these facts, Ottawa's infrastructure challenges are not unique. Indeed, Calgary and Toronto are also bursting at the seems with businesses poised to invest and move elsewhere if their growth needs cannot be accommodated.

So what needs to be done? In the short term, each city's needs must be assessed on a unique, case-by-case basis by upper tier governments as opposed to the tired old per capita figures and political patronage models that now exist.

Over the longer haul, the structure of municipal finance will have to change. According to Harry Kitchen from Trent University, the balance and mix of revenue sources has fundamentally shifted over the past decade. Between 1988 and 1998, grants from other levels of government from 23% of revenue to 15%, while property tax accounts for 57% where once it supplied 49%; user fees dropped from 20% to 21%; other sources went from 8% to 7%.

But the property tax base is insufficient over the long run to sustain infrastructure needs. New approaches are needed. As well, the priorities for city budgets and the structure of municipal finances (where and who they come from) must radically change. But my 800 words are up; we'll touch on these ideas for reform next week.

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Franco Terrazzano
Federal Director at
Canadian Taxpayers
Federation

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