Canadian Municipalities Aren’t Working
Municipalities are the forgotten sibling of Canadian governance. Despite municipal governments having the most immediate effects on the majority of Canadians living in cities and towns voter turnout for municipal elections remains low across the country. Scholarship into municipal law and politics is much less abundant than provincial or federal research and the research that exists tends to be much less recent than research into federal and provincial governments (Smith & Spicer, 2018). Canadian municipalities are not just understudied, they have much less autonomy and freedom than most other OCED countries (Smith & Spicer, 2018). In fact, municipalities in Canada are uniquely ‘creatures of the provinces’ (Young & Tolley, 1991). This status as creatures of the provinces has created a situation where municipalities lack the tools to needed deal with the problems afflicting their populations, problems most often caused by higher levels of government, and the tools they do have access to are inefficient, unreliable, and often regressive (Mutter, 2019). Municipalities in Canada need increased autonomy and more tools if they are going to be expected to deal with the numerous modern problems they did not have to face beforehand.
Like most things in Canada, our tradition of municipal government descends from the British. The Constitution Act of 1867 defines Canada as a federal system with a division between the provincial and federal levels of government, it does not however recognize local municipalities as a separate form of government (Young & Tolley, 1991). Interestingly while British cities have increased their autonomy Canadian cities have not (Smith & Spicer, 2018). This is where the doctrine of municipalities as ‘creatures of the provinces’ comes from. Because of their near-total subordination to the provinces, municipalities have very few tools they can use to finance their existing projects and programs, and in many cases, very little money to fund any new programs without external help.
Municipalities in Canada are responsible for the services that directly affect property. This includes firefighting, policing, roads and transportation excluding highways, libraries, public parks, sometimes sewage, water services, and occasionally electricity and telephone services. These services are funded in three ways. The largest proportion of cities budgets come from property taxes making up 52% of municipal own-source revenue (Kennedy & McAllister, 2005), the next source of financing comes from provincial (and to a lesser extent federal) grants, and finally charging for services such as trash bag tags, and parking. Fees like water are regulated by the province and are supposed to be just enough to cover the cost meaning they produce very little revenue. These methods of financing can be incredibly inconsistent and in the case of property taxes riddled with flaws.
There are three major issues with how Canadian cities finance themselves one of the largest is that municipalities are expected to be run like businesses and because of this they are only able to run slight deficits decided by the province. Many municipalities are forced to ‘borrow’ from their own reserves though how much they can borrow is regulated and they are forced to pay it back to themselves at a market rate of interest. The logic behind Canadian municipalities being heavily regulated around deficits is to prevent provinces from having to bail out a municipality if they end up bankrupt. What happens though is a city that is shrinking or unable to raise enough funds to maintain critical infrastructure is presented with two options. Either the city can cut back on existing services or raise property taxes. By cutting back on existing services, often those that benefit the disadvantaged such as public transit, the city is forced to engage in austerity. Raising property taxes on the other hand is incredibly unpopular and is often one of the primary reasons a city council is not reelected (Kennedy & McAllister, 2005) Instead of being able to invest in infrastructure and run a deficit, cities (and the elected officials) have to choose between cutting services or raising property taxes and risk losing their councillor seat. Property taxes as a system are incredibly inefficient and backward by themselves.
Raising the value of property in order to increase tax revenue is a common strategy undertaken by municipalities in order to raise funds. The construction of bike lanes, parks and green spaces, and more utilities all lead to an increase in property values and subsequently an increase in property taxes owed (Stein, 2019), the issue though is often the areas with the lowest property taxes are those inhabited by the most disenfranchised, racialized and working-class people most commonly who often also tend to be renters (Moskowitz, 2017). When property values go up the potential rent landlords can extract goes up and in unregulated renting markets or under-regulated markets like Ontario, this can lead to the mass displacement of people who are now no longer able to afford the rent prices or who are bought out of their apartment so that the landlord can charge higher rents (Moskowitz, 2017; Stein, 2019). Attempts to increase the standard of living like new parks and to raise funds for projects and infrastructure become harbingers of doom for those who are already insecure in their housing (Stein, 2019). The other way municipalities receive money predominantly is from provincial and occasionally federal grants, a system that can lead to uncertainty and conflict emerging between the levels of government.
Money from the provinces and the federal government is used throughout Canada for a variety of projects and services including policing, fire services, infrastructure projects, and investments in social services. The issue is that often municipalities and the higher levels of government can have different policy goals in mind and funding can be inconsistent between different elected governments. Municipalities take all the money they can in order to fund services, but a city whose population wants the city to invest more heavily in conserving green spaces matched with a provincial government that wants to expand and invest in development is going to be at odds with each other and excluding extremely powerful cities like Toronto the province will almost always win out. Municipalities’ reliance on the provinces for funds means that often the municipalities have to fall in line with the province’s policy agenda whether they want to or not, and there is a lack of multi-year funding meaning long-term or expensive projects are neglected.
The lack of autonomy Canadian municipalities have and their lack of alternative financing strategies has created an under-discussed issue. Canadian municipalities are being expected to take a larger share of the burden as the housing crisis, drug crisis, and climate crisis affect municipalities more than ever but municipalities simply do not have the autonomy or tools, whether its alternate governing structures or alternative ways of raising money to deal with these crises and the lack of research and awareness has meant that these issues have been able to bubble under the surface for decades. It is time Canada has a national conversation about the role of municipalities, and what must be done to bring them into the twenty-first century.
