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Local Government Bulletin No. 69, December 2006
 LOCAL GOVERNMENT BULLETIN No. 69, December 2006

The purpose of this bulletin since 1999 has been to focus debate on the need to increase local self-government in Canada and to help local communities achieve more autonomy. Our website is: http://www.localgovernment.ca .
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In this issue:
1. Municipal government in Canada – looking at the last decade
2. Thanks and farewell
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1. Municipal government in Canada – looking at the last decade

Two larger issues have occupied the municipal agenda over the last decade: the status and power of municipalities in respect to other levels of government; and municipal financing. These issues have received much public attention, often under monikers such as downloading, amalgamation and revenue sharing, and they have been addressed with regularly in the Bulletin. The website contains a search function of the Bulletins, which gives references to Bulletin numbers for the individual topics.

The following is a short summary of how these issues played out in the last decade.

A. Municipal Status and Power

A.1 Amalgamation
Provincial governments across the country have made it very clear that municipalities are organizations controlled by them and subject to their willful restructuring. Thus the Nova Scotia government created the megacity of Halifax in the mid-1990s almost out of the blue. In 1997 the Ontario government passed legislation to created the megacity in Toronto even though it was opposed by more than three quarters of the voters in a municipal referendum. That was followed in Ontario by the forced amalgamations of Ottawa, Sudbury, Hamilton, Victoria County and several other much smaller municipalities. The province of Quebec then amalgamated all of its major urban areas including Hull/Outaouais, Montreal and Quebec City.

In almost every case municipal leaders opposed these amalgamations with vigour, as did voters, but only in Montreal was there any turning back - a provincial election at a critical moment led to the promise that municipalities would be able to opt out of the merger in Montreal. Indeed voters in almost half the municipalities decided to remove themselves, although they regained only a small amount of the power they previously had.

The data on the impact of these forced amalgamations is clear. In virtually every study that has been done, the costs of amalgamation are more significant that costs would have been if amalgamation had not taken place. There is also deep unhappiness about amalgamations. No study has shown that people think they are better off with a megacity. Considerable anecdotal information shows that megacities limit access for communities, are much more prone to the activities of lobbyists (some claim it’s that the only way to get things done), and municipal services are substantially reduced. Most seem to the inefficient and dysfunctional. Nevertheless no provincial government has been willing to step forward to unravel these forced amalgamations or to try to rethink how local democracy might be re-established – even if it is in everyone’s interest to have stronger local government. One is left with the conclusion that provincial governments feel more secure if large municipalities are in a state of disarray.

A.2 The courts and the Constitution
Some held out a hope that the courts might come to the rescue of local governments. The most interesting opportunity came with the Alberta School Board case brought by the school boards in that province who were forcibly amalgamated in the mid-1990s. Their case argued that local governments had a sense of independence recognized both when they came into being and through their decades of existence. They said the section of the British North America Act which assigned municipal issues and local government to the provinces did not give to the provinces complete control over municipal governments, but only gave them (rather than the federal government) the ability to make legislation about local government – and that power did not include the power of unilateral disestablishment. They proposed that within the constitutional framework, provinces had to treat municipalities reasonably and with restraint, recognizing them as a separate level of government.

It was a fascinating argument that seemed to have history to support it. And while it received some support at the Alberta Court of Appeal the argument was rejected by the Supreme Court of Canada. Municipalities were left with the unfortunate court decision made in the late nineteenth century that said they were mere creatures of the provincial government. This decision was basically confirmed by an Ontario decision in a case challenging the Toronto amalgamation. There, the court ruled that while the province may have been guilty of `megachutzpah’, it was well within its right in restructuring Toronto against the will of the electorate.

The courts have been of no help for those who would ask that the municipal status be recognized as independent or that it be considered a level of government that has some rights to exist on its own.

A.3 New municipal legislation
A number of provinces introduced new municipal legislation that promised more powers to municipalities than the Act modeled on that introduced in Ontario in the early 1850s. Alberta led the way providing municipalities powers within defined “spheres of jurisdiction”, apparently expected to provide municipalities with more maneuverability. Other provinces quickly followed: Ontario, British Columbia, New Brunswick, Saskatchewan. But the new municipal legislation has made little substantive change. Municipalities still face a welter of provincial rules and regulations, and limited powers. Even the community charter proposals in British Columbia have not ushered in serious new ways of thinking about local government. The new Municipal Acts may have provided a minor updating, but not much more.

A.4 Pressure points for change
The Federation of Canadian Municipalities tried to grapple with these issues but it was no more successful than any one else. Canadian municipalities seem bedeviled by the fact that they are divided by provinces, and that since smaller municipalities are much more numerous than large ones, they control the organizations which might be capable of and interested in advancing the agenda of big cities and their need for more power to meet their responsibilities.

One attempt to get around these limitations was the creation of the C5 Group by Alan Broadbent and Jane Jacobs in 1999. This body brought together three interests from each of five of Canada’s largest cities: the Mayor; the local United Way; and the local Board of Trade. The cities were Vancouver, Calgary, Winnipeg, Toronto and Montreal. The organization offered much promise in its early years but it had to rely on the qualities of the mayors, who were the major actors. The impetus was generally subverted by several leading mayors and a lack of interest at the federal level. Within a year or two C5 lost its steam and disbanded.

B. Municipal Finances

B.1 Downloading
The gravest threat that municipalities across the country faced during the last decade was downloading. Federal treasurer Paul Martin decided in 1994 to download federal costs onto provinces, and the provinces followed several years later by downloading their costs onto municipalities. This move was intensified by the decisions of many provinces to attract voters by reducing taxes, which meant cutting back on programs. The downloading severely affected the health of municipalities as they slashed costs on both the capital and operating sides. Very quickly municipalities across the country found they were unable to maintain infrastructure in a state of good repair, and soft services such as recreation were also cut. Reports began to emerge that municipalities in Canada were not balancing their budgets as required by provincial law. Other reports documented the unmet costs of bringing infrastructure up to a good state of repair. Even though the federal government has managed to restore some of its transfers to provinces, downloading to municipalities has yet to be reversed.

B.2 Cities as generators of wealth
At the same time as municipalities experienced the impacts of downloading, attention was drawn to the extraordinary tax surpluses generated by senior governments in big cities. Large surpluses were documented in Toronto, Calgary and Kitchener, and similar results would most likely be found in other large cities. While cities might be impoverished, provincial and federal coffers were rolling in the very, very substantial sums generated from those cities - indeed the federal government showed an annual surplus in the billions of dollars for almost ten years. Senior governments put their financial houses in order on the backs of municipalities where the fabric was becoming more frayed every day.

B.3 Municipal access to new revenue
The natural reaction to this situation was for municipalities to ask for a share of the revenue available to senior governments. The province of Alberta was the first off the mark promising to municipalities a small share of gas tax revenue. Then, Paul Martin, as a leadership candidate for the Liberal Party, promised cities would receive new revenues, although very quickly his proposal was amended and extended to all communities throughout Canada. Cities would receive no special treatment even thought they did generate most of the revenue: they would receive a small share of the gas tax revenue like every other municipality. Some provinces agreed to participate in comparable revnue sharing arrangements.

But the sums transferred were small - in the order of $20 - $30 per capita per year. And as many people noted, the idea that one government should tax in order to turn that money over to another level of government was not sustainable. When the Stephen Harper government was elected in early 2006 it made clear it would not follow that strategy.

What municipalities needed was a new power to tax to generate the revenues they needed; but no mayor in Canada was interested in arguing for the power to levy new taxes. They preferred the tired idea of a share of tax revenue, even if it fell on deaf ears.

C. Conclusion
What has become clear in the last ten years is that economic activity in a handful of big cities in Canada has generated much of the wealth of the country, and that social and cultural policy has also been shaped in these cities. Maintaining the health of these places is critical to a healthy nation, and that requires public funds. However, this is not an argument which has had much sway at provincial or federal levels. Canada’s big cities have not been able to achieve reasonable powers of self government nor the power to levy the taxes needed to finance the kinds of programs they need to be healthy, sustainable, and innovative.

At the moment – the end of 2006 - it seems unclear how this situation might change given the political leadership in Canada’s biggest cities, which could be charitably called weak. However, situations do change. New challenges and opportunities emerge as do political leaders and while the outlook for large cities in Canada does not seem promising today, things will almost certainly change, hopefully for the better rather than for the worse.

2. Thanks and farewell

I have been writing and distributing the Local Government Bulletin for the past seven years. Bulletins have been issued almost monthly, although in the last 12 months I’ve found it harder to maintain interest as the opportunities for local government empowerment appear to have diminished. The Bulletin enjoys a wide readership – more than 1500 subscribers across the country - and every month, two or three dozen more people subscribe.

But for me it is time to move on. I don’t feel the moment for change is in the air, and at this point there is little I can add to the debate. It’s time for me to focus on other challenges. Thanks for your interest and support, and farewell.

The information in the Library and in the Bulletins on this site may be helpful to those who wish to continue to delve into or pursue these issues, so while new Bulletins and information will not be added, the site will continue as an archive for the foreseeable future. If needed, I can be reached in Toronto at j.sewell@on.aibn.com

John Sewell.

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