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Bulletin No. 14, March 2001
LOCAL SELF-GOVERNMENT BULLETIN – NO. 14, March 2001

The purpose of this bulletin is to focus debate on the need to increase
local self government in Canada and to help local communities achieve more
autonomy. The local self government web site is http://www.localselfgovt.org
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In this issue:
1. Amalgamation idea slammed again
2. Ottawa’s amalgamation boondoggle
3. Understanding city finances?
4. Subscribe to this bulletin
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1. Amalgamation idea slammed again

Writing for the C.D. Howe Institute, Robert L. Bish issues a powerful broadside against the forced amalgamation of local governments in his paper “Local Government Amalgamations – Discredited 19th Century Ideals Alive in the 21st Century.” Bish is Professor Emeritus, School of Public Administration and Department of Economics, and formerly Co-Director of the Local Government Institute, at the University of Victoria, British Columbia.

Bish takes a market approach to the functions and structures of local government, and his conclusions run contrary to virtually every statement made in support of the forced amalgamations. He states “single governing councils and large organizations are simply incompatible with the diverse range of issues that governments must deal with in urban areas” and “when there is a multiplicity of small municipalities in metropolitan areas, the costs of governments are lower not higher, and moreover the political system is more representative.”

He concludes that “size in itself is not the major determinant of per capita costs, and governments of different sizes can deliver services efficiently. It is simply not the case that big governments cost less because they can achieve economies of scale.”

He states, “It is no longer useful to think of the ideal local government as a large integrated bureaucracy supervised by full-time politicians and run by professional bureaucrats. Instead, a system of local government should be viewed as consisting of groups of citizens organized into cooperatives to provide services they prefer through a variety of production arrangements on a suitable geographic scale. The focus thus changes from single organizations to the incentives and relationships that prevail among multiple organizations.”

“Encouraging citizens to be reflective and to participate in policy debates is important to the health of a democratic society, and local governments need to be small enough to play a role in strengthening civil society in an age of globalization in other areas. Moreover, local governments represent a huge investment in social capital as well as a supplier of local services, and every effort should be made to retain them.”

Bish sees local government as a `producer’ responsible for delivering certain services and he says the important question is ensuring that the production is done in the most efficient manner possible. He concludes, as one might expect, that functions requiring large capital investments (such as water supply and solid waste disposal) can be better managed by large governmental units, but services that are labour intensive should be delivered by smaller government organizations. He believes that efficiency relates from a modest amount of rivalry and competition – something (as Jane Jacobs pointed out in criticism of the Toronto amalgamation) that can best occur between smaller structures of government, and can’t occur when there is only one structure.

He states, “local governments also require excess capacity and redundancy but this is usually reported as inefficiency. It is this kind of inefficiency that socialists and central planners hope to eliminate. Unfortunately, eliminating redundancy in a government organization also appears to eliminate its capacity to adapt to changing conditions.”

Bish looks at various ways of determining the scale at which local governments are most efficient but concludes that “no single size of organization is suitable for all [local services] even within a single function.” He notes that in terms of efficiency the most important variable “is not public versus private but whether or not the producing organizations produces in a competitive environment so that its management is stimulated to seek efficient production.” He states that size is not the primary determinant of costs and that “no government is the right size to produce everything itself.” He concludes “there is no reason to sacrifice the benefits of better citizen participation and representation that are a feature of small governments only to create a larger government that costs more and provides services that are less likely to meet local preferences.”

He spends considerable time in the paper dealing with issues of governance and how the structure serves citizens and consumers. He notes that “local government boundaries often help create a civil community for non governmental activities“ and that “the larger the government, the more likely well-organized groups with special interests will dominate public hearings.”

Bish’s paper is an important addition to the literature on amalgamations, although given the ideological approach recently exhibited toward local government structures in Nova Scotia, Ontario and Quebec, it is not clear that this kind of sophisticated arguments put forward by Bish would have had any useful influence on provincial decision makers in those centres.

The complete text of this paper is found in the library on this site or it can be obtained from the C.D. Howe Institute at www.cdhowe.org .

2. Ottawa’s amalgamation boondoggle

The Ottawa amalgamation is turning into a financial farce verging on slapstick humour. First, the estimated cost of amalgamating municipalities in Ottawa was $60 million. But now that the provincially appointed transition board is out of the way and the elected politicians have re-assumed control, the cost turns out to be $189 million. Of course, the instability of the estimate in Ottawa is not unusual: the same underestimate of real costs occurred in Halifax and in Toronto. With such significant costs, the promised savings will never materialize.

Second is the cost of staff severances authorized by the transition board – a whopping $102 million. Lists have been printed in the Ottawa newspapers of the handsome packages picked up by staff as they were bought out of their positions with the old Ottawa municipalities and, in many cases, quickly found new positions with other local governments. An estimated 90 staff received packages in the $200,000 range, including a number that are much more handsome.

And the latest news is about another expense of the transition board, which was chaired by Premier Mike Harris’ appointee, former Tory cabinet Minister Claude Bennett. The board spent $21 million on consultants. `A reckless spending spree,’ commented one councillor. `Outrageous’ remarked another.

The provincial government has agreed to cover slightly over half of the amalgamation expenditures authorized by its transition board. The rest are the responsibility of the hapless local taxpayers who were shut out of the amalgamation process.

3. Understanding city finances?

Some people have been lamenting the sad state of city finances for some time, but they have often seemed voices in the wilderness. Times may be changing.
Two national newspapers have recently tackled the subject of city finances. The Globe and Mail ran an editorial on March 3, 2001 titled `Will this be the year of the city?’ The editorial follows:

`Ottawa and the provinces know what is wrong with Canada's cities. The
question is, when will federal and provincial politicians do what is right?
Among those waiting for answers are Canada's big-city mayors. They gathered
in Ottawa last weekend to discuss ways to meet the pressing demand for
better public transportation, overdue infrastructure programs, more
affordable housing and new levers to control urban sprawl. Key to their
strategies is the long-promised support from senior levels of government
that, if put off much longer, will jeopardize economic growth and diminish
Canada's standard of living.

`The benefits that flow from helping cities are apparent in the United
States, where a massive renewal project is transforming the urban landscape.
Atlanta, Boston, Chicago, New York, San Francisco and Seattle (whose agenda
has been shaken by this week's devastating earthquake) have all benefited
from millions of dollars in federal and state funding that rewards "smart
growth," a planning philosophy that puts the brakes on urban sprawl and
gives new life to a city's inner core. Government support for public
transportation in each of these cities is part of a larger strategy that
rewards high-density development, which is more tax-efficient,
environmentally friendly and the harbinger of economic progress.

`In a globalized economy in which capital moves fast and freely, building
livable cities is not a frill. Businesses, large and small, locate in cities
where the quality of life makes it easy to attract the best talent.

`For too long, Ottawa and the provinces have paid scant attention to this
reality. The evidence is not hard to find. Roads and highways are crumbling
across Canada. Motorists are mired in gridlock. New capital and operating
funds for infrastructure and public transit are either inadequate or, as in
the case of the Toronto Transit Commission, non-existent.

`Ottawa has tended to excuse itself from long-term commitments by arguing
that, under the Constitution, cities are creatures of the provinces. In
doing so, the officials are playing down one of the federal government's
essential duties: to foster an economic environment across the country that
supports growth and prosperity. Provinces have not picked up where the
federal government has left off, and use the need to eliminate deficits and
reduce debt to explain their own inadequate response to cities that face
growing challenges in a changing economy.

`All this may begin to change. In the recent federal Speech from the Throne,
the Liberal government promised to "co-operate with provincial and municipal
partners to help improve public transit infrastructure." In Ontario, Mike
Harris's Conservative government has set its sights on urban sprawl and
announced plans to give tax breaks to developers who build on abandoned city
lands. It has also told mayors that supporting public transit is high on its
list of infrastructure priorities.

`Governments are beginning to come round to urban issues in Canada. What they must not do is simply offer cities ad hoc assistance. One-time special
funding does not encourage good planning. Canadians deserve better. There
should be clear and sustained funding for public transit and infrastructure
programs, tied to new powers that help urban centres battle sprawl.

`This year the Federation of Canadian Municipalities is 100 years old. For
the country's sake, may it have much to celebrate.’ Copyright 2000 | The Globe and Mail.

Two weeks later, on March 17, Saturday Night, published by The National Post, contained a long article by John Lorinc,` The Decline and Fall of the Great Canadian Cities’. The sub-head reads `Canadian cities are driving the economy, Why aren’t they reaping the benefits?’

After quoting the complaints of Toronto councillor Joe Pantalone, the article continues, `If you think this is just another Toronto politician whining about money, listen to the mayors of Canada’s seventeen largest cities, who travelled to Ottawa in late February to tell the federal government that local governments need a new deal. There's Calgary mayor Al Duerr, a farm boy and fiscal conservative who understands that his constituents have more in common with residents of other big cities like Halifax and Toronto than rural Albertans. For every dollar of tax collected within Calgary, he says, a scant eight cents goes to municipal operations. Nationally, the average is 10 percent, down from over 11 percent in 1993-94. Duerr's headaches include the influx of economic migrants who face housing shortages, as well as the Klein government's move to slash grants to roads, policing, and transit. He sees a huge disconnection between the provincial and federal decision-makers and the institutions that do the unglamorous, indispensable work of local government: "When you look at the quality of life, we deliver virtually everything other than health care and education," says Duerr. "It's a massive misappropriation of funds. The wrong people are managing the money." It's a decades-old debate that's reached a crisis point. The question is, are there any new ideas on how to fix what's ailing our cities? ‘

The full article is found at http://www.saturdaynight.ca . Go to the Archives tab and type `Canadian cities’ in the search tab.

Are these articles and editorials harbingers of change in the way provincial and federal politicians think about big cities? Or were these just slow news days?

4. Subscribe to this bulletin

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