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Bulletin No. 25, March 2002
March, 2002 -
LOCAL SELF-GOVERNMENT BULLETIN - No. 25, March 2002
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
In this issue:
1) Senior governments financial winners in the Region of Waterloo
2) More on zoning as a constraint to global trade
3) The banks adopt the city cause
4) Property tax regimes as a cause of sprawl
5) Redesigning this website
6) Subscribe to the bulletin
1) Senior governments financial winners in the Region of Waterloo
A recently released study by Canada's Technology Triangle Inc., the public-private economic development corporation for the Region of Waterloo in Ontario, concludes that the flow of taxes from the region to the provincial and federal governments was $900 million larger in 1999 that the services provided by those governments. Randy Ellis, the CEO of CTT puts a positive spin on the study by stating, "This tax flow analysis shows how dynamic an economy we have in Canada's technology triangle and as an area how we are a positive contributor to the well being of Ontario and Canada."
The study concludes that the total taxes going out in 1999 were $2.8 billion while the total value of senior government services and transfers in, was $1.9 billion, leaving a difference of net outflow of $900 million. With a 1999 population of 425,000, that's a cost of more than $2000 per person per year living in the region. Given the vibrant economy in southern Ontario in recent years, it's likely the annual outflow now exceeds $1 billion a year.
The study is a model of its kind - clear and straightforward - making it easy to replicate in other parts of the country. Revenues from the senior governments include grants and payments to municipalities, hospitals, school boards, universities, social agencies and the conservation authority. The study includes an analysis of how figures are determined for taxes calculated and transfer under various federal and provincial programs are determined .
Kitchener mayor Carl Zehr says `The recent census data shows that 80 per cent of Canada's population lives in urban areas, and that means we have to pay more attention to our cities, and to the urban core. The federal government in particular needs to recognize that life is in the urban centres. A new financial formula is needed, leaving more of the revenue in cities. This is where delivery is happening. Future delivery is on the ground at the local level.'
Regional chair Ken Seiling says `This is not a case of whining. But if the senior governments want the engines of the economy to function well, they must invest. They have to be partners. They can't take all the time. This study is a reminder of that.'
A similar study was done several years ago for the City of Toronto for 1998, showing a net tax outflow of $4 billion per annum, with a similar per capita cost. The Toronto study is can be found in the Library tab of www.localselfgovt.org , as can the Waterloo study. The Waterloo study is in a more attractive and readable PDF format at the CTT website, http://www.techtriangle.com
2. More on zoning as a constraint to global trade
The `C-trade' meetings held in mid-March between the provincial government representatives and the federal trade officials discussed I the last Bulletin did not include discussions about a proposed term of the draft General Agreements on Trade in Services (GATS) that would treat zoning as a barrier to trade. But the Deputy Minister of the Ministry of Economic Development and Trade in Ontario, Barbara Miller, says that municipal concerns about this matter will be raised by the Ontario representatives at future meetings.
In a letter responding to a request on this matter, Ms Miller states, `With regard to municipal zoning regulations and bylaws, Ontario supports the right of municipalities to regulate in this area and does not support subjecting these types of measures to potential World Trade Organization discipline on domestic regulations.'
Federal trade officials, in a written reply, have indicated that the GATS negotiations will not be finalised until January 2005. Don Stephenson, Director General, Trade Policy Bureau II, with the Department of Foreign Affairs and International Trade, states that while Canadian municipalities do not use zoning for bylaws as disguised trade barriers, municipalities in other countries might very well do so. Yet that very argument can lead to the very regulation which would negatively affect Canadian municipalities.
Mr. Stephenson notes that a working group has been established with the Federation of Canadian Municipalities to pursue these and other international trade issues, and a written report is expected in early April.
3. The banks adopt the city cause
The financial problem of cities is now an issue with one of Canada's largest financial institutions. Charles Baillie, chairman and CEO of the Toronto Dominion Bank spoke in Ottawa on March 19, saying `Canadians used to take great pride in the fact that our cities were in significantly better shape than cities in the United States. If you have visited an American city lately you will know that is simply not valid any more. `There has been substantial public discussion about the deteriorating state of Canadian cities, and rightly so. As the new census confirmed last week, four of every five Canadians live in urban centres. Despite the fact that these centres attract job-generating business clusters and create much of the wealth in this country, they are shamefully under-funded. Their populations are growing faster than their revenue. Without urgent and substantial investment, the only outcome for every city will be a lower standard of living and a lower quality of life. `If our cities are to be the innovative communities that the federal innovation strategy documents seek,' he continued, `we're going to have to do more than tip asphalt into the potholes. Baillie said he had asked TD's economists to undertake a full study of Canada's cities identifying `tangible ways that all levels of government and the private sector can make our cities unmistakably world-class.' This study will be available in April. If the banks are on side, can governments be far behind?
A copy of Baillie's speech can be found at http://www.td.com , and press the Speeches tab.
4. Property tax regimes as a cause of urban sprawl
A new study for the C.D.Howe Institute by Enid Slack, a municipal financial consultant, has concluded that current property tax regimes encourage low density development, aka suburban sprawl. She argues that property taxes rarely match the services provided to these areas and that generally low density developments are taxed less than higher density developments. She states `high property taxes provide an incentive for less dense projects and low densities mean that the city is likely to expand in a way that is inefficient.' In short the property tax encourages undesirable sprawl.
Slack suggests that user fees, where properly applied, could alleviate the negative impact of property taxes, but that most municipalities are `more concerned about charging user fees to raise revenues than they are about setting prices that can result in the more efficient use of services or more efficient land use patterns.' She also notes most politicians recognize that a complicated fee structure often looks like another tax and so they shy away from it.
Slack reviews other kinds of property tax tools such as site value taxation, land-value capture taxation and tax increment financing districts. These tools are not much used in Canada - few municipalities have the legislative authority to use them - but are applied in some cities in the United States. She concludes with arguing as many have done, that municipalities need to receive a portion of gasoline taxes as has occurred in some cities in Western Canada and in Montreal.
The full study can be found at the C.D.Howe website, http://www.cdhowe.org
5. Redesigning this website
This is the last issue of the bulleting being published under this website. We hope by early April to move to a new website with contemporary colours and crisp design, and the capacity to file PDF files in the Library. Those currently receiving the bulletin will be transferred to the new site, and the old site will directly feed to the new.
6. Subscribe to this bulletin
The bulletin is sent, at no cost, to about 1200 individuals involved directly or indirectly in local government in Canada. The next bulletin will be available in April. We invite you to subscribe by going to the 'Bulletin' tab of the web site http://www.localselfgovt.org and following the instructions. More information about the sponsors of the bulletin, a library of relevant and useful documents, and an archives of past bulletins, can be found on our web site. We appreciate your comments, your feedback (to firstname.lastname@example.org ), and items of interest that you wish to share with us and others who visit the web site.