When it comes to addressing critical issues like homelessness, affordability, housing, and the environment, it is often the municipalities that bear the brunt of responsibility. The federal and provincial/territorial governments engage in debates on these matters, but it is the municipalities that face the practical challenges of finding solutions on the ground.
Unfortunately, the imbalance of resources and tools has left municipalities grappling with increased expectations and diminishing support from higher levels of government.
Municipalities are severely constrained in their ability to address these pressing issues.
Federal and provincial leaders continue to download more responsibilities onto them without providing adequate resources. Municipalities receive the smallest share of the economic pie, collecting only 8 to 10 cents of every household tax dollar paid. This disparity hampers their capacity to meet the needs of their communities effectively.
The limited revenue sources available to Canadian municipalities exacerbate the problem. Besides provincial and federal transfers, municipalities rely on residential and non-residential property taxes, development charges, and user fees. However, as municipal expenditure responsibilities have grown over the years, revenue growth has not kept pace. This imbalance puts a strain on municipalities and hampers their ability to provide essential services to their residents.
The rise of e-commerce has led to a decline in demand for retail spaces, affecting municipal revenue streams. This dynamic further highlights the need for modernized revenue tools that can capture the economic value generated in today's digital economy. Municipalities, unlike provinces and the federal government, are burdened with outdated revenue tools that do not align with the current economic landscape.
The issue of downloading became more apparent in the 1990s when municipalities faced increased responsibilities due to provincial transfers. Federal budget cuts during that period resulted in a higher reliance on property taxes as a source of revenue generation for municipalities. This heavy reliance on property taxes has created an imbalance and forced municipalities to focus on urban growth as a means of increasing their tax base.
On average, property taxes account for 45 percent of municipal revenues across Canada. This heavy reliance on property taxes places a disproportionate burden on homeowners and limits the ability of municipalities to diversify their revenue streams. Municipalities need alternative sources of revenue to alleviate the pressure on property taxpayers and to fund vital services effectively.
The recent Federation of Canadian Municipalities (FCM) Annual General Meeting in Toronto shed light on these issues. Scott Pearce, the new President of FCM, emphasized the need for a modernized fiscal framework for municipalities. The FCM passed the New Growth Framework for Municipalities, asserting the importance of linking municipal financial capacity to factors like population growth and economic growth. The FCM also called on the federal government to collaborate in the development of this framework, focusing on exploring new sources of municipal revenue.
Municipalities are the front line of government, serving as the closest level of governance to the lives of Canadians. They are the ones who address the immediate needs of communities. Federal and provincial governments may come and go, but municipalities require the respect and recognition of their higher-level counterparts. Municipalities deserve to be treated as equal partners, not second-class citizens.
It is time for all parties to come together, leaving aside partisan politics, and prioritize the well-being of municipalities. It is essential to provide equal footing and fair support to every corner of the country. Municipalities should not be pitted against each other for the sake of political gains. Instead, federal and provincial governments must engage in constructive dialogue and work collaboratively to empower municipalities with the necessary resources and tools to fulfill their responsibilities.
In the end, it is the citizens who suffer when municipalities are burdened with inadequate support. By investing in the success of municipalities and recognizing their crucial role, we can create thriving communities and build a stronger and more prosperous nation for all.
Written by Christopher Brown Host of the Cross Border Interviews