Opinion: Municipalities looking for the next Paul Martin
As Canadian municipalities grapple with mounting financial challenges heading into the new year, they’re left wondering: Who will be the next Paul Martin? Who will rise to the occasion and address the growing disconnect between municipal funding realities and their critical responsibilities? The answer, unfortunately, remains elusive.
For over a year, the Federation of Canadian Municipalities (FCM) has been urging federal and provincial governments to sit down and negotiate a new fiscal framework for municipalities. Their message is clear: the current funding model is outdated, inadequate, and ill-suited to meet the 21st-century challenges municipalities face. The FCM argues that without significant reform, municipalities are left to fight an uphill battle against aging infrastructure, a spiraling affordability crisis, and an increasingly dysfunctional relationship between the federal and provincial governments.
Municipalities last saw a significant funding boost nearly two decades ago when then-Prime Minister Paul Martin launched the landmark "New Deal for Cities and Communities." In his 2004 address to FCM delegates in Edmonton, Martin called the existing funding framework a "19th-century blueprint for a 21st-century reality." His government promised to deliver $2.5 billion in new municipal funding, allocated five cents per litre of the gas tax to municipalities, and committed an additional $1.5 billion over five years for affordable housing.
Understandably, the announcement was met with enthusiasm. Municipal leaders like then-Toronto Mayor David Miller and former Winnipeg Mayor Glen Murray lauded the initiative, seeing it as a long-overdue acknowledgment of the financial strain their communities were under.
Despite some skepticism from provincial leaders—Alberta Premier Ralph Klein notably warned of potential strings attached—the "New Deal" marked a moment of increased cooperation between municipalities and the federal government.
Fast forward to 2024, however, and much of that optimism has dissipated. The Gas Tax Fund, now rebranded as the Canada Community-Building Fund, has remained relatively static over the years. While the name may have changed, the funding has not kept pace with inflation, population growth, or the escalating costs of addressing the housing crises, crumbling infrastructure, and provincial and federal downloading onto municipalities.
The FCM's latest report, The Case for a Municipal Growth Framework, lays bare the depth of the crisis. The report highlights how municipalities are struggling to deliver essential services under a fiscal framework designed for a bygone era.
Among its recommendations, the FCM proposes increasing direct annual transfers to municipalities by $2.6 billion (bringing the total to $5 billion), indexing federal transfers to GDP growth, and expanding the eligible uses of federal funds to include operating costs and infrastructure maintenance.
The challenges are stark.
Municipalities, which are legally prohibited from running deficits, rely heavily on property taxes and user fees to fund services. Yet they shoulder a growing share of responsibilities once managed by federal and provincial governments. From affordable housing to public transit to climate resilience, municipalities are often left holding the bag, while Ottawa and the provinces pass the buck.
Over the past year, I’ve asked several provincial leaders whether they would support a new fiscal framework for municipalities. Saskatchewan Premier Scott Moe responded diplomatically, saying, "More conversations are always welcomed." Manitoba Premier Wab Kinew offered a more encouraging response, stating, "If there's that national conversation, we're happy to be a part of it."
However, when it comes to federal leadership, the picture is murkier. Conservative leader Pierre Poilievre has been vocal in his opposition to increased funding for municipalities. In a recent interview with Bailey Moreton of Orillia Today, he dismissed municipal governments as "bursting with cash" and accused them of mismanagement. "Cut the bureaucracy, get their hands out of people’s pockets," the leader of the opposition said, while also blaming municipalities for infrastructure deficits due to inefficiencies in permitting and development cost charges.
Prime Minister Justin Trudeau, for his part, has expressed openness to dialogue. In June, he told St. Albert Mayor Cathy Heron that he was "happy to look at ways to convene both provinces and municipalities to talk about how we are going to create a new growth framework." Yet, six months later, there has been no follow-through.
The silence is deafening.
This lack of action has left municipalities at a crossroads. They must either continue down the current unsustainable path, where fiscal shortfalls grow year by year, or find a leader willing to champion their cause and deliver a new fiscal framework. The stakes could not be higher.
Municipalities are not asking for a handout; they are asking for a seat at the table. They are asking for recognition as equal partners in the governance of Canada—a recognition that reflects the essential role they play in delivering services that Canadians rely on every day.
From clean water to public transit to emergency services, municipalities are the frontlines of public service. Yet, they are often treated as "third-class citizens," bearing the brunt of federal and provincial offloading without the resources to meet these demands.
Paul Martin’s 2004 "New Deal" was not without its critics, but it represented a bold step forward. It acknowledged the structural inequities in Canada’s fiscal framework and sought to address them head-on. Martin’s leadership was a reminder that meaningful progress requires both vision and action. He didn’t just talk about working with municipalities—he delivered.
Today, Canada needs a similar commitment from its leaders.
As we approach 2025, the question remains: Who will take up the mantle and champion a new fiscal framework for municipalities? The need is urgent, and the potential benefits are immense. Addressing this issue is not just about fairness; it’s about ensuring that Canada’s municipalities can thrive in the face of unprecedented challenges.
If Trudeau is serious about his pledge to convene provinces and municipalities, he must act now. Empty promises will no longer suffice. Similarly, Poilievre’s critiques, while valid in highlighting inefficiencies, must be paired with constructive solutions. It’s easy to criticize; it’s harder to lead.
Canada’s municipalities deserve better. They deserve a federal partner willing to invest in their success and a provincial counterpart willing to share the responsibility. Without this collaboration, the problems will only worsen, and the costs—both financial and social—will continue to rise.
Municipalities are at their breaking point, and Canadians are watching. If federal and provincial leaders fail to act, they will be judged harshly—not just by municipal officials but by the citizens they serve.
The time for action is now.
Let 2025 be the year that Canada’s leaders come together to forge a new fiscal framework that reflects the realities of the 21st century. Let it be the year that municipalities are finally treated as equal partners in shaping the future of this country. And let it be the year that we find our next Paul Martin—a leader willing to take bold action and deliver for municipalities across Canada.
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