Retiring Toronto City Councillor Kyle Rae is sick and tired of the hopeless fiscal situation of municipalities.
The political retirement of veteran Toronto City Councillor Kyle Rae is not particularly significant for us here on the west coast as a stand alone story. Rae was Toronto’s first openly gay politician, and spent 18 years as the representative for Toronto Centre-Rosedale.
What is significant from the perspective of Vancouver, and indeed all BC municipalities however, is his reasoning for doing so.
In fact, in light of Vancouver’s current budget crunch, local Councillors and critics alike would be wise to use his experience as an indicator of what could be our future.
The most glaring message that I take from Rae’s words (read ahead) is a warning that municipalities are financially handcuffed by their provincial masters, and that without fiscal responsibility and tough decision making at the civic level, all hope for effective local governance is lost.
Allow me to contextualize.
Most politicians leave office claiming success with their work and a legacy of positive change. The straight-shooting Rae does not fall into this group, as evidenced by this excerpt from an email to supporters:
“I wish I could say that I have left the City in a better state than I found it.”
In fact, Rae’s prognostications about Toronto are very bleak:
“This is my 19th year and I don’t see a very healthy future in the city’s fiscal situation and I’ve spent 18 years trying to improve it.”
Why does Rae feel this way? Well, it has to do with the unbearable costs that have been shifted to Ontario’s municipalities over the past 15 years:
“I arrived before the Harrisite amalgamation and download. Queen’s Park has hobbled the City’s ability to deliver municipal services. Downloading provincial programs and services onto the municipal taxpayer has wrecked havoc on our parks, recreation centres, libraries, community services and culture. The federal and provincial aversion for responsible tax policy and appropriate tax increases has resulted in more than 15 years of cowardly downloading onto the City.”
I am presenting these quotes in order to frame the current budget cutting process that Vancouver City Council is spending ridiculous working hours trying to complete in these final weeks of 2009.
According to a 2007 pre-budget submission made by the Association of Municipalities of Ontario (AMO):
“Canada is the world champion of reliance on property taxation as revenue. At the local level, on national average, property taxes accounted for 40.4% of total revenues in 2004/05. This share has remained stable during the last 15 years, peaking at 43.4% in 1997/98.”
As I have mentioned in many previous posts, municipalities do not exist except by the will of the provinces. They are not constitutionally recognized in this country, and as any civic politician will tell you, the quest for such recognition is solely motivated by the increasing demands upon municipal fiscal resources (or lack thereof).
The Constitution Act, 1867 established the parameters of current federal and provincial relationships with municipalities. Section 92 of the Act sets out the exclusive powers of provincial legislatures in 16 areas, with section 92(8) giving the legislature of each province exclusive responsibility for making laws relating to that province’s municipal institutions.
Unlike their provincial and federal counterparts, municipalities can’t run annual deficits. As mentioned above, property taxes tend to comprise the majority of their revenues, forcing options like using debt financing to fund major capital projects.
Now while the Mike Harris binge of municipal amalgamation and the associated downloading of responsibilities has hit Ontario the hardest out of all the Canadian provinces, British Columbia’s municipalities have not escaped the cowardice of their provincial government.
Resolution B-26 of the recent Union of BC Municipalities (UBCM) convention stated the following:
“WHEREAS over the past few decades the provincial government has downloaded and offloaded provincially mandated services to local government without sufficiently, if at all, matching the services with funding (i.e., roads maintenance and replacement, homelessness, wildlife, policing, mental health and transit);
AND WHEREAS the provincial government may not be aware that their cost cutting measures over the years have resulted in pressures on communities to address the service gaps to the extent that limited local government funds are being used to fund provincially mandated services, negatively impacting a local government’s ability to adequately address core local government services:
THEREFORE BE IT RESOLVED that the UBCM strongly urge the provincial government to cease their downloading or offloading of services to local governments;
AND BE IT FURTHER RESOLVED that any future services, if devolved in any manner, whether subtle or not, must be accompanied by sufficient, sustainable revenues which will be in the control of the local governments”
The results of this phenomenon have been predictable. According to the Canadian Taxpayers Federation, municipal spending in B.C. rose by almost 50 per cent between 2002 and 2008. Property tax revenue jumped by 26 per cent, compared to inflation which rose by about 12 percent and population figures which increased by about 8.5 per cent over the same time frame.
As an example, take a look at the Vancouver budget, which went up by 19.4 per cent, from $773 to $923 million, between 2005 and 2009.
Now, in Vancouver’s particular experience, the Olympics as well as horrible political leadership with little controls over an out of control city bureaucracy also played a part in such a huge budgetary increase.
Nonetheless, with increasing costs shoved off on municipalities (take for example Translink and the Province recently holding Metro Vancouver’s municipalities to ransom) and limitations on revenue generation, something’s got to give.
Property taxes are a losing proposition in the long term, as the regressive and restrictive nature of this form of revenue means that municipalities do not necessarily keep pace with economic growth or inflation, as do income taxes or even sales taxes.
Property taxes are also the final resting place for tax increases, as federal and provincial government have chosen to download in recent memory in lieu of actually raising taxes.
This is the reason that I look at organizations like ThinkCity, which just recently conducted its annual citizen budget survey, and shake my head with their support for the option of raising taxes instead of making cuts to spending.
Here’s a question…if our federal and provincial counterparts aren’t willing to do so to fund the projects and initiatives they deem as important, why should our cities?
Municipalities are no doubt in an impossible situation that is in no way sustainable. Limited revenues that have remained steady over the past decade meet with ever increasing costs handed down by gutless senior levels of government. It is a recipe for disaster.
But until this situation gets fixed, and as long as municipalities are prevented from running deficits, fiscal responsibility is the only option left.
So before we go and place an undue burden on civic taxpayers for the sins of others, isn’t looking internally for cost savings a reasonable course of action?
As a side note, Rae also has words of wisdom for those advocates in Vancouver who are so very enamoured with the idea of wards:
“I’m turning 56 next year and I didn’t want to be like some colleagues who have been there for 30 years and are only interested in their ward’s agenda and have no clue how the city has changed.”
This is exactly what I talked about in this post. Wards have the potential to entrench pedestrian politics and pit Councillors against each other for limited resources. They do not lend themselves well to the concept of a broad and sweeping municipal vision for the future.
Anyways, Rae’s words are prophetic for Vancouver, and should be considered very carefully for a perspective of where we could end up with the continuation of fiscal limitations at the civic level and the introduction of wards as a new electoral system.
So enjoy your retirement, Mr. Rae – civic politics is most definitely a thankless job.
Mr. Rae is retiring because he faced almost certain defeat. He may have found these reasons now, but they are mighty latter day. The fiscal downloading is not new, and is most certainly better over the years since the Harris regime was dethroned. This is duplicitous sophistry – nothing more, nothing less.