In the wake of municipal and provincial elections and with a fresh face leading the charge in Ottawa, Canadians and their leaders are amicably united on a new hotbed issue. Unabashedly borrowing its title from Franklin D. Roosevelt’s revolutionary 1930’s policy, the ‘New Deal’ for Canadian municipalities is increasingly being touted as a cure for our urban ills.
With such a laudable goal, the New Deal has received much attention of late, both in the media and within political circles. Indeed, that very issue was the topic of discussion at a high-profile National Roundtable on the Environment and the Economy (NRTEE) conference held in Toronto this week, which attracted hundreds of participants from across Canada’s business and political communities.
“Quality of life in urban centres will become one of the defining challenges of this century”, noted Mike Harcourt, former premier of British Columbia, in his address to the NRTEE conference. Harcourt, who is currently Chair of the International Centre for Sustainable Cities, called for the implementation of a New Deal for municipalities to address a looming “urban tsunami” that will see 98 per cent of Canadians living in cities by 2025.
At its core, the New Deal aims to forge new financial partnerships between municipalities and higher levels of government in order to create a sustainable revenue stream for cities. The concept received a strong boost this week with the federal government announcing plans to roll back the GST charged to municipal governments, which is expected to translate into $7 billion of savings to cities over the next 10 years.
But while it is clear that addressing urban issues will be crucial to Canada’s long-term success, what is less clear is how to do so effectively. Despite the sanguine rhetoric surrounding the New Deal, a fundamental question remains: just why is a ‘New Deal,’ with its implicit reliance on the federal and provincial coffers, required?
In other words, what’s wrong with the ‘Old Deal’?
According to Pat Vanini, Executive Director of the Association of Municipalities of Ontario (AMO), an almost universal reluctance amongst municipal governments to increase property taxes coupled with downloading of services in the 1990’s is creating major budgetary problems for cities. “There’s a lot of tension around municipal budgets these days,” she noted. “Municipalities are close to crisis mode for things requiring capital dollars.”
One of the central issues driving the New Deal furor is property taxes. “There’s not an elected official I know that wants to raise property taxes,” Vanini stated bluntly. In particular, she expressed concern about the consistency of revenue generated from property taxes and their lack of income consideration. “Property taxes are a very regressive form of taxation,” Vanini warned.
Thus, AMO, which represents the majority of municipal governments across Ontario, is calling for alternative financial arrangements to address the budgetary tension, including provincial tax exemptions for cities, the uploading of social, community and health services off of municipal shoulders, and a portion of the gas tax to be dedicated to municipal infrastructure. They see this as an initial blueprint for the New Deal.
But John Farrow, former president of the Canadian Urban Institute, and a lecturer on policy analysis here at U of T, cautions that the issues behind the New Deal are not as simplistic as its justifications often are.
“Property taxes are probably one of the more robust sources of funding available to municipalities,” said Farrow, questioning the wholesale dismissal of property taxes as a primary revenue source. He added that the call for gas tax revenue threatens to put municipalities on even more unstable footing in terms of revenue consistency.
But a more fundamental concern, according to Farrow, is a lack of creative thinking that is implicit to the New Deal, particularly with its emphasis on financial transfers between levels of government. “A major problem with the transfer payment type of thinking is that it doesn’t force innovation” he said, adding that “there needs to be tension within municipal governments to make more with less.”
Thus, in Farrow’s view, budgetary tension would go a long a way toward addressing inefficiencies that are often endemic to municipal governments, and might also serve as a creative seed for innovative local policies, such as property tax reform, that directly address long-term urban sustainability.
Nonetheless, the New Deal is likely to become an enduring concept for Canadians. With the seeds firmly planted in political reality, “the question now is no longer the ‘what’ of the New Deal, but rather the ‘how to’,” notes Harcourt.
Clearly, the successful resolution to that question will require innovative thinking from each level of government.
