This article was originally published in Maclean's Magazine on January 19, 2004
Cities to Get More Money and Autonomy
POLITICAL CHOICES always look easier on the campaign trail than from the seat of power. When Paul MARTIN was out barnstorming the country on his way to becoming Liberal leader and prime minister, the plight of Canada's cash-strapped cities seemed to cry out for a bold remedy. So he offered one: give municipalities a permanent slice of gas and diesel fuel taxes - a fat $4.8-billion-a-year federal revenue stream. Amid Martin's more fuzzy rhetoric - all that "transformative change" talk - the gas-tax pledge stood out for its sharp-edged clarity. The lagging pace of urban investment in everything from rapid transit to sewage treatment was reaching a crisis point, and here was Canada's ascendant national leader putting a big part of the solution squarely on the table. If he really did it, maybe transformative was the right word.
Now that Martin is in office, though, he must balance competing priorities. As he prepares to tell Canadians how he means to govern, in a Speech from the Throne and then a budget, both likely next month, he's also facing demands for new spending on such key files as defence and health. Yet his vow to share the gas-tax wealth was about as firm as campaign commitments come, if a little vague on exactly when he'd make good on it. "No matter how long it takes," he said in a speech last fall to the Union of British Columbia Municipalities, "we are going to provide Canadian municipalities with a portion of the federal gas tax."
It's more than a matter of money, although that's a large part of it. Also at stake is how big a role Ottawa will play in what many experts say is a key to Canada's future competitiveness: the allure of its cities. "We all agree the future prosperity of Canada is closely linked to the strength of its largest cities," says Montreal Mayor Gérald Tremblay. Martin has even bought into the trendy concept of a "bohemian index," the notion that a key component in any urban economy is its concentration of hip creative talent. He has cited the wealth-generating capacity of Vancouver's Yaletown, Montreal's Plateau and Winnipeg's Exchange District. Clearly, he craves a piece of the downtown action. The problem is, the Constitution gives the provinces control of municipalities. The federal role in local affairs is remote at best.
The man Martin assigned to get around that roadblock is Toronto-area MP John Godfrey, his parliamentary secretary for the cities agenda. Godfrey's take on the gas tax sounds unmistakably as if he's trying to give himself - and his boss - a little wiggle room. "The gas tax is actually code for predictable, stable, future funding for municipalities," he told Maclean's. "So if we can come to that same end point through another method, then there's nothing sacred about the gas tax."
Not around Parliament Hill, maybe, but in many CITY halls, Martin's pledge is regarded as something close to holy writ. "The gas tax is paramount in a lot of people's minds," says Halifax Mayor Peter Kelly. Toronto Mayor David Miller says he believes Martin "will honour his commitment." That emphasis among municipal leaders threatens to dominate what Godfrey clearly hopes he can turn into a more wide-ranging discussion about helping cities. The terms of that debate should firm up after Jan. 22, when Miller will host a summit of major city mayors in Toronto, with Godfrey as a special guest. So far, the mood among the mayors remains optimistic. "I can't recall a prime minister, certainly not in my lifetime, having cities as high among his priorities," Miller says.
Of course, Martin didn't come up with the notion that cities need urgent attention all on his own. Urban woes have been a hot topic in policy wonk circles for several years, often inspired by Toronto's urban planning guru, Jane Jacobs, and given plenty of heft by a spate of thick think-tank reports. As well, a crop of outspoken mayors - including Winnipeg's Glen Murray, Vancouver's Larry Campbell, and, more recently, Miller - have made big city politics a focal point as it hasn't been since the 1970s heyday of Toronto's David Crombie and Montreal's Jean Drapeau. Critiques of the way Canadian cities are run vary, but the common theme is that they sorely lack political autonomy and revenue-raising flexibility.
Those problems can be traced back to Confederation. It made sense in the 19th century, in what was overwhelmingly a rural Canada, to make municipalities a constitutional responsibility of the provinces, rather than a separate order of government with their own defined powers. At the dawn of the 21st century, though, two-thirds of Canadians make their homes in cities with populations of at least 100,000. Over half live in just four sprawling urban zones: Toronto and the Golden Horseshoe it anchors; greater Montreal; Vancouver, B.C.'s Lower Mainland and southern Vancouver Island; and the Calgary-Edmonton corridor. This is no longer the Canada of Anne of Green Gables or Who Has Seen the Wind.
The Constitution leaves Ottawa and the provinces to carve up the most attractive ways to raise revenues - especially income and sales taxes. Municipalities are left far too reliant on property tax, a poor alternative, since it tends to lag population growth and has only an indirect connection to economic activity. "Of all the cities in the world, ours are the most heavily dependent on property taxes," complains Jim Knight, chief executive officer of the Federation of Canadian Municipalities, pointing to stiff competition from resurgent U.S. cities with a far greater range of tax tools.
Winnipeg's Murray has pushed further for a radical overhaul of urban finances than any other mayor. But his ambitious blueprint for cutting property taxes in half, and relying instead on a range of other taxes and user fees, has hit a wall in the form of the Manitoba government. Last fall, the province turned down his request for a share of the sales tax, a key part of his plan. That has left Murray, who has been touted as a possible star Liberal candidate in the next federal election, urging Martin to lean on the premiers to make concessions to cities, using federal health transfers to provinces as a bargaining chip. "The mayors and the Prime Minister have to work together to get the premiers to the table," Murray says. "I think the federal government has to say, 'We can't talk about health care with you until you talk to your mayors about the cities.' "
There's no indication Martin is ready to take that get-tough approach. "This is not about stepping between provinces and municipalities," he has said. In fact, while some mayors expect a more direct financial pipeline from Ottawa under Martin, the old three-way federal-provincial-municipal relationship appears far from dead. Under the multi-billion-dollar federal infrastructure grant programs, which were the main way money flowed to cities from Ottawa under former prime minister Jean Chrétien, each level of government had to fund one-third of a project. Halifax's Kelly, among others, says Martin should relax that formula, allowing cities to tap federal money even when their province isn't willing, or able, to match it. But Godfrey says provinces won't be let off the hook. "We never want to finance something that is a primary provincial government responsibility, so that they can take a pass, make a tax cut, and get the political credit, whereas we're stuck with filling in the gap," he says.
Getting any deal in place involving the provinces by the time of a federal budget late next month looks all but impossible. Still, Godfrey says a "symbolic down payment" on future bigger reforms could be ready in time. One possibility: speeding up the spending of $3 billion for infrastructure from last year's budget, much of it earmarked for big cities, that was to have been spread out over a decade. Another option is reallocating money already in federal spending plans. Vancouver's Campbell wants Ottawa to shift money from drug enforcement to drug treatment - including funding for more safe injection sites like the one now operating at full capacity, about 500 injections a day, in his city's troubled Downtown Eastside. "That's 500 people who are not in the alleys," Campbell says. "It's working."
Some mayors might be satisfied with moving money around, speeding up some spending already announced. But others are determined to keep the focus on the gas tax. Calgary Mayor Dave Bronconnier urges Martin to not edge away from that promise. "It's a major part of his platform," he says. "It has to come in the budget. It has to be a strong signal that he's serious about a new deal for cities." Having created such expectations, Martin may find it hard to turn last year's stirring campaign vision on cities into this year's convincing government action.
LARRY CAMPBELL "I'm not hung up on the details. What I know is that I need help-I need help with infrastructure and social services."
GLEN MURRAY "The federal government has the capacity to make this a national discussion, to get Canadians to understand what's happening in cities."
DAVID MILLER "I'd like to see the federal government enter into agreements directly with municipalities in areas of overlapping jurisdiction, such as immigration."
GÉRALD TREMBLAY "Mr. Martin understands the urgency of increasing the per capita income of Canadians. To do this, he must encourage the wealth creation of cities."
PETER KELLY "In the [federal] budget, it would be nice to see an increased injection of money into urban transportation in this country, toward meeting the Kyoto objectives."
Maclean's January 19, 2004