Municipal Revenue-Raising Woes Point to an Enduring Problem
Cities across Canada are struggling. As we approach the year-mark of the municipal response to the COVID-19 pandemic, it is worthwhile to reflect on one of the greatest lessons that policymakers have drawn: municipal finance is in dire need of reform. At the height of the fiscal crisis, cities across Canada were forced to implore provincial and federal leaders for immediate relief, receiving billions of dollars in aid from Ottawa and hundreds of millions from Queens Park. Nonetheless, the city of Toronto is set to face a $1 Billion-plus budget shortfall this year and has requested further aid from the other orders of government. These quick fixes ought not to be swept under the rug, as they highlight a mismatch between cities’ power and responsibility that is not going away, regardless of our ability to “return to normal(cy).”
In the case of Toronto, the pleas for budgetary salvation have not been made by an idle city council unwilling to make vital changes; the city has made a series of cuts ranging in the hundreds of millions, but is limited in its capacity to obtain supplementary income. This is due to the fact that cities, as “creatures of the province,” do not have the right to the taxation powers enjoyed by the provincial and federal governments, and rely on property taxes to fund a large proportion of their budget. The city has recently stated that a modest $22 increase in property taxes could help alleviate some of their budgetary concerns, a fee that could reasonably be much higher, but is capped due to Mayor Torys’ campaign promises.
It seems untenable that cities should continue to be so impotent in their revenue-raising capabilities, given their outsized importance in service delivery. It is absurd that authorities responsible for delivering 40% of the annual provincial budget should have no say on how the funds for said services are collected, prioritized, and implemented. In a recent paper, authors Harry Kitchen and Enid Slack propose giving cities the power to draw income taxes in coordination with provincial authorities. As the agents at the forefront of solving the crises of climate change, homelessness, and wealth inequality, cities ought to be elevated to junior partners — at the very least — in the revenue-raising arena.
