Challenges and Opportunities of Canadian Municipalities
March 22, 2022
It is my pleasure to rise today to participate in the debate started by our colleague Senator Simons to draw the attention of the Senate and Canadians to the challenges and opportunities that Canadian municipalities face and to the importance of understanding and redefining the relationships between Canada’s municipalities and the federal government.
I wanted to take this opportunity to speak about the renewal of the relationship between the municipalities and other levels of government, as this issue has been at the heart of my political engagement for 40 years.
I will begin by saying that it may seem paradoxical to discuss the role of the federal government in Canadian municipal affairs, because local government falls under the exclusive jurisdiction of the provincial government, giving rise to the oft-heard expression that cities are creatures of the provinces.
No doubt you know that I shudder when I hear this expression. First, because it is extremely paternalistic and disrespectful and it devalues municipal democracy, but also because it is not quite accurate from an historical perspective. In the history of human development, cities appeared before empires, countries and provinces.
The first municipal institutions in Quebec were founded in Quebec City, Montreal and Trois-Rivières during the French regime, long before Confederation in 1867, under which the provinces were given exclusive jurisdiction over municipal institutions.
In fact, it would be more correct to argue that municipalities create countries and provinces.
I apologize for that historical aside. Getting back to the federal-municipal relationship, I think it’s important to note that this relationship is not static and has evolved quite a bit over the past few decades. This is important to note, because I often hear people say that nothing can be done and that it would be impossible to rethink the nature of federal-municipal relationships without triggering a difficult round of constitutional negotiations.
Formally recognizing the role of municipalities in the Constitution would be ideal, but let’s be realistic. Given that it is virtually impossible to amend the 1982 Constitution, I think we should focus our efforts on changes that we can make outside the scope of the Constitution.
Over the course of my 40 years in municipal politics, I witnessed many attempts to redefine the federal-municipal relationship. I’d like to demonstrate that changes to this relationship are possible.
First, we need to recognize that the federal government has shown renewed interest in urban issues in recent years.
One such example is the recognition of the central role that municipalities play in our economic development. The economist and urbanist Jane Jacobs did a wonderful job of demonstrating that in the 1960s, saying cities create the wealth of nations.
Paradoxically, the national policies that are imposed on cities can end up curbing their vital activities. This truth stands the test of time and knows no geographic bounds.
In Canada, 80% of the population is concentrated in urban centres. No so-called national government can claim to have control over the economy unless it mobilizes our cities as economic drivers.
To paraphrase an old saying, what’s good for cities is good for the country — and vice versa.
Moreover, municipalities’ expenses have increased considerably in recent decades, partly because of responsibilities downloaded onto them by higher levels of government, but also because of the social changes some cities have been dealing with for some time.
Our colleague, Senator Boniface, did a great job explaining the situation when she talked about problems related to opioids and the municipalities’ responsibilities in that regard.
The pandemic has also made it clear that municipalities play a vital role in all aspects of human activity.
Cities have stepped up to facilitate vaccination. They have had to reinvent how they deal with homelessness. They have contributed to public health efforts since the start of the crisis. Montreal even stepped in for the federal government to better handle international travellers.
Clearly, no so-called national government can claim to be in control of public health, the fight against homelessness, mental health issues, welcoming immigrants, fighting climate change and more without mobilizing cities and municipalities.
Federal government involvement in municipal affairs is not a new phenomenon. As early as the 1920s, the federal government implemented national programs to improve housing conditions by providing loans and grants to cope with waves of mass immigration. Yes, we are experiencing a housing crisis at the moment.
It is also important to remember that, during the Great Depression, the government created a loan program to enable municipalities to upgrade their infrastructure and stimulate job creation.
In the 1950s, as the suburbs grew, the federal government supported municipalities by creating programs to improve water and wastewater infrastructure. In the 1970s, the federal government even established a Ministry of State for Urban Affairs to foster cooperation between the three levels of government. The ministry had a short life, however, as it existed for less than nine years.
The weak economy, the fiscal crisis, the federal government’s refocusing on its own responsibilities, and the particular dynamics of federal-provincial relations on the eve of the Quebec referendum dampened the federal government’s interest in municipal issues for a time.
What a shame.
It was not until the Liberal Red Book in 1993-94 that a proper infrastructure program reappeared. Originally intended as a temporary two-year program, it expanded greatly as the federal government’s finances improved.
Under the Paul Martin government of 2004 to 2006, we saw an interesting attempt at establishing closer collaboration between the federal government and the municipalities with the launch of Canada’s New Deal for Cities and Communities. This new deal was a real attempt at establishing:
. . . a national urban policy aiming to transform federal-local relations by involving municipalities in public policy development.
This policy was based on three pillars: first, provide municipalities with predictable, long-term revenue streams; second, establish multi-level collaboration mechanisms for area‑based policy making in the larger urban centres; and third, introduce an urban lens to assess and improve federal activities in cities.
Unfortunately, this promising experiment ended abruptly with a change in government, but several worthwhile initiatives survived, from the sharing of gas tax revenues — an excellent initiative — to the full GST rebate and the inclusive cities initiative.
There is no denying that the need to review the federal-municipal relationship stems primarily from budgetary pressures, because the current financial situation of the municipalities is untenable. In 1955, municipalities owned 22% of public infrastructure in Canada. Today, municipalities are responsible for nearly 60% of all public infrastructure in Canada.
The revenues did not follow, however. In fact, the federal contribution to municipal budgets fell from 23% in the 1990s to 17% in 2005.
I was unfortunately unable to obtain updated statistics, but it is not difficult to imagine that the trend has continued, if not accelerated.
Municipalities’ current tax regime is based on property taxes, which represent more than 70% of their revenues. In the 1970s, the reason for this association was that the role of municipalities was basically limited to providing property-related services such as firefighting, wastewater treatment, and road maintenance.
This premise no longer corresponds to today’s reality, given that municipalities are now involved in all aspects of the organization of our societies.
When I was president of the Union des municipalités du Québec, we published a municipal white paper entitled “L’avenir a un lieu,” about the place of municipalities in the future. It called for the municipal taxation system to be adapted to take the municipalities’ current responsibilities into account and for municipalities to finally be recognized as local governments.
The idea of requesting a constitutional amendment was set aside.
It would have been too easy for higher levels of government to latch onto this as a pretext for not making changes. I believe that the strategy we proposed in the white paper is still valid and that only two things are required to revisit the federal-municipal relationship.
First, all levels of government must acknowledge that municipalities are local governments, which means that they are in the best position to address various issues. Once this has been generally acknowledged and there is a new division of responsibilities, we can review the tax base of each level of government. Like it or not, I think that a new division of responsibilities can be done through administrative agreements.
Seeing as Quebec and Ottawa have managed to come to an agreement on the transfer of responsibilities regarding immigration and skills training, for example, I don’t see why we couldn’t come to an agreement to assign municipalities some responsibilities that, I should point out, some already take on. The municipalities would receive more revenue in proportion to their increased responsibilities, and this would allow all levels of government to contribute to wealth creation, while focusing on environmentally friendly choices and social cohesion.
I’m not deluding myself. I know that this will involve some difficult discussions, but we’ve been sweeping problems under the rug for too long.
We unfortunately need to acknowledge that the provinces and Ottawa are just fine with the status quo because it gives them a fiscal advantage.
However, for the future of our country, we must be mature enough to consider this in accordance with the principle of subsidiarity. This principle will help us determine which level of government is best suited for and most efficient at providing a given public service most cost-effectively.
I’m choosing to be positive here, in spite of the challenges. I suggest that we build on the progress made in recent years. I note, for example, that the Gas Tax Fund, renamed the Canada Community-Building Fund, is working quite well. It is a cornerstone of federal infrastructure programs and is framed by federal, provincial and territorial agreements that provide municipalities with considerable flexibility and predictability.
Another good example of a tripartite agreement is that Toronto, Canada’s top destination for immigrants, is a signatory to the Canada-Ontario-Toronto Memorandum of Understanding on Immigration and Settlement.
In the category of positive experiences, we could also include various urban revitalization projects that are led by tripartite organizations. Some examples that come to mind include the Corporation du Pôle des Rapides, which manages the revitalization of the Lachine Canal in Montreal, and Waterfront Toronto, where the relationship between Ottawa, the provincial government and the city has been institutionalized.
If we can agree on a piecemeal basis on how to share responsibilities in order to better serve Canadians, I am confident that we can achieve this with a more ambitious project.
In closing, I want to thank Senator Simons for raising this important debate. Now is the time to get this done. We have a moral duty to work together to modernize our institutions and create an effective environment for delivering quality public services at the local, provincial, territorial and national levels to serve the fundamental interests of Canadians.
I see a clear path to renewing the relationship between the municipalities and the higher levels of government. All it will take is a bit of political will.
Thank you. Meegwetch.
Senator, you have a minute and a half remaining. Would you agree to take a question?
In my home province of Alberta, there has been a dispute in recent days where the province wished to make it impossible for cities to maintain mask mandates. One of the members of Jason Kenney’s government said of municipalities:
Municipalities are children of the province. If the children get not aligned, maybe it’s time for someone to get spanked. . . .
This is a great illustration of the situation we are in.
I believe that when we look at pandemic-related issues, the people of Alberta or Calgary, or any city really, are the same people who turn to their municipality first to call for the adoption of measures that affect their daily lives. In that case, it is truly the cities that can take the pulse of their population and adopt appropriate measures.
The situation you mentioned is an anecdote that clearly shows the connection between the municipalities and the provincial governments.
Thank you for your question.