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Challenges and Opportunities of Canadian Municipalities

Inquiry--Debate Adjourned

December 2, 2021

Rose pursuant to notice of November 24, 2021:

That she will call the attention of the Senate 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.

She said: Honourable senators, I hope this inquiry will provoke senators to give a long, hard thought to the role of municipalities in Confederation and to the urgent necessity to ensure that municipalities have the fiscal and political resources they need to lead Canada to a more just, prosperous and creative future.

In spite of the sprawl of our vast country, almost 82% of Canadians live in urban areas, making us one of the top three most urbanized countries in the world. That’s a tremendous shift from the way Canada looked in 1867, when about 84% of Canadians lived in rural areas. Back then, at the beginning of Confederation, our Constitution set up cities as “creatures” of the province.

Some municipalities contain multitudes. Cities such as Toronto or Calgary have populations and economies that are far larger than those of many Canadian provinces.

Some municipalities are small towns or villages or rural counties. But they are municipalities nonetheless and face challenges that parallel those of their larger, more urbane sisters.

Municipal governments are on the front lines of so many of the major issues, problems and crises facing our country. They are, for example, the ones most directly affected by natural disasters, including those spurred by climate change. Whether we’re talking about flash floods, wildfires or violent storms, it is municipalities that have to pick up the pieces and rebuild their communities.

Hence, it is also cities and towns which are the first responders when it comes to rebuilding and retrofitting infrastructure to withstand the impacts of climate change — from retooling storm sewers, to protecting water reservoirs, to depopulating flood plains.

In our global world and in our multicultural nation, municipalities are also the ones that do the nitty-gritty practical work of helping new immigrants adapt and adjust to life in Canada.

And in our country, still wrestling with the realities of reconciliation, cities and towns, particularly in the Prairie West, have been the ones working directly with urban Indigenous populations, and the ones in the vanguard, forging new relationships with nearby First Nations. Cities such as Winnipeg, Saskatoon and Edmonton have all taken leadership roles in establishing those new relations of trust.

Municipalities, large and small, are dealing first-hand with the twin dilemmas of homelessness and drug addiction as Canadian cities and towns wrestle with the scourge of the opioid crisis.

And in parts of the country, including Alberta, it was municipalities that responded most urgently and nimbly to the COVID-19 crisis, bringing in public health measures such as masking and occupancy rules when provinces declined to act.

But cities aren’t just tasked with problem solving. They are also the economic and creative engines of our Confederation. They are where our entrepreneurs, inventors, artists and authors gather; where our research universities are centred; and where our theatres, orchestras and ballet companies thrive. Cities are where you go to find our banks, venture capital and so much of our industry.

The digital revolution? It’s taking place in our cities. We need to acknowledge our municipalities not just as places to solve social problems, but as the drivers, the incubators of our economic prosperity. Yet these poor “creatures” are the constitutional Cinderellas of Canada, the Rodney Dangerfields of Confederation. For decades, they have been fighting for the respect and resources they need — and, yes, their voices have sometimes intermittently been heard. But they still find themselves in a dance that feels all too often like two steps forward, one step back.

Cities, which provide so many of our most essential public services and which are responsible for so much of our economic future, are the most poorly resourced order of government, collecting far less in tax revenues than provinces or the federal government. For every household tax dollar paid in Ontario, for example, municipalities collect just nine cents.

Canadian cities on average derive about 45% of their revenue from property taxes. This creates a variety of problems. In cities such as Toronto and Vancouver, where home prices have soared to stratospheric levels, homeowners may often be real estate rich but cash poor, unable to pay the taxes on previously modest homes that have somehow escalated sharply in value.

Then there is the separate challenge of business property taxes — one that may become far more acute as we absorb all the social changes wrought by the continuing COVID-19 pandemic.

Even before the coronavirus, we were transitioning from an industrial economy to a digital one. Even before this health crisis, retail stores, large and small, were feeling the pressure of internet competition. The pandemic has led to a rapid acceleration in online shopping. With meal delivery apps all the rage, how many restaurants are feeling pandemic pressure to change their business model, to reduce or even eliminate in-person dining space?

As for office towers, after the business world has spent some 20 months with staff working from home, how many office towers are going to be sitting empty for years to come? The current Canadian office vacancy rate is 15.7%. It’s 15.5% in Halifax, 16.1% in London and 24.4% in Edmonton. In Calgary, the current downtown office vacancy rate is a concerning 31%.

How many plans for new office spaces and cities across Canada have been mothballed indefinitely?

City business taxes are based on the square footage of an operation. If malls and power centres close down, if independent stores and restaurants shut their doors, if office towers never rise, where will cities get their property tax revenues?

As we undergo tectonic shifts in our industrial resource economy, there are regional repercussions for small municipalities too. Towns and counties all across my home province of Alberta are seeing huge stresses on their finances because of the loss of revenues from oil and gas producers.

In 2019, the Rural Municipalities of Alberta found that an unprecedented $81 million in property taxes from oil and gas companies had gone unpaid to small towns and counties across the province. By January 2020, the same body reported that Alberta’s rural municipalities were facing a shortfall of $173 million in unpaid property taxes from the oil and gas industry. For 2021, Rural Municipalities of Alberta reported its members were owed $245 million in unpaid property taxes from oil and gas operations.

Municipalities have few other options to raise money. User fees and permit fees simply can’t make up the shortfall when traditional property taxes aren’t enough — or even available — to keep cities and towns in proper operation. In the meantime, many provincial governments have downloaded more and more responsibilities to municipalities to deal with, which used to be in the provincial ambit, without necessarily giving them the additional resources to take on those tasks.

Various federal governments over the years have tried to step in to address the short gap. The Canada Community-Building Fund, formerly known as the Gas Tax Fund, now provides more than $2 billion to Canadian municipalities — not directly, but as flowed through from their provincial governments.

There are a variety of other project funds too — ranging from the Universal Broadband Fund, to the Zero Emission Transit Fund, to the Investing in Canada Plan — which support municipalities and their needs. Those are welcome dollars, to be sure, but they don’t quite get to the heart of the constitutional inequity in this country, which leaves cities, even cities with millions and millions of residents, dependent clients of other orders of government.

In a paper written this year for the Centre of Excellence on the Canadian Federation, the author, Dalhousie political science professor Kristin R. Good, notes the 1997 decision by the Ontario Court of Justice against a challenge to the provincial City of Toronto Act, 1997, the one that dissolved six discrete municipalities to create one big “megacity” via a controversial unilateral process. Five of the six municipalities went to court to challenge the province’s legislation. In its ruling in the case, known as East York v. Ontario, the Ontario court stated that, one, “ . . . municipal institutions lack constitutional status;” two, “ . . . are creatures of the legislature and exist only if provincial legislation so provides;” three, “ . . . have no independent autonomy and their powers are subject to abolition or repeal by provincial legislation;” and, four, “ . . . may exercise only those powers which are conferred upon them by statute.”

The decision cited expert Andrew Sancton, who opined that Canadian municipalities “ . . . have no constitutional protection whatever against provincial laws that change their structures, functions and financial resources without their consent.”

We saw that illustrated again just this October when the Supreme Court ruled 5 to 4 that Ontario was within its constitutional rights to dramatically reduce the size of Toronto’s city council in the midst of a municipal election campaign.

Unless there is some kind of fundamental change, it would seem, Canada’s municipalities will forever be locked in a feudal relationship with their provincial overlords.

Wholesale constitutional reform is probably a political non-starter. That doesn’t mean we couldn’t embark on incremental changes to give Canadian towns and cities more economic self-determination and control over their future planning and growth.

I have no magic answers. Rather, I hope we in the Senate can start asking the necessary questions. I’m inviting you, my fellow senators, to join me in this undertaking. This inquiry needs your voices, your stories, your ideas, your experiences and your insights. Several of you have been mayors yourselves. Others of you have spent years thinking over these very questions because of your work with provincial governments or with First Nations or with not-for-profit organizations or with the business community.

There is no Senate committee with the appropriate mandate to study this question. Still, I hope this essential inquiry can bring to bear the Senate’s best expertise and analysis. I look forward to hearing from you soon so we can compile a sort of collection of thoughtful speeches that interrogate different aspects of this dilemma from different political perspectives.

In his great comic novel Candide, the French philosopher Voltaire suggests that the secret of happiness in life is to cultivate one’s garden.

We must cultivate our garden.

One could take that advice literally or, as I do, as a metaphor. Canada’s municipalities are the gardens where our communities set down roots and grow. They are the hothouses where we can test our plans to fight climate change, to encourage diversity and to inspire reconciliation. If our cities do not flourish, our nation cannot prosper. We must tend our municipalities, because there we plant the seeds of our future.

Yes, dear friends and colleagues, we must cultivate our gardens and, in this chamber, we must cultivate our gardens together. Thank you, hiy hiy.

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