Financial Sustainability of Cities
Excerpt from an interview with Bob Chiarelli, former Ottawa mayor, in the Ottawa Citizen:
Q: Is the City of Ottawa financially sustainable?
A: Let’s look at total tax revenue. Of every tax dollar collected from incremental economic growth, the federal government collects 50 cents, the provincial governments get 42 cents, and the cities only eight cents. Yet, the cities are responsible for the bulk of the cost of building and maintaining the strategic infrastructure that generates the growth. That is how the federal and provincial governments have been slowly (now more quickly) killing the goose that has been laying all their golden tax eggs.
Here’s a simple example. The city’s biggest tourist attraction is Winterlude. Studies have shown that the three weekends generate about $56 million in economic activity. This translates into about $8 million just in GST and PST for the federal and provincial governments — in their coffers almost immediately. The municipal government gets nothing; indeed, it costs the city money to supply buses and security. That’s the problem in a nutshell.
In my opening speech at the Smart Growth Summit in 2001 I said that « 21st century problems can’t be solved by 19th century solutions, » but it’s not in the interest of either the federal or provincial governments to make real changes.
Did you know, for example, that in addition to downloaded services, Ontario cities are the only ones in Canada that pay for a share of provincial responsibilities? If Ottawa ratepayers paid only for the services under its own jurisdiction, there wouldn’t be a sustainability problem.
In my six years as mayor our team brought our city closer to sustainability and we more than achieved « responsible » financial management. But true financial sustainability is out of reach until the « pot » of total tax revenues is more fairly distributed. That decision is up to the federal and provincial governments.
Notes:
« downloaded services »
Social programs (including housing, social assistance, public health) transfered to cities (download) under the Conservative government of Mike Harris. Some of these programs were transfered back to the province (upload) under the Liberal government of Dalton McGuinty.
« Ontario cities are the only ones in Canada that pay for a share of provincial responsibilities »
Even though municipalities collect taxes on behalf of the Province, they only keep one portion for themselves. In Ottawa, the City keeps about two thirds of your property tax bill for municipal services and about one third is put aside for the Province either for education or for provincially mandated programs such as welfare, social assistance and affordable housing. (Source: City of Ottawa)
