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Comment: We need to change the way municipal governments are funded

Reforming how local governments are funded will provide resources to tackle many issues that need to be addressed.
A new funding model for municipalities is urgently needed, writes Dallas Gislason, to help them deal responsibilities downloaded from senior levels of government. DARREN STONE, TIMES COLONIST

A commentary by the interim CEO of the South Island ­Prosperity Partnership in Greater Victoria.

At the annual Federation of Canadian Municipalities conference in Calgary last weekend, municipal leaders from across Canada released a critical report detailing the case for a municipal growth framework that would reform how local governments are funded.

It would replace “an outdated revenue model that is creaking under Canada’s population growth,” the report says.

It outlines actions for the federal and provincial governments, including tying federal transfers to population growth, increasing these transfers to a total of $5  billion (equivalent to only 0.5% of GST) and ­guaranteeing provincial matched dollars.

This new framework is urgently needed. The current toolbox available to municipalities does not work when senior governments download responsibilities onto local governments (Exhibit A: systemic issues that lead to chronic homelessness).

That leaves municipalities in a tough spot. The result? Year after year, local ratepayers complain about property tax increases. Meanwhile, many issues that need addressing get worse, especially as needed resources are more limited.

Some have suggested municipal governments should “benchmark tax increases to inflation” or other ill-conceived ideas.

This cannot work. While Canada’s population increased from 30.7 million to 39.1 million since the turn of the century, a full 29.8 million of those 39.1 million people live in Canada’s 36 metropolitan areas. That’s two out of every three Canadians living in just 36 places (including the 16th largest of these: Greater Victoria).

Municipalities are the chief stewards of 60% of Canada’s key infrastructure, yet they cannot access sufficient revenues needed to manage this infrastructure. Meanwhile, the housing crisis has left many feeling abandoned by public policy as we’ve allowed costs — of both renting and owning — to ­skyrocket.

What levers do municipalities have to raise the revenues needed? Aside from property taxes, the answer is: not many.

Sure, they have development cost charges and amenity fees (both used to help prepare municipalities for new development), but these charges increase the cost of housing. Aside from that, do they ­offset other increased costs, like wages of a parks maintenance employee or the rising cost of fuel used by the transit system? Not really.

To deal with 21st century challenges, municipalities need better tools. That’s why the South Island Prosperity Partnership (SIPP) endorses the new Municipal Growth Framework. However, this framework alone is not enough. Municipalities also need ways to leverage funding, and that’s exactly what the SIPP model does.

SIPP’s model was developed as a response to the 2008-2009 financial crisis, which led to a stagnation of our region. Meanwhile, the Clark government was shrinking the provincial public service (Greater Victoria’s largest single employer) through attrition, while also moving jobs to Vancouver.

To counter our region’s vulnerabilities and diversify our economy, a group of regional stakeholders — including municipalities, First Nations, major employers and post-secondaries — came together in 2016 to create SIPP as a multi-jurisdictional, cross-sectoral alliance.

The goal? Create a more economically diverse, prosperous region.

Fast-forward eight years. SIPP has shown that it’s both an efficient and effective model. From a modest $1.64 per capita of municipal investment each year, we’ve been able to leverage private sector, provincial and federal government investment into projects. Over our eight-year history, we’ve leveraged $1.63 for every municipal dollar invested.

That means SIPP more than doubles municipal contributions while bringing an estimated $93 per capita back to the Greater Victoria economy: a 50-to-1 ratio on investment.

Now imagine what’s possible if we combined these two approaches: first, an expanded toolbox that gives municipalities the flexibility to raise proper resources and direct these toward priorities; and second, a proven model that brings neighbouring municipalities together to leverage resources in partnership with private-sector and ­not-for-profit partners.

An example where this approach could apply might be addressing Greater Victoria’s need for family physicians.

As lawn signs around the region highlight, this is a high priority. But solving it requires much more than just a physician compensation package.

It requires a true, multi-­jurisdictional, cross-sectoral collaboration addressing things such as adequate housing options for physicians and their families, access to flexible childcare, jobs that align to the spouses of incoming physicians, addressing language and cultural barriers for physicians who are new to Canada.

The list goes on.

Solving complex issues – such as the need for doctors – necessitates collaborative solutions involving a range of partners. As an example of this approach, SIPP is well-positioned to accelerate these types of solutions.

But fully addressing them requires municipalities to direct proper resources toward the full scope of each problem. And this requires adopting the new municipal growth framework that the Federation of Canadian Municipalities has put forward.

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