CANADA

LOCAL CRISES

MUNICIPALITIES ACROSS CANADA ARE DEALING WITH A CASH SHORTAGE BY SLASHING THEIR SERVICES

TOM FENNELL April 27 1992
CANADA

LOCAL CRISES

MUNICIPALITIES ACROSS CANADA ARE DEALING WITH A CASH SHORTAGE BY SLASHING THEIR SERVICES

TOM FENNELL April 27 1992

LOCAL CRISES

CANADA

MUNICIPALITIES ACROSS CANADA ARE DEALING WITH A CASH SHORTAGE BY SLASHING THEIR SERVICES

Some of Jessica Peroff’s happiest times are spent at nursery school, playing and learning with her friends. When she is in the right mood, the browneyed three-year-old proudly demonstrates her newly acquired knowledge by reciting the alphabet and counting to 20. Her father, Brian Peroff, says that Jessica has been looking forward to attending junior kindergarten next fall at nearby Briarwood Public School, as her sister, five-year-old Kathleen, did last year. But two weeks ago, the cash-starved local school board in the Toronto suburb of Mississauga voted to cancel its entire junior kindergarten program—a sign of the growing financial crunch that is playing havoc with municipal budgets from St. John’s to Victoria. Last week, 200 people rallied outside the school board’s offices to protest the cutback, which will affect about 6,000 young children. “I realize everyone is short of money, but the kids learn a lot in junior kindergarten,” says Peroff, a radio announcer. “I really believe that the more schooling you get, the better it is.”

Across Canada, the squeeze on municipal budgets is becoming tighter as deficit-ridden governments in Ottawa and the provinces reduce their spending on education, welfare and other services—and shift more of the financial burden onto municipal ratepayers. As a result, officials in many towns and cities say that they can no longer afford to deliver the full range of services that residents in their communities have long taken for granted. In January, Saskatoon reduced winter garbage pickup to once every two weeks from once a week. In Metropolitan Toronto, local politicians have cancelled subsidies for 700 day care spaces, resulting in the impending layoffs of several hundred workers. And in Dartmouth, N.S., Mayor John

Savage says that he and his fellow councillors have been forced to impose a wide range of cutbacks. Added Savage: “There will be fewer flowers, less frequent grass-cutting, and some people will be reassigned or laid off, including police and firemen.”

The current round of spending reductions has done much more than eliminate fat from municipal budgets. Doreen Quirk, president of the Ottawa-based Federation of Canadian Municipalities, which represents 565 cities and towns across Canada, says that many cash-poor communities can no longer afford to repair or replace aging facilities like bridges, sewers and roads. On April 6, Quirk met three MPs from the major political parties to outline her organization’s plan to pump $15 billion into the repair and construction of municipal projects. Said Quirk: “It is easy to let a road deteriorate, because it cannot come into a council meeting and scream at you. But if we are going to remain competitive as a country, we need to maintain the infrastructure of our cities.”

The two-year-old recession has clearly aggravated the budgetary difficulties faced by local governments, restraining tax revenues at a time when more and more funds are needed to finance the growing welfare rolls. But the underlying problem, municipal officials say, is that the federal government has repeatedly tried to limit the growth of the $450-billion national debt by cutting back on the money it gives to the provinces. In the 1985-1986 fiscal year, Ottawa transferred 26 per cent of all federal revenues, or $21.2 billion, to the provinces; in contrast, transfers to the provinces in the 1992-1993 fiscal year will account for only 20.2 per cent of total federal revenues, or $26.5 billion.

CANADA WATCH

Constitutional Affairs Minister Joe Clark and Prime Minister Brian Mulroney appeared to adopt opposite approaches towards the premiers in dealing with national unity issues. After a federal-provincial meeting in Ottawa last week, Clark told reporters that he is optimistic that an agreement will be reached by early June. However, on a campaign-style swing through Toronto, Mulroney threatened to call a national referendum if the negotiations fail. In other developments:

• Quebec Premier Robert Bourassa announced plans to visit the four western premiers from May 4 to 7 to discuss constitutional issues.

• Alberta Intergovernmental Affairs Minister James Horsman said that Edmonton will settle for less power in a new Senate if each province gains an equal number of representatives in the chamber.

QUOTE OF THE WEEK

“We don’t want another House of Commons. We have one and that’s enough.”

—Quebec Intergovernmental Affairs Minister Gil Remillard, on proposals to give the Senate more power

Across the country, provincial governments have responded in kind, limiting the annual growth in their contributions to municipalities for core services ranging from public transport to sewer construction. Indeed, Dartmouth’s Savage says that municipalities in Nova Scotia have not received an increase in provincial transfers since 1990. And in Saskatchewan, where the province’s recently elected NDP government is attempting to slash almost $800 million from its projected spending this year, local governments have had to absorb a 15-percent cut in provincial transfers for a wide range of municipal programs. Complained Saskatoon Mayor Henry Dayday: “The federal government created a deficit and then passed it down to the provinces. They, in turn, are passing it on to us.”

In their own defence, Prime Minister Brian Mulroney’s Conservatives say that they are simply trying to ensure that the burden of fiscal restraint is shared equally among all levels of government. But some senior Tories say privately that there is also a philosophical reason why Ottawa has cut back on transfers to other levels of government. They argue that taxpayers gain a false sense of the cost of public programs when services are provided by one level of government with revenues raised by another. Forcing local politicians to come up with the funds necessary to pay for the services they provide, the Tories say, will help to make voters more acutely aware of the limitations of government—and of the hard choices that have to be made between the public demand for lower taxes and the equally forceful call for improved government services.

This year’s round of provincial budgets is certain to exacerbate the financial crunch at the local level. In British Columbia last month, the provincial government cancelled a major municipal grant that had been used to offset the cost of education at the community level. As a result, local administrations will have to raise almost $90 million in new revenues from their property taxpayers throughout the province. Says Vancouver Mayor Gordon Campbell: “The provincial government is not keeping its costs in line. They are protecting themselves by passing their costs on to property owners.” In nearby Victoria, meanwhile, city councillors have responded to the provincial cutbacks by slashing $450,000 from the $3.2-million budget to maintain and repair municipal buildings. Said City Manager Colin Crisp: “It’s like keeping a car up. If you ignore the maintenance, sooner or later it’s going to stop running.”

Although the Ontario budget will not be tabled until April 30, the province has already notified municipal politicians that they can expect, at best, a one-per-cent increase in funding this year. The same level of increase will likely apply to Ontario hospitals and universities. So far, only Alberta has introduced a program aimed specifically at helping municipalities. That province’s budget, tabled last week, contained $200 million in special capi-

tal-works grants for cities and towns.

In Ontario, Kingston Mayor Helen Cooper, who is also president of the province’s 670member Association of Municipalities, says that the funding squeeze is being aggravated by the fact that provincial governments have arbitrarily transferred responsibility to municipalities for some services. For one thing, she said, Ontario now requires local governments to pick up the tab for security guards in courthouses—a responsibility previously shouldered by the province. Another area of controversy is education. According to the Peel Board of Education, which administers the school that Jessica Peroff was to attend in September, the province’s share of funding for education at the elementary and secondary levels has dropped sharply in the past decade, to 14 per cent in 1992 from 34.2 per cent in 1982. Most of the rest of the money is raised through property taxes.

To bring its own costs into line, Peel Board of Education chairman William Kent says, the board had no choice but to cut junior kindergarten classes. The action is expected to save $3.9 million during the 1992-1993 school year from a total budget of more than $650 million. Designed for threeand four-year-olds, Ontario’s junior kindergarten program began in 1988. Its objective is to introduce preschool children to the classroom, making smoother the transition to what educators now call “senior kindergarten.” Currently, 136 of the province’s 200 public school boards offer junior kindergarten, but dozens of boards across the province now are considering whether to drop the program. Said Peel board vice-chairman Beryl Ford: “A number of boards are looking at cancelling non-mandated programs to help pay for the programs that are mandated by the province. They are watching the situation in Peel very closely.” For his part, Kent says that the board had already cut back on administration and resource activities designed to enrich regular education programs, and that it was reluctant to cut further. He added: “We’ve made devastating cuts in administration. The province cannot export all of its financial problems to the municipalities.”

In Metropolitan Toronto, the country’s largest municipal jurisdiction, with 3.1 million residents and a budget this year of $3.2 billion, the debate about service cutbacks and tax increases has overshadowed virtually all other local issues. The region, which includes the city of Toronto and five surrounding communities, has been told to expect a one-per-cent increase in unconditional provincial funding for 1992, equal to $1.4 million. But to cope with an anticipated welfare bill this year of close to $1 billion—of which $187 million will come from property taxes—the regional council is proposing to raise local tax rates by 14.7 per cent.

Metro Councillor Scott Cavalier, who favors deep cuts in local spending to reduce the size of the tax increase, says that virtually every program, from community health care to recreation, should be subjected to a strict budget review. Says Cavalier: “We have to define what level of service we want and how we can deliver

it. I think we should be looking at limiting service in some areas.” He adds: “Virtually every person I talk to says that they can’t afford this tax increase. And we’ll have to lay off several hundred workers—some of them have been with us for years.”

If current trends continue, Kingston’s Cooper says, municipal politicians will be forced to move more aggressively towards a user-pay system of funding local services. Kingston itself adopted the user-pay approach to help fund the construction of a new sewage treatment plant. Currently, local homeowners pay a water tax of about $20 a month, a fee that is likely to rise to about $60 a month by the time the

facility is completed in two years. Explains Cooper: “We were not getting any money from the provincial government. So we had to charge homeowners not only for the water they use, but once they had used it, we had to charge them to clean it up.”

The city of Lethbridge, Alta., has also adopted a user-pay approach to help alleviate its financial problems. Said deputy mayor John Boras: “We used to subsidize the digging and maintenance of graves, but now our citizens have to pay about $1,000 for the service.” In a further effort to save money, local politicians have cut the city’s 800-strong workforce by 49 positions. And under a new pay-as-you-go sys-

tem, the city will no longer borrow money to finance routine capital projects, such as paving. Instead, city officials plan to undertake such projects only when they have raised the necessary money in taxes.

But none of those measures addresses what many municipal officials say is the root cause of their problems: the use of property taxes to fund a growing range of services that they were never intended to support. Ottawa Mayor Jacquelin Holzman, for one, says that property taxes were introduced originally to finance the maintenance and construction of municipal infrastructure, to provide police and fire services and to pay part of the cost of elementary and

secondary education. But because the provinces have reduced their own share of funding for such big-ticket items as education and welfare, the tax burden on individual homeowners has increased. Says Holzman: “Instead of dealing with income redistribution at the federal and provincial level, they seem to be backing it onto property taxes. I don’t believe that we should be doing that at all.”

For her part, Quirk says that she hopes the federal government will move ahead with her national federation’s plan to finance construction of new roads and bridges. Under the plan, each of the three levels of government would contribute $1 billion a year for five years,

generating a total of $15 billion for capital projects. But Finance Minister Donald Mazankowski has declined to endorse the proposal. Indeed, the federal government has considered and rejected similar recommendations on many occasions in the past five years. Nor does it seem likely that Ottawa and the provinces will soon volunteer to shoulder a greater share of the cost of local services. As a result, municipal politicians warn, the potholes will become deeper, more bridges will rust, and children like Jessica Peroff may enter a much poorer school system.

TOM FENNELL