BUSINESS

BRIGHT LIGHTS, BIG PROBLEMS

Our cities are competing in a global game—with 19th-century tools

COLIN CAMPBELL November 27 2006
BUSINESS

BRIGHT LIGHTS, BIG PROBLEMS

Our cities are competing in a global game—with 19th-century tools

COLIN CAMPBELL November 27 2006

BRIGHT LIGHTS, BIG PROBLEMS

Our cities are competing in a global game—with 19th-century tools

BUSINESS

EXCLUSIVE REPORT

COLIN CAMPBELL

Dave Bronconnier is one of Canada’s most aggressive mayors— one who’s proved adept at getting under the skin of his provincial masters, such as Premier Ralph Klein. These days, he has to. “Bronco,” as he’s sometimes known, sits at the helm of Calgary, the fastest-growing big city in Canada, overflowing with people and new money from the oil and gas boom, but struggling to manage the demands that come with such unprecedented growth. “I have no choice but to be passionate and aggressive and inyour-face about proposing solutions to meet our needs,” he says. Lately, Bronconnier has been pushing the provincial government to turn over a bigger share of taxes to the city government to use for badly needed infrastructure upgrades—everything from new roads to schools and hospitals. So far, Klein hasn’t been overly receptive. “We have a paternalistic relationship with our provincial government,” explains Bronconnier. “Provincial governments are loath to give up

what is any perception of power, but they’re quite prepared to download responsibility.” Across the country, civic leaders are staring down long laundry lists of badly needed infrastructure and social projects, but lack the revenue to get them done. Toronto is agonizing over what to do with its eyesore Gardiner Expressway as more and more traffic, not to mention smog, chokes the city. Its lakefront is a shambles. Its transit system is overburdened and underfunded. Ottawa’s recent mayoralty race boiled down to a debate over a commuter rail project, aimed at connecting a fractured, sprawl-

‘Govemments are loath to give up power,1 says Calgary’s Bronconnier. ’But they’re prepared to download responsibility.’

ing city with its downtown core. In Vancouver, Montreal and Toronto,

local governments are struggling to provide necessary housing, settlement and social services required by the large number of immigrants landing each year. Canada is an urban country, yet its major

cities—the engines of the modern economy and international hubs competing for foreign investment—are being neglected, forced to shoulder more responsibility with fewer resources than ever, says the Conference Board of Canada’s “Mission Possible” report. For Canada to prosper, there needs to be a dramatic shift in opinion about the importance of cities, and a significant investment in them, according to the report. Back in 1867, Canada was a decidedly rural nation: 85 per cent of us lived in the country. Today, 80 per cent of Canadians live in urban areas. It’s where the bulk of the nation’s economic wealth is created. Last year, 10 major cities accounted for 51 per cent of Canada’s gross domestic product. The numbers are only expected to grow. Calgary’s population recently hit the one million mark and will jump by another 150,000 in the next five years. Greater Toronto’s population is ex-

pected to swell from 5.7 million to over seven million in the next two decades. Canada is no longer a rural country, but the 19th-century system

of governance and division of powers of that era persists. For example, federal and provincial electoral systems have a built-in rural bias that leaves urban dwellers under-represented. In Parliament, there are more debates each year about agriculture and fisheries than there are about urban concerns, notes the Conference Board. Cities remain under

the constitutional thumb of provinces, and lack legislative power to match their growing economic might. “The fundamental fact exists that right now cities remain a junior level of government,” says Anne Golden, president and CEO of the Conference Board.

Out of all the taxes paid by Canadians, 50 per cent goes to the federal government, 42 per cent to the provincial governments, while less than eight per cent goes to municipal governments, says the Federation of Canadian Municipalities. Outside of raising property taxes (a city’s main source of revenue), municipal governments have few avenues to find the kind of sustainable revenue they need. The current system of relying on property taxes is “perverse and broken,” says Glen Murray, an urban consultant and a former mayor of Winnipeg. “You’re using property taxes to pay for social services and public health, and things it was never intended to.” In coming years, cities will need to raise billions merely to keep up with the need for new infrastructure, says the Conference Board. According to the FCM, the infrastructure deficit is about $60 billion and growing. This kind of fiscal imbalance is nearly insurmountable under the current system.

In the last two years, there have been some forward-looking changes, such as the federal government’s decision in 2005 to give municipalities a share of the gasoline tax, and commitments in the 2006 federal budget for spending on infrastructure and immigration settlement. But it’s not enough, says the Conference Board. Since the 1990s, responsibility for many services has been off-loaded by higher levels of government and heaped onto cities, notes the board. From the feds, munici-

palities have been handed more responsibility for things such as maintenance of local airports and immigration settlement. In some provinces, cities have been handed a growing share of the bill for transit, social assistance and child care.

Immigration has also heaped additional burdens on cities. Although immigration is controlled by the federal and provincial governments, many of the costs (from affordable housing to settlement services) associ-

ated with immigration now rest on the shoulders of municipal governments. And those costs have been rising, in part because immigrants in recent decades have had less economic success than in previous generations and are taking longer to close earning gaps with non-immigrant workers.

The Conference Board says a fundamental change in the way cities are handed is neededone that doesn’t simply give more money to all cities, but focuses spending on Canada’s major cities. Its research suggests that the success and growth of Canada’s major cities “generates an even faster rate of economic growth in other communities within their province or region.” Those major cities, defined by the board as any with a population over one million, plus those that lead their regions in economic growth, include: Montreal, Toronto, Vancouver, Calgary, Edmonton, Halifax, Winnipeg, Regina, Saskatoon, and Ottawa. “It is time for Canadians to recognize that it is to the collective long-term benefit of all citizens to support government funding policies that would give major cities the resources they need to succeed,” says the Conference Board.

Although the idea of giving more money to the biggest cities has been supported by urban thinkers like Jane Jacobs, it remains a controversial proposal. Many smaller centres are also growing rapidly—Abbotsford, B.C., Fort McMurray, Alta., Kitchener-Waterloo, Ont. They, too, need substantial funding. “We’re not saying don’t give any support to other cities,” says the Conference Board’s Golden. “We’re saying, let’s fund strategically. Let’s fund looking at not just needs but also the potential to benefit.”

If the largest cities have a greater potential to contribute to our national well-being, they also have special needs that set them apart, says the Conference Board. Currently, the federal government provides provinces with money through grants and transfer payments that are in turn handed to all cities to support things like affordable housing and transit. The funds are typically handed down on a per capita basis. While this might appear fair, “it ignores the distinctive and more intense needs of major cities,” says the report. There appears to be a “diseconomies of scale” for bigger cities—as the city grows, services begin to cost more and more, not less.

Federal programs are meant to promote equality, but the board argues that they sometimes end up discriminating against large cities. For example, employment insurance programs provide fewer benefits to urban, unemployed workers than to seasonal workers in rural communities. In Toronto, 22 per cent of the unemployed receive regular benefits compared to 75 per cent of unemployed workers in P.E.I. and Newfoundland, says

Hub cities: Drivers of the Canadian economy

the Conference Board. Beyond more transfer payments from provincial and federal governments, cities need new sources of revenue, like sales taxes and payroll taxes, says the report. Sales taxes, for instance, have been used successfully in cities throughout the United States. Unlike property taxes, they spread the tax burden beyond only those who live in city centres. Hotel occupancy taxes, which have raised millions in revenue for many municipalities, should also be considered, says the Conference Board.

Not all the news is bad. Canada has prospered over the past decade. Important steps have been taken to ensure economic growth, like the federal government’s wrangling of the federal deficit. Still, cracks in the rosy picture are emerging. “Canada addressed its federal deficit,” says Golden, “though people are starting to realize that a lot of that was done by burying that deficit in the ground through neglect of infrastructure upkeep.” Research by the Conference Board suggests that fiscal problems within cities will only worsen under the status quo. “The dominant message,” says Golden, “is, give Canada’s major cities the requisite infrastructure tools and resources so they can drive the country’s economy.”

The growth of Canada’s cities, and the transition from a rural to an urban country, has not been painless. City economies have

boomed, but income disparities within the population have also grown. Things that affect quality of life in cities, such as pollution, homelessness and crime, have worsened. Left unaddressed, these problems can make a city into a less desirable place to live, detracting from its ability to lure business, skilled workers and investment. “You’re seeing in our cities more air quality problems, more concentration of poverty,” says Golden. “There is deterioration in social issues, a deterioration in infrastructure, a deterioration in increased gridlock, and as a result you’re seeing missed opportunities.”

Long gone are the days when Canadian cities, like Toronto and Montreal, competed against each other. Today, cities compete internationally for their share of business, investment and the most skilled, creative workers. All of these tend to flow toward cities that are most liv-

able and where there is a high quality of life. “Canada is missing out on foreign direct investment and we know that comes at the city level,” says Brenda Lafleur, one of the authors of the Conference Board report. “It’s Toronto competing against Beijing and Shanghai.”

Cities will need to find ways to promote environmentally sound growth (through things like eco-friendly industrial parks that reduce and recycle waste) and improve social

To deal with gridlock, the Conference Board says cities may have to emulate London (left) and impose road tolls

cohesion (through better immigrant selection and an investment in affordable housing by provincial and federal governments), says the Conference Board.

But one of the single biggest obstacles facing cities is traffic. It can almost singlehandedly crush a city’s quality of life while sucking billions from municipal coffers. As commuters in just about every city across the country are well aware, road networks in the largest cities can be frustratingly clogged, unable to keep up with current volumes of cars and trucks. On a typical day in Toronto, the 401, one of the busiest highways in North America, is a mass of unmoving traffic. The scene is little better on roads throughout

B.C.’s Lower Mainland, or in parts of Calgary. This congestion, says the Conference Board, not only hurts the competitiveness of urban centres by adding to pollution and energy use, but affects the national economy by delaying the movement of goods. A recent Transport Canada report estimated that congestion on Canada’s roads costs the nation’s nine largest urban areas $2.3 to $3-7 billion.

More and more, urban populations have spread far and wide to surrounding suburbs and towns. At the same time, however, government subsidies to public transit have decreased—as has ridership.

How to deal with this transportation chaos? The Conference Board says cities will have to consider measures such as road tolls and restraints on automobile use: Singapore, for example, issues permits that allow some cars to be used only on weekends. Road tolls are commonly used around the world to alleviate congestion while feeding municipal budgets: London, England, introduced a congestion charge to reduce traffic in its city core. Tolls might also be used to help finance road construction, says the Conference Board. Urban transit, on the other hand, might be improved by simple measures like giving buses more right of way on roads, says the report. Better landuse planning by city and provincial governments would reduce urban sprawl and also improve transportation.

The missing catalyst Canadian cities need to become sustainable and internationally competitive cities is strong leadership, says the Conference Board. “It’s not just mayors,” says Golden. “We have to expect more from our city governments.” Successful cities will have to draw on partnerships with business, community and academic leaders, says the report. Forging connections with the various levels of government is also essential. Some “jurisdictional entanglement” between various levels of government will be needed to develop policies on things like transportation, immigration, environment, and affordable housing, notes the report.

“All citizens should be worried that Canada’s major cities are struggling to stay competitive,” says the report. It’s a warning echoed by mayors like Bronconnier: “We can’t compete globally as a municipality taking on this kind of growth if we’re going to continue to perpetuate the mediocrity of a city.” M