Overtaxed and underfunded: Canada used to have model cities, but funding cutbacks have knocked them down fore decades.

A century ago, 80 percent of Canada's population was rural; today, 80 percent of the country's 31 million people lives in towns and cities, and that figure is expected to reach 90 percent by the year 2020. Between 1996 and 2001, almost all of Canada's population growth was in the four largest urban regions: the extended Golden Horseshoe (Toronto and surrounding area) in Ontario, the Montreal region, the Lower Mainland of British Columbia, and the Calgary-Edmonton corridor. These parts of the country grew by 7.6% (compared with 0.5% for the rest of Canada), and they are home to more than half of the Canadian population. In 2002, 48 percent of Canadians lived in the eight largest metropolitan areas: in order, Toronto, Montreal, Vancouver, Ottawa-Hull, Calgary, Edmonton, Quebec City, and Winnipeg.

But, cities have been starved of resources by the country's senior levels of government for years. Ottawa and the provinces tackled their own deficits by cutting spending and downloading responsibilities to cities. And, the cities didn't receive more money to deal with their new tasks. Figures from the OECD (Organization for Economic Cooperation and Development) show that, in 1995, federal and provincial funds made up 21.4% of municipal revenues; by 1999 they provided only 16.5%. So, cities were forced into the position of having to provide more services with less money. Not surprisingly, they became cash-strapped, and dries that worked beautifully three decades ago, started to fall apart. Now, sewers, roads, bridges, transit, and other important elements of infrastructure are in a state of near collapse. By one estimate, the broken pipes and pavement cost billions of dollars to fix: the Federation of Canadian Municipalities said in 2003 that there's a backlog of $57 billion needed to repair the damage done by years of neglect, a bill that rises by $3 billion to $4 billion a year. Civic leaders are saying (yelling, actually) to senior government levels: "You must pay us now, or pay us later. Later, will be more expensive."

Municipalities get most of their income from property taxes, accounting for more than 50 percent of their revenues. Property tax is paid by anybody who owns real estate--the higher the value of the house, factory, or land, the higher the tax. Municipalities don't have a lot of leverage to increase property taxes and they are forbidden by law to run deficits. So, by taking an income hit from above, they are in a tight spot.

Mayors across the country say they need a bigger share of tax revenue beyond property taxes. Winnipeg's mayor, Glen Murray, pointed out recently that federal revenues are up 70 percent over the past decade, and provincial revenues are up by 50 percent. Meanwhile, he says city revenues "can't even keep up with inflation."

In 2002, federal New Democratic Party leader Jack Layton was a Toronto Councillor and president of the Canadian Federation of Municipalities. He pointed out that Canada is lagging in its treatment of cities compared with other countries. U.S. municipal governments spend more than twice as much per resident as Canadian cities. They depend on property taxes for only 27 percent of their total revenue, and they have more access to local sales taxes and income taxes. They also receive more than their Canadian counterparts in transfers from state and federal governments. For example, in 2002, Washington put $54.55 (U.S.) per resident per year into municipal budgets, compared with Ottawa's $10.22 (U.S.) for similar services: American cities received about 27 percent of revenue from senior governments, and in Europe the contribution to cities from senior governments was 31 percent and rising.

Our cities, said Mr. Layton, need more power and more money. In an article in The Globe and Mail, he wrote that, "The future of the country relies on cities with robust and diverse economies that can generate wealth to support the less fortunate, integrate newcomers, and connect into the global economy.

"But cities can't thrive when thousands are homeless, affordable housing is dwindling, public transportation is neglected, child care programs are starved, (public) swimming pools are closed, and roads are clogged ..."

Cities are the great generators of wealth in Canada. In 2002, for example, Winnipeg accounted for 64 percent of Manitoba's Gross Domestic Product (GDP)--that's the total of all the goods and services produced in the province. The story's similar across the country. Halifax produced 48 percent of Nova Scotia's GDP; Toronto accounts for one-fifth of Canada's GDP. The business growth within cities, the jobs and personal income growth, the increase in consumer spending, all are taxed by Ottawa and the provinces. But, the cities cannot tax personal incomes, retail sales, or profits. Toronto, for example, points out that it receives only eight cents of every new tax dollar that residents pay on their rising incomes; the other 92 cents goes to the federal and provincial governments.

As an editorial in The Globe and Mail observed, in September 2003, "Something's got to give (in relation to the sorry state of Toronto) ... the underlying malaise remains. The income gap widens. The inner city needs repair. The hospitality industry hasn't really recovered from the fallout of the SARS outbreak [in the spring of 2003]. Public services have been cut back. Public transit limps along with low funding, even as all governments give lip service to its benefits."

A coalition of almost 200 business and community groups called the Toronto City Summit Alliance prepared a 36-page action plan called Enough Talk (in 2003). The alliance said it wants Ontario to resume paying for some of the social programs it offloaded onto the City of Toronto. The coalition called for senior governments to beef up funding for transportation, education, housing, and community services for poor neighbourhoods. It wants city purchases to be exempt from federal and provincial sales tax, and it wants Ontario municipalities to be free to levy new taxes and set fees for services.

Another coalition says poorly maintained roads are hurting the economy of the entire province. The Canadian Automobile Association (CAA) says the problem discourages tourism, causes accidents, and increases wear and tear on cars, and is partly responsible for rising insurance premiums. The CAA, along with associations of trucking firms, road contractors and motor coach operators, has formed a group called the Municipal Roads Coalition. The group wants roads to be a priority for both provincial and federal governments. It says more of the fuel taxes and road user fees ($3.7 billion in Ontario in 2000-2001) should be spent on the road system itself (only $1.1 billion of that $3.7 billion went to roads).

In Ottawa, Prime Minister Paul Martin has agreed to let cities off the seven percent Goods and Services Tax. He also says improving cities is one of his major priorities. There's been talk of the federal government transferring billions of dollars in gasoline-tax revenues to municipalities. This, according to The Globe and Mail, could reach $2.5 billion a year (up to half of the $5 billion in annual revenues Ottawa receives from the federal gasoline tax). The funds would go straight to communities for roads, public transit, water, sewers, and other needs, on condition they give written guarantees of how the money will be spent. How much each municipality receives would depend on its population. And, while the money won't be tied to specific projects, the recipients would have to submit a 10-year capital-works plan, showing how they plan to use the extra funds. The provinces also would be involved with the transfers, agreeing to them, contributing their own shares, and promising not to cut grants to municipalities by the amount of the federal transfer, in effect taking the money for themselves. Municipalities also have to agree not to divert existing capital budgets to other priorities as a result of the new federal funds.

However, at the time of writing, and with a federal election looming, talk of sharing gas-tax money became muted.

But, many say that because cities are a provincial responsibility, it's to this level of government that they should look for relief. And, Ottawa is expecting some provincial premiers to resist what they see as federal government interfering in an area of their jurisdiction. However, when Canada's 13 premiers met for the first meeting of the Council of the Federation in December 2003, there was not even the tiniest peep of approval for the idea of diverting some gasoline tax revenue to Cities.

As reporter Bruce Little put it in a Globe and Mail article, cities are "Like young teens (because) they remain under the parental thumb of their provincial governments, which set the rules they live by: what chores they must do, what money they can earn on their own, and how they can handle their money.

"And, if the grandparents--the federal government, in this case--want to help the kids out with a little extra cash, they must first get the parents' permission."

FACT FILE

Traffic congestion is not so much a symptom of not enough roads, but of not investing enough in other forms of transportation.

FACT FILE

Canada is the only G8 country without a national, urban transit investment program.

FACT FILE

It was estimated in 2001 that B.C.'s inadequate road system cost $500 million in lost time and wasted fuel, and that's in a province that shares 11 cents of its 17-cents-a-litre gasoline tax with the Greater Vancouver Transportation Authority.

FACT FILE

By 2005, there will be 16 megacities on the planet, estimates the latest edition of the Times Atlas of the World: the largest of them will be Tokyo, with 27 million people. Urban dwellers; the book predicts, will outnumber the world's rural population for the first time by 2007.

FACT FILE

By 2003, Greater Toronto had a larger population than eight of the 10 provinces, and Calgary and Edmonton each had about the same number of people as Saskatchewan.

FACT FILE

In 2001, a Supreme Court decision gave the Quebec municipality of Hudson the right to control pesticide use within its borders despite the fact that cities don't have constitutional jurisdiction over the environment or hazardous materials.

SUGGESTED ACTIVITIES:

1. Globe and Mail columnist Jeffrey Simpson says he doesn't think the federal government should bail out Canada's cities, viewing them as a provincial responsibility. He says Ottawa lacks expertise, experience, jurisdiction, and local sensitivities to handle dry issues effectively. Discuss Mr. Simpson's view.

2. Winnipeg Mayor Glen Murray says our current municipal tax base relies too heavily on an outdated system of properly taxes. In an article in The Globe and Mail in September 2003 he wrote that the system "was created 100 years ago when 80 percent of Canadians lived in rural Canada. Today, 80 percent live in urban centres. That's why Winnipeg has stepped forward with what we call a New Deal for allies (http://www. winnipeg.ca/interhom/mayors_office/ newdeal/). This is a plan to restructure the tax system to cut property taxes and replace them with new ties and levies lied directly to the cost of providing dry services (Winnipegers will, for example, pay a dollar a bag to get their garbage picked up, and pay a city sales tax)." Report on the details of Mr. Murray's new deal, and what he and the dry of Winnipeg hope to achieve.

3. Donna Morton is the Executive Director at the Centre for Integral Economics in British Columbia. Here's how an article in The Victoria Times Colonist described her in November 2003: "She's part of a think-tank that wants to slash properly taxes, business taxes, and even income taxes--and boost taxes for polluters and SUVs. Donna Morton the tree-hugger has become Donna Morton the tax-shifter, heading a small but influential west coast think-tank. Tax-shifter. want to overhaul the entire tax system to simplify it and make it fairer, their idea is to control pollution, congestion, urban sprawl, and other problems by taxing the things that cause them. Discuss what you think of this approach.

CALL THE FEDS

In 2002, a Liberal task force on urban issues (under then-Prime Minister Jean Chretien) released its first report entitled, Canada's Urban Strategy: A Vision for the 21st Century. The task force of 11 MPs and two senators met with provincial ministers and officials, civic politicians and administrators, community leaders, business people, experts in the field, and volunteer groups across the country. The task force found that participants were unanimous in calling for direct, federal involvement in such things as infrastructure, immigration settlement, transportation, and affordable housing, The following were among its recommendations:

* Establish an advisory body with representatives from key national organizations, the academic community, and the business sector to provide ongoing consultation and advice on urban policy to the government of Canada;

* Establish a National Affordable Housing Program to address the shortage of affordable housing, which every major urban region saw as one of the biggest challenges "affecting economic competitiveness and quality of life;"

* Establish a long-term National Infrastructure Program that will build on current programs to provide stable, reliable funding (i.e. 15 years);

* Establish a National Transportation Program to provide long-term, sustainable funding for public transportation systems, and to invest in integrated, multi-modal transportation systems and high-speed rail service to connect major centres: The Task Force heard that traffic congestion costs an estimated $2 billion annually in the Toronto area alone through lost productivity.

SICK TRANSIT

In the United States, a six-year program of federal matching funds for urban transportation is paying out equivalent of about $50 billion (Canadian) a year to U.S. cities. To match this level in Canada, Ottawa would need to spend $5 billion a year--more than 16 times the current level. As a result, our transit systems are inadequate, and we have the highest rates of user pay in the world.

In The Netherlands, users pay only, 28 percent of their transit costs at the fare box; Americans pay just 41 percent; and Sweden's rate is 44 percent. In Vancouver. transit users pay 54 percent of the cost, while Montreal's is 56 percent, and Toronto's is 82 percent. By contrast, except for a tiny number of toll roads, people commuting by car in Canada get to use highways free of charge.