There has been considerable discussion recently about whether Rothesay and Quispamsis should amalgamate into a city. Now both councils have discussed it and may be considering having a study done.
Amalgamation discussions are nothing new to people in greater Saint John. In 1992, the province issued a discussion paper on the subject and in 1997, commissioned a study that ended up recommending full amalgamation of Saint John and its outlying communities (the Cormier report).
I worked with the mayors and councils in 1992 to ’93 to respond to that initiative and again in 1997, as the MLA for Kennebecasis, to respond to the Cormier report. I wrote both reports that went to the government. As a result, I have some opinions which may be worth sharing with citizens and municipal politicians.
Merging isn’t cheap
The Cormier report contained much useful and interesting information and it detailed some conditions, if full amalgamation was to be implemented. Among them were changes to the operation of the police department and a change to the “culture” at City Hall. The report stated “Perceptions exist that the city is poorly managed, fiscally irresponsible and in bad shape financially.”
These perceived problems were not, however, the reasons that the government rejected this proposal. It was because the financial information and proposed tax rates contained in the report were not realistic.
The outlying communities team found that transition and other costs were significantly underestimated, resulting in the report’s proposed tax rates being at least $0.30 lower than what they would actually be. We estimated that the urban tax rate would exceed $2 by 2002, and even that did not include past service pension costs (which had to be actuarially calculated) related to all additional employees joining the Saint John pension fund, which had vastly superior benefits.
I urge municipal politicians to exercise caution as they examine amalgamation.
Let’s look at another example – one that did happen. I quote Charles Cirtwell of the Atlantic Institute for Market Studies (AIMS), as he comments on the Halifax Regional Municipality: “fashionable ideas that get into the heads of premiers, mayors and powerful cabinet ministers are not subjected to searching analysis. If an idea sounds good to the right people, things happen…. (for example) municipal amalgamations.
“Evidence is quite strong that creating single-tier local government monopolies doesn’t reduce costs – it increases them. Researchers seem to agree that roughly 80 per cent of municipal services enjoy no economies of scale.”
He comments specifically on HRM by saying, “The costs of amalgamation were underestimated by a very significant margin. The final tally was a minimum of $40 million, whereas the estimate was under $10 million. Average residential property taxes went up by 10 per cent in urban areas and as much as 30 per cent in suburban and rural areas. Polling data show low levels of satisfaction with post-amalgamation services.”
Are there savings?
There is a perception that large savings are available when duplicate mayors and councils are eliminated. Brian Lee Crowley, formerly of AIMS, says “the supposed savings from smaller councils and elimination of several city halls and other trappings is so paltry as to be not even worth mentioning.” I looked at the numbers for Quispamsis and Rothesay and estimate the savings at less than one half of one per cent of gross expenditures.
Here are some other considerations:
*Will there be more provincial funding available?
There seems to be a notion that if Rothesay and Quispamsis amalgamate, there will be more -rovincial money available (editorial, TJ, Feb 8). This is hard to imagine. If they are a city, they will be competing with similar size cities; most in northern N.B. with mill closures, high unemployment and declining populations. The province is in very bad financial condition and is unlikely to increase grants. So if the new city is to get more, it will be at the expense of others. What government is going to take away from Miramichi, Edmunston, Bathurst Campbellton or even Dieppe, to give more to the affluent Kennebecasis City?
At present, there is competition between the towns. Do they consult each other before setting their tax rate? You bet they do! And neither wants to increase taxes more than the other. Yes, they squabble – and in public! But you know, it’s quite healthy and most often it is arguing over how not to spend some money. There are two separate cultures: very careful and frugal Rothesay contrasts with a more liberal spending, quite progressive Quispamsis. They keep each other on their toes and that benefits us-the taxpayers.
If they become a city, the councils then will be comparing their proposed tax rates to the other cities of their size such as Bathurst, Dieppe, Edmundston and Miramichi with an average tax rate of $1.65. If you think our tax rate will stay around the $1.20 to $1.30 range, think again.
Bilingualism (requirements for a city under the Official Languages Act) will eat up a fair increase in the tax rate. The difference between our present tax rates and those of the cities to which we will then be compared, will present a windfall opportunity for the mayor and council of the day to spend our tax dollars on projects they deem essential for a city of our size. Most politicians are spenders, and what a wonderful opportunity to appease the public with projects and legacies befitting a city that would be the fourth largest in New Brunswick.
Look before leaping
I urge extreme caution. I think amalgamation will cost our residents a significant increase in taxes over the first several years, because of transition costs and a move to a new plateau of tax rates because we are a city.
If our elected officials are determined to flush out the facts and appease the public with a soul-searching examination of this amalgamation possibility, I strongly recommend that they engage recognized experts to perform a comprehensive study. There are several in Canada. This must include reliable financial projections and realistic estimates of transition costs.
Taxpayers deserve to have a fairly accurate estimate of what their future tax rates will be. Be prepared for the towns to have to spend at least $100,000 to $200,000 to get the real facts about whether or not Rothesay and Quispamsis should amalgamate and to have the proper planning performed.
Peter LeBlanc is a retired chartered accountant, a former cabinet minister and a past chairman of the Saint John Board of Trade and the Atlantic Provinces Chamber of Commerce.