Think-tank: cities should keep own houses in order

Beauchesne, Eric

The federal government doesn’t have the constitutional right to give cities new sources of revenue, nor is there any need for it to do so, says a report by an economic think-tank.

Instead, municipalities should learn to be more efficient and make better use of existing avenues to raise the funds they need to pay for services and upgrade their roads, bridges, sewers and other infrastructure, argues the report by Halifax’s Atlantic Institute for Market Studies.
Ottawa’s role should be limited to funding only those services, such as immigration and urban aboriginal programs, for which it is directly responsible, or programs, such as social housing, that are of national interest, or where a national government presence is needed, says the report by the conservative research firm released last week.
Cities over the past decade or so have had to deal with increased financial responsibilities, reduced provincial grants and an ensuing greater reliance on their own revenues, concedes the report, authored by Harry Kitchen, a Trent University economics professor in Peterborough, Ont., and expert on local government issues.
That, however, does not justify new federal involvement in financing cities, which is a provincial responsibility, it adds.
The federal Liberal government, as part of its cities agenda, has promised to give municipalities what in five years will be a $2-billion-a-year share of its gasoline tax revenues.
The money is to go toward helping cities clean up their environment, including ensuring they have safe drinking water, improving public transit and renewing infrastructure, such as roadways and bridges.
It has been estimated that municipalities are suffering a $60-billion infrastructure deficit.
But the AIMS report says there is much the cities could do to put their own houses in order, including a more efficient and fairer application of property taxes and development charges, including the setting of variable tax rates based on the cost of providing services to properties.
The application of user fees should also be reformed so they are not used to raise revenues, but to direct resources to their most efficient use to reverse what has been an overinvestment in some services and the building of unnecessarily large plants or facilities, it says.
It also suggests the introduction of per-bag fees to cover the costs of garbage collection, and tipping fees for solid-waste disposal that capture all costs.
With respect to public transit and transportation, efficiency could be improved by using higher prices in peak hours, which would reduce peak-hour demand and encourage use during off-peak hours, it said. Further, cities should be allowed to impose higher taxes on parking lots, add a city vehicle registration fee to the provincial fee, have a dedicated municipal fuel tax with rates set locally, and use tolls on major arterial roads.
Cities would then be able to tax both residents and non-resident commuters and visitors for services that both groups use but for which non-residents don’t pay, it said.