Municipal officials across Canada are again calling for ample revenue sources to meet their service provision obligations, stay on top of capital maintenance and tackle a backlog of required infrastructure improvements. A new package of proposals, released last week in conjunction with the Federation of Canadian Municipalities’ (FCM) annual conference, reiterates that a 157-year-old fiscal arrangement that’s highly reliant on property tax is out of step with 21st century demands.
The FCM report and associated recommendations set out an envisioned overhaul of municipal funding models that would see the federal and provincial/territorial governments each contribute about $5 billion annually toward municipal revenues. That would entail an approximate doubling of the current federal transfer to municipalities, while it’s recommended the provincial/territorial governments’ matching share could come from a combination of an allocation of income and/or sales tax, uploading some funding responsibilities and modernizing municipal taxation and fee mechanisms.
It’s also recommended that federal transfer payments be indexed to gross domestic product (GDP) and be available to support municipal operating costs in addition to the their current application for capital projects. Overall, the package of proposed fiscal reforms is characterized as a way to rebalance municipalities’ thirst for property tax and development charges at a time when both those expenses are fingered as a drag on new housing development. As well, it would broaden the base of what the FCM report describes as “a 19th century revenue framework that was never designed for the realities of the 21st century”, which includes demands to address homelessness, climate change and public safety.
“A new fiscal framework for municipalities is not a single tool nor is it a single commitment from one order of government. It is an acknowledgement that the delivery of public services and the distribution of public funds need to evolve to meet today’s challenges, through a partnership between orders of government,” the FCM report submits.
Municipal officials are urging the federal government to respond with some kind of a commitment in its fall economic statement this year. However, getting provinces and territories on board would require separate agreements between each of those governments and the municipalities within their jurisdictions, and its acknowledged that there will likely be varying willingness to tackle the issue.
