By Nick Falvo, PhD, Director, Research and Data, CHF
In October, the Government of Alberta held public consultations to garner public input on changes to the Municipal Government Act. These changes could result in Alberta’s two largest cities gaining additional power and resources from the Government of Alberta. This has relevance not only to voters, but also to a host of public services. Here are 10 things to know:
- Canada’s municipal governments, compared with our federal and provincial governments, have rather limited authority when it comes to public policy. Canada’s Constitution stipulates that provincial governments determine what authority their respective municipal governments will be given. In particular, the only sources of revenue municipal governments have are those that have been granted to them by provincial legislation. (Across Canada, property taxes account for 50% of total municipal revenue.) Likewise, provincial legislation can also be passed that takes policy authority (and revenue sources) away from a province’s municipalities. (For more on this, see this background paper written by Library of Parliament researchers.)
- Most Canadian municipalities receive provincial and federal grants. Examples of such grants include funding for social services and public transit. Most of these grants come with ‘strings attached’—that is, with conditions stipulating that the funding must meet federal or provincial policy objectives. For example, Alberta’s provincial government provides Calgary and Edmonton with an amount equal to five cents per litre of gasoline and diesel fuel—this money must be spent on transportation infrastructure. In total, Alberta’s provincial government “provides over 65 conditional grants to municipalities from 10 different provincial government departments.” The Ontario government provides its municipalities with two cents per litre of gasoline while stipulating that this funding must be used for public transit. (For more background, see this 2009 conference paper by Enid Slack.)
- While changes to Canada’s Constitution would be the ultimate political victory for municipalities, Canada’s municipalities often choose pragmatism over principle (rather than lobby for Constitutional changes). Indeed, given how politically challenging it would be to make changes to the Constitution, municipalities use much of their political capital lobbying the federal government for more funding, and lobbying provincial governments for legislative changes. Examples of funding asks of the federal government can easily be seen by perusing the web site of the Federation of Canadian Municipalities (FCM). Specific examples include more funding for affordable housing, public transit, telecommunications, clean water and other forms of public infrastructure.
- Targeted lobby efforts by municipalities have often been successful. In the 2004 federal budget, the federal government announced it would give municipalities a full rebate on both the Goods and Service Tax and the federal portion of the Harmonized Sales Tax. And in the 2005 federal budget, the federal government announced $5 billion (over five years) to municipalities—the funding was derived from gas tax revenue. (For more on both these developments, see this link.)
- Some Canadian cities have advocated for their provincial government to upload responsibility for certain forms of spending (as opposed to giving them more revenue tools). This is what happened in Ontario beginning in 2008, when the provincial government agreed that its municipalities would no longer fund social assistance benefits, drug benefits, disability benefits or court security.
- Several of Canada’s large cities have advocated for ‘Charter status,’ which gives them more authority than other municipalities in the same province. The City of Toronto advocated for such status beginning in 2000. The City of Toronto Act, signed into law in 2006, confers more authority to the City of Toronto than to other Ontario municipalities. Among other things, it allowed the City of Toronto to implement a land-transfer tax in 2008, which today generates $350 million annually for Toronto’s municipal government.
- Recently, the mayors of both Calgary and Edmonton have made similar pitches for their respective cities. Discussions in Alberta have taken place since 2014 (mostly behind closed doors) as part of a broader review of Alberta’s Municipal Government Act. (A relatively recent news article on this can be found here.) A background document has been released that hints at some of the changes that may take place in Alberta; but that report contains very few specifics. Pundits expect that, by the time Alberta’s municipalities hold elections in October 2017, this process will be over and the legislation passed.
- Since the mid-1990s in both Calgary and Edmonton, the property tax base has increased much more quickly than the personal income tax base. Indeed, between 1994 and 2012 in Calgary, nominal personal income per capita doubled, while the annual value of per capita property assessments increased 3.5 times. This may make it challenging for the mayors of Calgary and Edmonton respectively to make the case that they need a renewed fiscal arrangement. (For more on this, see this 2014 report by Melville McMillan and Bev Dahlby.)
- As a percentage of annual revenue, Alberta cities spend less today on social service than they did in the 1950s and 1960s. This too may make it more challenging for the mayors of Calgary and Edmonton to persuade their provincial government that they need a new fiscal partnership. (For more on this, see McMillan and Dahlby’s 2014 report.)
- If Calgary and Edmonton want to spend more on public services and infrastructure, they always have the option of increasing property tax rates. In fact, in their 2014 report, McMillan and Dahlby note that property taxes in Alberta, relative to household income, are quite low by historical standards. But municipal politicians are often reluctant to raise property tax rates, in part because property taxes are very visible to—and unpopular with—homeowners. Put differently, from the vantage points of mayors and city councilors in both Calgary and Edmonton, raising property tax rates might be good public policy but bad politics.
 It was a bit of an anomaly that Ontario municipalities had these responsibilities in the first place—as outside of Ontario, this was not the case for municipalities. Indeed, this uniqueness was often invoked by Ontario municipalities as they advocated vis-à-vis the provincial government in the lead up to the 2008 change.
The author wishes to thank the following individuals for invaluable assistance with this blog post: Caroline Andrew, Janice Chan, Bev Dahlby, Jason Ennis, Louise Gallagher, Katherine Graham, Dan Hanson, Mark Heyck, Allan Maslove, Melville McMillan, Enid Slack and Matt Wilson. Any errors are his own.
The views expressed in this blog post are those of the author, and not necessarily those of the Calgary Homeless Foundation.