Municipal governments do not usually attract the same amount of attention in Canada as do provincial and federal governments, but they should. All levels of government have had a spending spree over the last decade or so. Part of this was justified by the pandemic, but data show that governments used the pandemic as an excuse to spend many taxpayer dollars that had nothing to do with Covid 19. Canada also spent considerably more than other countries on what they claimed were pandemic-related matters, yet did not have any better outcomes.
A recent report by the Fraser Institute examined municipal finances and found that spending was at record levels and, instead of looking at ways to economize, municipal governments typically just hiked property taxes. The Fraser study found that from 1990 to 2023, real (discounted for inflation) per capita revenue of local governments rose by 32.7 per cent, and spending by 30 per cent. In the period between 2008 and 2023, municipal government spending grew 12.4 per cent in inflation-adjusted terms, exceeding real per capita revenue growth of 10.1 per cent. Needless to say, spending growth outpacing revenue growth is not a positive long-term trend.
Among the different provinces, there are wide variations in financial data as municipalities in different provinces do not have the same responsibilities nor the same abilities to take advantage of economies of scale when providing municipal services. For example, Ontario recorded the highest per-capita municipal revenue of all provinces in 2023 at $4,156 while Alberta showed the highest per capita spending at $3,750. PEI had by far the lowest comparable revenue at $1,635 per capita and expenditure of $1,186.
The quality of public services provided by municipalities must also be considered, as taxpayers may not mind significant tax increases if they perceive value for money. However, considering the disorder going on in most of our major cities currently, although also in some smaller centres, with hate-mongering demonstrations taking place regularly and a significantly increased crime rate, most citizens do not believe their increased taxes are worthwhile.
Leadership among municipal governments is sorely needed. For example, it was refreshing to see the Niagara Regional Council recently set an upper limit of 3.5 per cent for property tax increases in next year’s municipal budget. This is still higher than inflation, which is currently running at about 2 per cent. There is no doubt this “restraint” had to do with the reality of Council facing an election next year, but hopefully sensible limits on future tax increases will be something Council with stick with in future. In particular, Council has to date stood up to the demands of Niagara Police Chief Bill Fordy for more money. Last year, the Niagara police budget increased by an incredible 13.2 per cent, more than four times the rate of inflation! For the upcoming year, Fordy is asking for an eight per cent increase – again about four times expected inflation.
Of course, police should be well-paid for a dangerous job, and they are. They are also rewarded by very early retirement provisions and generous pensions. But there is a limit to the depth of taxpayers’ pockets as well, and many police forces do not seem to recognize that fact. When municipal bankruptcies occur, as they have in a number of U.S. and Canadian jurisdictions over the years, it is typically the budgets for police and firefighters which are the key causes, and often as a result of unfunded pension liabilities for these groups.
The Fraser analysis and other data indicate that Canadians should begin paying more attention to what their municipal government is doing with their tax dollars. Voter turnout percentages in municipal elections are lower than those in provincial or federal elections – usually lower than 40 per cent – and have been declining in recent years. This happens despite the fact that most people experience the results of municipal government decisions often in their daily lives. Many Canadians are currently suffering from affordability issues. Instead of only blaming our grocery store or gas station for higher prices, maybe we need to take a closer look at all of our governments and what they extract from us in taxes before we even have a chance to think about how we spend our hard-earned money.
She has published numerous articles in journals, magazines & other media on issues such as free trade, finance, entrepreneurship & women business owners. Ms. Swift is a past President of the Empire Club of Canada, a former Director of the CD Howe Institute, the Canadian Youth Business Foundation, SOS Children’s Villages, past President of the International Small Business Congress and current Director of the Fraser Institute. She was cited in 2003 & 2012 as one of the most powerful women in Canada by the Women’s Executive Network & is a recipient of the Queen’s Silver & Gold Jubilee medals.
