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Business calls for cities to receive greater share
of tax revenue

by Julian Beltrame
The Canadian Press

Canada’s big cities are facing a fiscal crunch that threatens their ability to pay for such things as transit, sewers and housing, say business groups in a joint appeal to federal and provincial governments.

In a news release to be issued nationally Tuesday morning, the chambers of commerce from 13 of Canada’s largest municipalities call for a new urban strategy to keep cities from falling apart.

“The bottom line is that Canada’s largest urban centres need a more stable, secure and growing revenue source,” the release states.

The four-page statement is signed by the heads of chambers and boards of trade from coast to coast, including Halifax, Quebec, Ottawa, Toronto, Winnipeg, Calgary, Edmonton and Vancouver.

They say that should not mean more taxes, but a different way to split the current tax pie between the three levels of government.

In an interview, Toronto Board of Trade president Carol Wilding said the continuing trend of people flocking to urban centres has brought about a disconnect between tax revenue and spending requirements.

About 80 per cent of Canadians live in the major urban centres, while according to studies, less than 10 per cent of all taxes are collected by municipal governments.

Ms. Wilding also noted that 97 per cent of new immigrants move to major urban centres, particularly Toronto, Montreal and Vancouver, and that puts added burdens on those cities.

As well, in many cities, urban transit and repairs for sewage and water systems are lagging behind needs.

The fiscal deficit has implications for the country’s economy as well, Ms. Wilding argued, since cities are the acknowledged engines of economic growth.

“The municipalities need more money,” she said. “We need to find a balance to make sure urban centres get the affordable housing in place, that the transit and infrastructure is built, in order to be globally competitive.”

Canada’s municipalities have made similar claims before, most dramatically in 2007 when they released a report from Saeed Mirza of McGill University that estimated cities’ infrastructure deficit at $123-billion.

Without an infusion of cash, Canada faces “catastrophic failures” of vital infrastructure, including bridges and the water supply.

But while municipalities have traditionally placed the lion’s share of blame on underfunding from Ottawa and the provinces, the chambers say the municipalities share some responsibility.

The chambers point out that recent property-tax increases in urban centres have outstripped the rate of growth in population, inflation and gross domestic product.

As well, since 2005 Ottawa has turned over a portion of gas taxes to municipalities, currently capped at $2-billion annually.

“While cities may argue that growth has fed a need for increased services, there is little evidence of productivity improvements within municipal government,” the chambers say.

“We believe that the federal and provincial governments providing municipalities with access to greater revenues must go hand-in-hand with those municipalities demonstrating fiscal discipline.”

Ms. Wilding said the chambers have recommended specific mechanisms for a fairer distribution of total tax revenues, not how much more cities need. She said that issues should be worked out by the three levels of government.

The appeal comes at a difficult time for the two higher levels of government, which are also facing a fiscal crunch.

Ottawa reported a $55.6-billion deficit last year, and many provincial governments are even more deeply in the red when measured as a percentage of their economies. As well, Ottawa’s two-year, $46-billion stimulus package, some of which went to pay for infrastructure, is due to expire March 31.