Lawrence Solomon
National Post
September 18, 2004

Canada’s cities must “work together to make sure we all have the tools and resources we need to thrive,” an inspired Toronto Mayor David Miller said earlier this week, in anticipation of this weekend’s City Summit of mayors in Toronto. Uninspiringly, the resources the cities crave are more tax revenues; the tools they wave a tin cup and a begging bowl.

This latest summit is only the second one to be held among Canada’s so-called “hub cities” – 10 cities that are economic hubs of their regions. The first summit, held in January of this year and also in Toronto, proclaimed that cities are the engines of the economy. A joint communique then begged senior levels of government for more taxing power, more regulatory power, more federal and provincial subsidy programs, and a share of the federal and provincial gas taxes to rescue city economies.

The Hub-10 cities grew from the C5 – Canada’s Big Five Cities – “to address the looming crisis of urban Canada.” The C5’s first meeting in Winnipeg in 2001 won plaudits for waking Canadians up to the realization that our big cities – Montreal, Toronto, Winnipeg, Calgary and Vancouver – were economic basket cases suffering from inadequate taxing power. The plaudits were drowned out by the protests of smaller cities that feared their own cries for more grants would be drowned out. The C5 became the Hub 10.

The cities do have some legitimate points. The property tax that they rely on is unfair – not just outdated, as the mayors state, but positively harmful because the tax falls most on intensively used land, discouraging compact developments, and least on marginal lands, encouraging sprawl. The mayors also are right to demand more freedom in their operations, such as the right to earn a profit from services that they run, as private sector businesses do.

But the mayors don’t put the powers that they already have to intelligent use – just the opposite. In the case of the property tax, for example, they magnify the perversity of disproportionately taxing compact developments by heaping surtaxes on apartment buildings, office towers and other high-value uses. These intensive uses, in fact, require less water main, road surface, power line, and other infrastructure per occupant, making them generally much cheaper to service. In the case of municipally owned businesses such as public transit and garbage collection, the mayors already have the right to run on a break-even basis. Yet they prefer to see huge operating losses rather than run disciplined operations.

Canada’s Hub-10 cities point to U.S. cities as exemplars because U.S. cities, which have more autonomy than Canadian cities, receive more federal funding, have more taxing options, and rely less on property taxes. What the Hub-10 don’t tell us is that federal funding of municipalities is trivial in both the U.S. and Canada (3.3% versus 1.3%) while U.S. states provide muncipalities much less funding than do Canadian provinces (4.5% versus 17.3% ). What the Hub-10 especially don’t want us to know is the real source of autonomy in U.S. cities: user fees. U.S. muncipalities meet fully one-third of their budgets from user fees; Canadian muncipalities just one-fifth.

For the real urban exemplar, however, look not to the U.S. but to the U.K., where privatizations in electric power and other sectors generated windfalls for governments and lower rates for residents. In the U.K., most public transit routes now run on a for-profit basis, competing well against the automobile and thriving as modern, consumer-oriented businesses. Most of all, look to London and its courageous hard-left Mayor Ken Livingstone, who charges cars and trucks for the use of downtown roads. Soon London vehicles will be paying for the use of all city streets, as will vehicles in other large U.K. cities. Some 100 cities around the world, in fact, are now planning to introduce road tolls – Stockholm city council voted to start tolling in spring of 2005 – thanks to Livingstone’s leadership. None of those 100 cities are in Canada.

In truth, while our cities do have some legitimate gripes, they can easily acquire the wherewithal to look after themselves – they need only charge residents for the services they consume. Our city mayors don’t lack fiscal tools so much as they lack the courage to use the tools they have. Those who won’t help themselves have no moral claim to more money from the government purse.

At the last Hub-10 meeting, Toronto Mayor David Miller stated: “I don’t think it’s an exaggeration to say that the absence of adequate investment in our cities – in everything from public transit, to affordable housing, to child care, to infrastructure – is reaching a crisis point. Speaking as Toronto’s mayor, I will tell you that our city government does not currently have the capacity to avert the crisis.”

You can tell that to the other Hub-10 mayors, Mr. Miller, and to others in municipal backwaters. Just don’t tell it on the other side of the pond, or to mayors with convictions around the world who know nonsense when they hear it.

Lawrence Solomon is executive director of Urban Renaissance Institute and Consumer Policy Institute, divisions of Energy Probe Research Foundation.