Beginning Of Provincial Regulation Over The Municipality example essay topic

78: 263 Municipal Government The Evolving Provincial-Local Financial Relationship in Canada, and the Prospects for Municipal Fiscal AutonomyKarly McRae 000421 Nov. 21, 2003 After tracing the evolution of the provincial-local financial relationship in Canada it has become apparent that the trend, throughout history, has been towards greater Provincial control and in turn less fiscal autonomy for the municipality. There has been an increase (due to demand as well as downloading from the provinces) in the functions and responsibilities of the municipality, as well as the cost of these functions, and a decrease in fiscal resources and revenue sources. Yet, It has only been in very recent years that we have seen a trend moving in the direction of Municipal fiscal autonomy. The trend towards Municipal fiscal autonomy is possibly more prevalent today then it has ever been.

The proposal of such things as Glen Murray's New Deal for Winnipeg, and Paul Martin's proposed change in federal-provincial-municipal relations (of the same name), provides optimism for local fiscal autonomy in the future. The Baldwin Act was the beginning of Provincial Regulation over the Municipality. It was based on several principles including the decree that "Municipal Councils were the creatures of the provincial legislature and were subject to its sovereign authority". The second principle of the Baldwin Act stated that a municipality's power should vary with its size and character (i.e. whether it was rural or urban), and the third principle stated that members of council should be elected from only those people who held stakes in local property. "The powers of the municipal councils were strictly defined by the provincial legislature and strictly interpreted by the courts".

The Baldwin Act was only the beginning of what would be decades of development that would hinder the autonomy and independence of local government. The Baldwin Act began the landslide of provincial downloading, conditional grants and a provincial-local relationship that seems more like a parent child relationship then a relationship between two elected governing bodies. Early municipal roles were much more simple and straightforward then they are today, but they were dependent on much the same source of revenue as modern municipalities. Although modern municipalities receive much more assistance from the provinces as well as the federal government then did their early counterparts, they have very few new ways of generating substantial revenue other then through property tax.

Since the Baldwin act, the provinces have tightened their grip mainly in times where municipalities were in a state of great financial need, or where the demand on them seemed to exceed their functional ability. "The department of municipal affairs was formed within a number of provinces by the turn of the century". This was intended to "give leadership and guidance in municipal development and to provide for the continuous study of the problems of the municipalities."Manitoba established a Department of Municipal Commissioner as early as 1886, with Saskatchewan following suit in 1908 and Alberta in 1911. British Columbia appointed an Inspector of Municipalities in 1914, but a full department was not created until 1934. Ontario's experience was somewhat similar, with an office of Provincial-Municipal Auditor as early as 1897 and a Bureau of Municipal Affairs from 1917, but no department until 1935. The same year Nova Scotia created a Department of Municipal Affairs and in 1936 New Brunswick established a Department of Education, Federal, and Municipal Relations".

The provinces put these departments in place to accommodate for "rapid development of local government institutions and a sudden expansion of population". The Depression of the 1930's led to the next era in tightening of provincial control over municipal finance. In response to "municipal defaulting on financial obligations, provincial governments established or expanded not only municipal departments but also boards with a variety of administrative and quasi judicial responsibilities relating to local government. A number of these bodies had originally been formed to regulate public utilities and their relations with municipal authorities.

As a result of the financial difficulties of the 1930's many of these bodies were assigned responsibility for controlling municipal financing as well as jurisdiction in other areas such as zoning and assessment". Municipal Boards were created from organizations that previously had no jurisdiction over fiscal matters pertaining to municipalities. With the creation of these boards, the province now had control over approving or disapproving debenture issues in regards to the local governments. By the mid 30's provincial control had increased immensely. "Every municipal by-law was subject to approval of the Minister of Municipal Affairs... All of the provinces except Prince Edward Island required provincial approval of by-laws to incur debt."In many cases municipalities were authorized to exercise specific powers only subject to review or control by some provincial authority".

Today the Municipal Act states, "No municipality can proceed with any undertaking that is to be paid for in a subsequent year, or by an issue of debentures, until the approval of the Municipal Board is obtained". The grip that the provinces had on municipal fiscal autonomy only tightened in the post WWII era. "Massive centralization occurred because of the war effort. As part of the tax-rental and then tax-sharing agreements brought on by the wartime emergency, municipal governments were squeezed out of such fields as income tax and sales tax, and confined to their historical dependence upon the real property tax as their main source of revenues".

Massive urbanization led to increased demands on municipalities, forcing the provinces to increase their assistance. "As the revenues from the real property tax became less and less adequate to finance the growing expenditures of municipal government, the provinces increased their financial assistance. Most of this increased assistance, however, was in the form of conditional grants". The idea behind these conditional grants was that the "provinces were attempting to ensure that certain services were provided to at least a minimum standard regardless of the varying financial capacities of their individual municipalities". The result was that "as municipalities participated in more of these conditional grants and shared cost programs, their local expenditures increasingly reflected provincial priorities". Conditional Grants are provided for a particular purpose, usually with certain conditions attached.

They have tended to skew municipal priorities and have resulted in making local governments decentralized provincial service delivery agencies. Increases in downloading and entangling of responsibilities from and with the provincial as well as the federal government over the last few decades has led to further encroachment on local fiscal autonomy. "In many traditional areas of local competence, provincial supervision, regulations or outright control have been deemed the acceptable solutions... The overall effect has incorporated municipal affairs more completely in the broader contexts of provincial and federal public administration. Indeed, local autonomy in all but a few... areas is extinct". The above statement remains true today.

Although, recent proposals and studies regarding reform give a promising outlook that one day some form of fiscal autonomy might be possible. Municipal reform attempts of the day have had at their heart, possible remedies for disentanglement and downloading, Municipal Autonomy, and more specifically Municipal Fiscal Autonomy. However, none of the recent reforms has had great overall success. "A number of the more recent initiatives seem to be more concerned with downloading than disentangling and result in arrangements which are at least as entangled as before". Therefore, it is likely that for reforms to succeed concentration will have to be placed on disentangling the three levels of government in order to make room for any other successful changes, including fiscal autonomy. The advantages to disentanglement include "less overlap and regulation from above, and increased local autonomy.

It has also been suggested that the local level would be left with clearly assigned services and access to the revenues to carry these out". In 1976, the Canadian Federation of Mayors and Municipalities maintained that "local governments' loss of power had reached crisis proportions". Stating, "The outward signs are the steady loss of municipal power and increasing financial constraints. Grants from provincial and federal Governments come with so many strings attached and represent such a large part of municipal budgets that municipalities are becoming puppets in a show run mainly by Provincial Governments". Because Municipal Responsibilities are increasing and provincial transfers have decreased Municipalities across Canada are searching for a new way to generate enough revenue to stay afloat. Over 80% of the revenue generated by Canadian municipalities is through their own sources.

Intergovernmental transfers account for 17% of the additional funding, with the provinces contributing 16.6 percent of this and the federal government. 04%. Of the 17% of revenue coming from provincial transfers, 85 percent of this money is in the form of conditional grants. Municipalities have been the victims of a "fiscal squeeze" in the last decade, the result of a decrease in provincial transfers of nearly 10% of their total revenue. These statistics are consistent with that of the city of Brandon as well as the city of Winnipeg (Table I). Under the current situation municipalities who are feeling the financial squeeze have little choice but to place a more heavy reliance on property taxes.

"An option for reducing the property tax burden in many provinces is to reduce provincial property taxes. In several, the provincial property tax emerged with the provincialization of school finances. With access to superior alternatives at the provincial level for financing schools, a provincial property tax (at least on residences) could be eliminated without any increase in the overall tax burden even at the provincial government level. (A problem however, is that such a move might imply higher provincial income taxes, a tax about which provincial governments appear particularly sensitive.) Reduction or elimination of provincial property taxes would leave the property tax; a tax well suited for municipal government the domain of municipal government. The municipalities however, would still need to convince their taxpayers that municipal levies are warranted". This is precisely what Glen Murray (Mayor of the City of Winnipeg) is trying to do through the proposed "New Deal" for Winnipegger's.

The city of Winnipeg is plagued with a sagging infrastructure and a recurring debt. Currently the city depends to a large degree on provincial funding, and takes a majority of their revenue, as most municipalities do, from property taxes. Under the proposed "new deal", property taxes would be cut in half, and the dependency on direct provincial funding would be eliminated and replaced by provincial sharing of sales and income tax with the city, and an increase in user fees and consumption taxes (Table I & II). A rise in property tax is inevitable without a look at other possible solutions to the problem. The new deal proposes a solution to this problem, and with it, local fiscal autonomy would be created. Conditional grants would be eliminated and replaced with own source revenues and tax sharing; leaving more room for the city to spend money on things that it gives priority, instead of being tied up with provincial regulation.

In addition to cutting property taxes in half the new deal proposes to "eliminate the business and amusement taxes". The deal has been deemed by Glen Murray as a "tax shift, saying it would reduce the city's reliance on property taxes by moving toward consumption taxes and user fees, which he says allows taxpayers to have a say in what they pay. At the same time, the deal increases the total amount of revenue the city receives, which will allow the city to pay for desperately-needed infrastructure maintenance and repair (table )". In order for the new deal to go through it will first have to be approved by council and after that, "negotiations would have to take place with both the federal and provincial governments". The federal government under Paul Martin does not appear as though it will be much of a roadblock. Martin has promised a new deal for cities that would provide the municipal governments with a "significant share of gas taxes".

This works nicely with Glen Murray's proposed new deal since a good portion of the revenue under the 'new deal' would be dependent on the gas tax. The problem facing the new deal does not lie with the federal government, but rather with its provincial counterparts. Historically there has not been much evidence to show that Provincial governments are very willing to relinquish their control over local fiscal affairs, but pressure from opposition governments, such as the recent liberal proposal for a province wide 'new deal' in Manitoba may cause the current NDP government to consider Glen Murray's proposition. Although the provincial-local fiscal relationship that has evolved over the years has not been one that has moved in the direction of Municipal Fiscal Autonomy, the emergence of new proposals such as Glen Murray's New Deal for Winnipeg gives hope for movement in that direction. Municipalities have become more and more frustrated by the provincial strangle hold that has been placed on them over the years, and they are beginning to demand change. This need for change is rapidly being recognized by all levels of government, and promises and ideas for reform are materializing.

This reform will not only provide for local fiscal autonomy it will provide for prosperous communities, and a higher quality of life because people will have invested in their city. Bibliography Warren Magnusson and Andrew Sanction, City Politics in Canada, University of Toronto Press, 1983. C. Richard Tindal and Susan Notes Tindal, Local Government in Canada, 5th Edition, Scarborough, Nelson Thomson Learning, 2000. Ian Mac Fee Rogers, Municipal Councillors' Handbook, Sixth Edition, Carswell Publishing, 1993 Jack Masson, Edward C. Les age Jr., Alberta's Local Governments: Politics and Democracy, University of Alberta Press, Edmonton, AB., 1994, Melville L. McMillan, Municipal Relations with the Federal and Provincial Government, a Fiscal Perspective: web Of Brandon: web of Winnipeg, What is a New Deal? web office / New Deal / TheNewDeal. stm CBC Manitoba, In depth, Winnipeg's New Deal: web Sewell, Winnipeg Shows the Way, Muni mall. net: web of Winnipeg, New Ideas. New Times. New Deal., Top Ten Questions and Answers: web I: Winnipeg Sources of Revenue Before New Deal (CBC Manitoba, In depth, Winnipeg's New Deal: web) Table II Winnipeg Sources of Revenue After New Deal (CBC Manitoba, In depth, Winnipeg's New Deal: web) Table No Change vs. Change Under New Deal (City of Winnipeg, What is a New Deal? web office / New Deal / TheNewDeal.'s tm) UNDER THE OLD DEAL: UNDER A NEW DEAL: Our property value taxes would need to go up more than 50% to pay for the streets, bridges, sewers and water mains we " ve put off fixing. No one is proposing that - no one wants that.

Property value taxes could go down by 30-40-50% and other sources of revenue would fund infrastructure renewal. Our roads might eventually get fixed. Our roads could be in good shape within 10 years. Most City services are paid for with property taxes.

Property taxes would only pay for property-related services (police protection for our homes, fire, street cleaning, snow removal, flood protection, neighbourhood revitalization, neighbourhood parks, urban planning). Only about 8.5% of fuel tax collected in Winnipeg by the Province and federal government goes to roads and Transit. 100% of a City fuel tax could go to roads and Transit. The cost of making Winnipeg a better place to live, work and play falls on us, Winnipeg taxpayers. Visitors and those living outside Winnipeg, who come here to work, shop and play, will share the cost of police services, road construction, recreation, parks and arts, entertainment and culture.

The City doesn't have $1.2 billion to spend on upgrading its sewer and water system. Increased revenues could pay for the necessary upgrades to our wastewater treatment plants, combined sewers and water mains, ensuring a clean environment. Citizens have no say in where their tax dollars go. Starting with public consultations and possibly ending with a shift to consumption taxes and user fees, each and every Winnipegger will have a say in what we pay.