Mar 10, 2014
The Canadian Federation of Independent Business (CFIB) released a report entitled “Municipalities Are Richer Than They Think” on February 24, 2014. The report says when all revenues received by cities are calculated, including transfers and user fees, the actual amount of funds received by cities amounts to 15 cents out of every tax dollar in Canada rather than 8 cents argued by FCM. The report concludes that instead of a revenue problem, cities have a spending problem. The report was released the day before the FCM Big City Mayors Caucus meetings in Ottawa on February 25 and 26.
Municipal organization responses:
While the CFIB relies on Statistics Canada numbers as the basis for its claims, the report by CFIB focuses on all revenue received by municipalities while the FCM focuses on tax dollars directly collected by municipalities. The CFIB includes in its analysis municipal tax revenue, sales of good and services, investment income, and other revenue (e.g., fines) as well as all federal and provincial transfers for a total of $73 billion in revenues. The FCM solely refers to property and other taxes collected by municipal governments, which accounts for about $38 billion in tax revenue.
The CFIB claims that while the amount of transfers to municipalities declined in the 1990s, transfers have since increased to a record level ($16 billion in 2008). The CFIB also states that any funding lost during the reduction in transfers was covered by increasing property and other taxes, which still remain at the higher rate, and that municipal spending increased during this time at a rate exceeding population growth. As such, instead of a revenue problem, the CFIB argues municipalities have a spending problem. The CFIB concludes by calling on governments to freeze additional funding to municipal governments until spending is better managed.
Municipal responses to the report included, among others, FCM, the Municipalities of Newfoundland and Labrador, and the Union of Nova Scotia Municipalities. FCM wrote a letter rebutting the report, reaffirming that municipalities only collect 8 cents of each tax dollar collected in Canada and advocating for a fairer share of taxes collected in Canada. The MNL posted a formal response to their website stating staffing issues, unsafe drinking water, and inability to maintain roads indicate that revenue is indeed the problem particularly in light of transfers being project-specific and municipal operating grants having been on the decline since the early 1990s. The President of the UNSM stated that municipal expenses are rising due to increasing costs of regulations and citizens demanding higher levels of services, and municipal income sources are limited.
SUMA takes issue with the CFIB report, as it does not reflect the fiscal reality facing communities, which includes the following:
- The total amount transferred by federal and provincial governments to all municipalities is not a stable and predictable funding source for each municipal government. Moreover, the large majority of the transfers (81 per cent in 2008) are for specific individual projects.
- The lack of stable revenue sources continues to be a struggle for municipal governments meeting increased regulations (such as solid waste regulations), and citizen demands for more and better quality services. This is particularly true for Saskatchewan which is experiencing tremendous growth while dealing with outdated infrastructure maintained during times of scarce resources.
- Municipal governments are trying to deal with these budgetary constraints and only having access to 8 cents of tax dollars in Canada while providing the most immediate and essential services out of any level of government, including safe drinking water, fire and police services, transportation, and waste management services.
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