The 2012 FCM Report paints a slightly improving picture with respect to municipalities after some decades of decline in key areas that contributed to a fiscal imbalance between responsibilities and resources. Of note, although there has been some improvement with regards to property taxes as a proportion of own-source revenues in municipal budgets since 2004 (decreasing from ~53% to 1995 levels of just under 50%), the proportion of general-purpose grants has decreased while specific-purpose have increased (the latter are conditional or earmarked funds from the Province for specific projects). And, although there has been some improvement with respect to Gas Tax transfer funds, and the Building Canada Fund (BCF), there are still parlous shortfalls precipitated by overall decline of intergovernmental transfers as proportion of municipal budgets, and the regressive property tax model that precipitates less capital and expenditure revenue for critical infrastructure repairs and local service delivery. It should also be noted that, despite some reversals by the provincial Liberal government in uploading services that were downloaded during the Harris era’s LSR exercise, the fiscal imbalance still remains (albeit less bleak). Also, the cost of municipal policing and fire protection has seen an increase, which for some small and rural municipalities, can prove particularly challenging and which can represent the highest costs in the annual budget. In response to budgetary challenges, some municipalities have sought creative and alternative ways of increasing own-source revenues such as through user fees, voluntary and involuntary hotel taxes, signage fees and licensing, and a host of other taxation tools within the jurisdiction of municipalities.
Federal investment has been seen as a key to halting or reversing infrastructural decline. However, despite initial positives in this area, these transfers have been drying up as agreements expire and the federal government reallocates its funding priorities. Federal transfer agreements concerning the Building Canada Fund (BCF), HST rebate, and those concerning public transportation capital and affordable housing have all expired, leaving only the Permanent Gas Tax Fund in place. Speaking with a collective voice and inaugurating advocacy groups such as the FCM has gone some length in attempting to establish better intergovernmental relations between municipalities and the federal government, with some notable successes amidst some lagging support. However, as FCM membership continues to grow and speak collectively in advocating for communities large and small, this has resulted in demonstrable changes in federal policy. That being said, there is much more to do to improve the federal-municipal relationship given the economic, environmental, social, and demographic realities local governments face.
The delegation of responsibilities has always been a key component - and sometimes a source of contention - with respect to the jurisdictional powers of each level of government, in addition to attendant bodies under provincial mandate (such as school boards, various agencies, and commissions). We see here reflected in the FCM report the changing nature of which levels of government ought to take responsibility for certain services, and how these may be supported (sometimes through grants, policies, or partnerships). As local government is subordinate to the upper levels of government, an abrupt change in provincial policy can impact certain municipalities more than others, for good or ill. I can here provide four examples: 1. Changes in food security and safety policies enforced by the local health unit can hinder small local food growers and producers as requirements may be set at a level that is not financially feasible to support a locally sourced agricultural enterprise; 2. Some municipalities that operate as a single tier may have more affordable access to OPP services, whereas other municipalities may pay higher rates for police services. 3. The province’s Green Energy provisions for additional wind farms has been a contentious issue among many rural residents, some of whom claim either health issues or lowered property value as a result. Despite some vocal opposition, municipal governments are not in a position to change the provincial goal for erecting more wind turbines to generate more renewable energy. 4. Winter maintenance of arterial highways that come under provincial jurisdiction was shown to lack oversight, possibly resulting in more winter-related driving accidents. The Ministry of Transportation has since revised their public tender practices, but previously it was shown that contracts were issued to the lowest bidder, and very little oversight was maintained to ensure the successful contractor had sufficient capacity in vehicles or use of de-icing fluid. Why this can impact a municipality might be on account that, pending geographic placement, provincial highways are seen as an economic life line.
We may remark that, as municipal autonomy in adjusting taxation to levels that would better generate revenue are constrained by the province, it would seem that municipal governments are by circumstance returning to a model of governance attempted in the early 20th century, and thus ever more emphasis is placed on the administrative at the expense of the representative role of councils. Without additional revenue supports, or changes to the Municipal Act that would benefit municipalities, many councils are left with the prospect of budgets driving policy, instead of the other way around. When this occurs, civic engagement and having the flexibility to respond to shifting needs of a community suffers.
The fiscal imbalance still remains despite some minor improvements. Municipalities face unprecedented challenges, be it the rising costs of service delivery; skilled personnel shortage amidst a wave of retirements or souring relations between councils, management, and staff; immigration settlement patterns; perennial problems associated with rapid urbanization and development; crumbling infrastructure and forced deferment of repairs due to financial shortfalls; declining population in rural and sparsely populated municipalities; regressive property taxation laws; climate change; and the still enduring and occasionally fractious legacy of the Harris-era amalgamations.