Sep 18, 2014

Feds and provinces push billions in costs down on to towns and cities


It is all too easy to get lost in “today’s issue” when we look at things without realizing they are part of a larger pattern that affects our lives.

Desperately needed public transit in the Lower Mainland becomes a political football with competing interests and imposed referendums. In the Capital Regional District plans for sewage treatment are stalled over local priorities.

But both of these issues and many more are all connected to the growing crisis confronting towns and cities in Canada facing growing costs and limited revenues.

An important report released today links these issues to the growing responsibilities faced by local governments with diminishing support from higher levels of government. Published by the Columbia Institute’s Centre for Civic Governance, Who’s Picking up the Tab: Federal and Provincial Downloading onto Local Governments looks at the staggering costs shifted from provincial and federal spending onto towns, cities and regional districts in British Columbia.  It is a pilot project looking at the province and attempting for one of the first times in Canada to get a sense of the size of this issue.

While the report is partially based on federal statistics and research by other parties by far the most important source of information for this document was input from 133 elected officials representing more than half of BC’s local governments. More than 95% said downloading of costs from the province and the federal government was a problem. Nearly 84% said it was a major problem.

While the respondents identified many issues, more than half pointed to the three issues of environment, policing and related costs and health and social services.

New environmental mandates have imposed billions of dollars in costs on our towns and cities. Whether or not people agree it was necessary, people in the Capital Regional District face $700 million in costs after being ordered by the province to build a sewage treatment plant. New federal regulations are forcing Metro Vancouver to spend $1.7 billion in sewage plant upgrades in this decade.  Even smaller communities like Nanaimo are looking at $61 million in capital costs for secondary treatment and another $18 million for an outflow.

Every community on the water is facing increasing costs as the province has cut support for flood management programs and shifted responsibilities to local governments. Climate change makes floodplain mapping critical but federal participation in this program has been withdrawn and the province has downloaded most responsibilities to local governments.  Between 2008 and 2013 only 10 BC local governments completed floodplain mapping.

Policing costs have become a complicated mix of law enforcement and social services. Over the past decades many people with mental health issues were moved out of institutions without the appropriate increase in funding to community services from the province.  In the 1990s the Vancouver Police Department had 1.5 full time employees assigned to work with people with mental health issues.  They now have 17 paid for by the City and by 2013 the force was reporting that mental health issues were involved in 21% of the issues they handled.  Between 2008 and 2013 the Victoria police reported a 356% increase in “disturbed person“ calls.    Over the same period the Prince George RCMP reported a 40% increase in mental health calls.  All of these are health related issued downloaded from the province to local governments that pay for policing.  The report estimates this has imposed a cost of between $50 million and $150 million annually.

The lack of affordable housing was one of the biggest issues identified by mayors and councillors. At a meeting this year mayors of Ottawa`s 22 largest cities ranked housing as their top priority ahead of transportation and the infrastructure deficit.  In the 1950s and 60s the federal government had robust housing programs which paid for 75% of public housing construction, operating costs and rental subsidies.  But the federal government got out of this program and provinces largely went in the same direction.  Cities, where the people live and faced their housing issues, were left to face the consequences or to replace the spending.  While the province has stepped up to some of these issues in recent years it is still far behind in Canada`s most expensive province.

While these issues were highlighted the report examines a number of other issues and case studies worth reading about.

It also takes a hard look at spending patterns. It finds that in 1988 BC local governments were responsible for 35% of spending on capital assets in the province but by 2012 this had risen to 52%.  In 1955 the federal government accounted for 34% of spending on capital improvements in Canada.  Despite its more lucrative revenue sources, by 2003 this had fallen to 13%.  If transfers from higher levels of government had remained at the same 1995 per capita levels BC local governments today would have an additional $4 billion for roads and infrastructure.  The amount of spending by Canada`s local governments, as a percentage of our national wealth, has remained roughly the same from 1945 to 2004 – about 5%.  Over that time period provincial spending increased from 5% to 17%.  Yet funding by the province to local governments has not kept up to demands.

The Columbia Institute report outlines options for dealing with the challenges faced by local governments. It calls for no transfer of responsibilities to local governments without a funding source, something promised by BC`s municipal legislation, the Community Charter, and then largely ignored. It calls for stable funding sources instead of short term grants and for any cuts in provincial programs to be reviewed in light of their impact on local governments.  It calls for the review of the municipal funding model, something proposed by the Union of BC Municipalities at their convention in 2013 in its Strong Fiscal Futures document and then ignored by the province.

While all of these issues may be important the report raises an even more critical issue. Climate change is going to impose enormous costs on local government and there is no revenue stream to face these costs.  And while the costs to face potential climate change are massive, they are nothing in comparison to the cost of doing nothing.  Even in Alberta, where work was done to mitigate flooding issues, the cost of flooding was in the billions of dollars.  As the report points out:

These transformations are beyond the capacity of local governments to `go it alone’.  Regulatory leadership and financial investment from provincial and federal governments is crucial to ensuring that Canada fulfils its climate change responsibilities. While the costs are not small, they are less than the damage that will result from failing to meet the climate challenge. A major federal and provincial reinvestment in Canada’s urban infrastructure is needed to meet 21st century economic and environmental challenges.

It would perhaps be easier to think about struggling with one issue at a time as social, transport, housing and environmental issues cascade down on local governments, but it is no solution. Canada is an urbanized country and it is in our cities and towns where our solutions lie.  A 19th century funding model based on property taxes is not going to give us those solutions.  Leaving cities to deal with these issues on their own is a recipe for failure, maybe even catastrophe.

Full disclosure

As well as being a CCPA Research Associate I am a municipal researcher for the Canadian Union of Public Employees and these issues are important to me. I also served as an advisor to this project.

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