What ever happened to the New Deal for cities? A view from the Throne

By Michael Fenn and John Matheson, StrategyCorp Municipal Practice

In municipal circles, among the urban media, and within the academic community there is a widespread and growing consensus that there should be more recognition by the Canadian and provincial governments of the crucial role of cities, especially as the agenda for recovery from COVID-19 is being developed.

There is also long-standing municipal agreement that the existing fiscal arrangements deny municipal governments the resources to deliver sustainable results for Canadians. The best example is the fact that local governments are responsible for 60% of public infrastructure, but only receive 8 cents of every tax dollar paid by Canadians.

Municipal officials listening to Governor General Julie Payette deliver the Speech from the Throne might therefore be forgiven for wondering if she had lost a few pages from the text drafted for her by the Trudeau Government. Were cities not highlighted by the Premiers and the Prime Minister as COVID-response priorities a mere two months ago, when announcing the “Safe Reopening Agreement”, on July 16?

If everyone in municipal circles nods in agreement, but nothing changes, it is reasonable to assume that their message is not getting through to decision-makers in Ottawa and in Provincial capitals. Municipalities may have received welcome short-term support – like compensation for lost transit and utility revenues, or funding for extraordinary public health and long-term care home costs – but those helpful one-time grants do not change the underlying funding issues.

Looking through that lens, can cities and municipal governments take comfort from the future directions of the Trudeau government, as laid-out in the Speech from the Throne?  Let’s look at a “top ten topics” in that document. There are several things that might benefit municipalities, their residents, and their business communities but there certainly is no evidence of the much-sought New Deal for urban Canada’s governments.

1. “Trickle Down” Economic Policies

If you believe in “trickle down” policies, broad-scale measures to repair the economy and safeguard the health of Canadians will ultimately serve the interest of cities. But that is hardly targeted reform, nor a recognition of the special needs and opportunities facing Canada’s cities.

2. Infrastructure Spending 

The Government’s oft-repeated focus on spending on infrastructure “of all kinds” is promising, but that has been said before. Terms and conditions, amounts and shares, are what counts. Is there any recognition of the need to create revenue sources to fund “the municipal share” or a new, more practically useful role for the Canada Infrastructure Bank?

3. “Not a time for Austerity” 

There is a recognition that this is “not a time for austerity”, although no-one is calling for that this year. At the municipal level, ‘austerity’ will be the inevitable consequence of an inability to fund current operations and the municipal share of infrastructure projects.

4. Federal-Provincial Priorities 

Federal and provincial governments have a range of competing priorities, some large (health, education, environment) and many small (especially the myriad of stakeholders and special interest groups – from airlines to the petroleum industry – adversely affected by the Pandemic).

If municipalities were top-rank priorities, there would have been mention of the need to rebalance unsustainable revenues, enlist local government in restarting the economy, and urgent, ongoing funding for transit operations and other front-line services.

5. The Safe Reopening Agreement

The Speech from the Throne recognizes July’s landmark $19B “Safe Reopening Agreement” and implies that there is more to come. Although municipalities had a piece of that fiscal package, the achievements that the Speech from the Throne celebrates from that Agreement are all among the perennial top priorities: health and education, with no mention of municipalities.

6. Temporary Initiatives & Future Municipal Burden

As is common with high-level Speeches from the Throne, there is a shopping list of worthwhile but unpriced areas for government attention including: subsidized childcare, homelessness, pharmacare, the opioid crisis, reviving “main street” hospitality businesses, a sustainable successor to the Canada Emergency Response Benefit (CERB), and a really encouraging proposal to put local trades and suppliers back to work with home retrofit incentives, which will particularly benefit urban Canada.

As municipalities have learned from past temporary initiatives, however, they often create new demands but do not come with sustained or sufficient funding. Post-COVID, will some of these welcome “gifts” burden future municipal budgets, as senior orders of government move on to new issues?

7. Handgun Ban & Urban Park Assistance 

In the Throne Speech, the only direct reference to municipal governments came in relation to municipal handgun bans and assistance with urban parks. Both issues deserve attention, but how would these ‘extra-constitutional’ interventions work and where will the political burden of implementation fall?

8. Police Reform 

The Throne Speech responds to calls for reforming police and justice for Indigenous and Black Canadians, as well as for community policing. It rightly focuses Federal government action on reforms to the RCMP, First Nations policing and the criminal justice system.

For their part, most major cities and urban regions have their own municipal police forces. Those urban and metropolitan police forces are now fully engaged in discussions with municipal and community leaders relating to racial discrimination, hate crime, responding to mental health ‘calls-for-assistance’, local policing reform, and so on.

9. Taxing the “Digital Giants” 

The Speech from the Throne flags corporate tax avoidance by ‘digital giants’, as well as complaining about ‘web giants’ “taking Canadians’ money while imposing their own priorities.” The Government says, ‘things must change’, arguing that the Canadian revenue of these multi-national firms needs to be shared more fairly with ‘our creators’ and Canadian media.

Things must, indeed, change, but not just to the benefit of Canada’s creative industries. Unlike senior orders of government, Canada’s local governments rely heavily on real property taxation of businesses and residents. The effects of COVID and on-line retail are projected to generate bankruptcies of established firms, while squeezing the scale and value of office space, malls and storefront retail, hospitality and live entertainment venues, and other key elements of the municipal tax base. By contrast, digital companies – the FANAMA  firms (Facebook, Apple, Netflix, Alphabet, Microsoft, Amazon) – pay relatively little into municipal coffers while imposing local costs and benefiting from local services. This, too, needs to change.

Municipalities cannot continue to deliver 21st century municipal services using a 19th century tax base. Sharing fiscally in the economic success of digital industries, to which municipalities contribute, is an obvious place to start.

10. Investments in Broadband 

In the 20th century, provincial governments committed themselves to provide modern highway infrastructure and price-competitive electrification to their rural communities. These public infrastructure investments boosted economic activity that benefited cities as much as rural communities.

The Throne Speech proposes a similar approach to broadband. If mobile 5G infrastructure is to be available Canada-wide to a workforce already looking at working-from-home (WFH) and lower-cost family housing options, what are the implications for the central and suburban cities in our metropolitan areas?  Will the advent of ubiquitous, accessible, high-speed broadband mean more urban sprawl and increased demands for transportation and other infrastructure?

As our American cousins learned when their formerly dynamic central cities de-populated in the 1960s, there are significant economic, social, environmental and fiscal implications to policies that encourage “moving to the lake.”