Why Ontario municipalities are struggling to make ends meet

Ontarians will be going to the polls to elect municipal representatives in October, and while this is the level of government responsible for many of the basic needs of the province’s citizens, voter turnout is notoriously low. Municipalities provide most, if not all, of the funding for important services such as transit, policing and fire, social assistance, and urban infrastructure — traffic lights, sidewalks, water.

Carlo Fanelli — a social science professor at York University and the author of Megacity Malaise: Neoliberalism, Public Services and Labour in Toronto — explains to Nam Kiwanuka on The Agenda in the Summer that cities face limits on raising money to pay for these services.

“If you look at section 92 (8) of the Constitution, it's really only one line. And it says municipalities are creatures of the provinces,” he says. “And this means that provinces can determine what responsibilities municipalities have to provide and how they can go about actually raising the revenue. One of the ways that subsequent authors have thought about this relationship is that municipalities have responsibilities without power, whereas provinces have power without the responsibility in determining municipal services.”

This is complicated by the fact that municipalities can’t carry deficits or collect revenue from corporate or sales taxes, meaning that many of them derive more than half their services funding from property taxes — an arrangement Fanelli calls “inelastic and problematic.”

The situation, Fanelli says, became even more complicated in the “emblematic year” of 1995.

“There were a number of events happening federally and provincially. [The federal] Liberal government made changes to what was then called the Canada Assistance Plan [now called the Canada Social Transfer] and established ‘programs financing.’ Basically, this was a range of programs and transfers to the provinces. And this went toward funding big-ticket items like post-secondary, health care, social assistance, and infrastructure.”

Although it transferred programs to the province, the federal government didn’t offer any matching revenue — which is similar to what happened in Toronto when Mike Harris’s Tories came to power provincially.

“One of the first things that [his] government did was slash social-assistance rates by over 20 per cent,” Fanelli says. “And they undertook this big process where they froze new investments in non-profit and co-operative housing, in transit, in roads and bridges. Part of the idea was that they wanted to cede ever more avenues of historically public provision of services to the private sector.”

Services that had been funded by the province, then, became the responsibility of municipalities.

One of Fanelli’s research objectives over the years has been to challenge the idea that there’s a funding crisis within municipalities: it’s more a question, he says, of an erosion of resources coming from other levels of government.

“One of the things Rob Ford did as [Toronto’s] mayor was implement this core-services review that KPMG undertook. And I guess the big item coming out of that study was that there was very little fat to trim,” he says.

“So the idea that there is wasteful spending at the municipal level is simply not reflected in the data. And one of the most troubling aspects of the promise to reduce gas prices by 10 cents a litre — this is more than a 30 per cent cut in the amount of revenue generation from the provincial level — over $1 billion of that funding goes directly to municipalities for infrastructure. So if we’re cutting a billion dollars, and there's a significant $60 billion infrastructure need for Ontario municipalities, it's very difficult to wrap your head around how municipalities are otherwise going to fill that gap.”