The Benefits of Municipal Investments

June 1, 2008


It has been an interesting experience as a newbie to the world of blogging to watch the posts that generate the most comments and traffic.  The anti-idling post is the hands down winner so far. 

I say this as I suspect that this post will have little drawing power (thanks for staying with me so far) yet it is of great significance to municipal taxpayers and people who care about building complete and quality communities.

The story starts with the Federation of Canadian Municipalities (FCM) which is a strong advocate for local governments at the national level.  Guelph is a member of FCM and I am at their conference.

One of the big issues that FCM continues to champion on behalf of all municipalities is the need for sustainable infrastructure funding from the federal government.  FCM has identified that there is a $123 billion municipal infrastructure deficit in this country.  There is simply no way municipalities can fund this deficit when they receive only 8 pennies from every tax dollar raised in this country and especially with most that comes from property taxes. 

Municipal politicians and staff understand this quite well.

Fortunately, the public also understands the problem.  In a Canada-wide survey commissioned by FCM, 68% of Canadians said they would support a 1% increase in the GST if it was directed to municipalities to pay for the infrastructure that keeps our cities strong and competitive.

A recently-released report from FCM further builds the case for federal funding of infrastructure.  FCM has examined who benefits from the infrastructure investments that municipalities make.  Turns out it is the economy — and the Federal and Provincial governments.

Last year, $16 billion was invested in infrastructure from all levels of government in Canada.  This investment created 191,000 jobs and added 2.1% to the GDP.  For every dollar invested, the Federal government received 18 cents, the provincial government received 17 cents and municipalities gained less than a penny back.

The use of property taxes to pay for infrastructure has three strikes against it.

First, they represent one of the most regressive forms of taxation.  That is to say, they are poorly aligned with an individual’s ability to pay.  Picture a senior on a fixed income trying to stay in their own home. 

They are also not up for the infrastructure job as they do not increase at the same pace as economic growth, unlike other forms of taxation (e.g. sales tax).

And finally as shown by FCM’s new economic research, property taxes deliver the lowest return on investment.  More economic spin offs and jobs are created when the investment comes from Federal and Provincial coffers, primarily because of the regressiveness of property taxes.

There may be only one taxpayer but some taxes are fairer than others.

Infrastructure investments bring three key benefits but not all levels of government benefit equally:

  • Infrastructure investments lower the cost of operation for business (federal and provincial governments are the prime recipients)
  • Infrastructure investments also improve health and safety (once again, Federal and provincial governments are the prime beneficiaries)
  • And lastly, they reduce maintenance costs (finally something that brings benefits to the municipality)

We need to fix this fundamental problem if Canadian cities will be able to compete globally and provide their residents with the quality of life that Canadians are known for. 

Expect federal support of municipal infrastructure funding to be a big election issue in the next federal election — whenever that might be. 



About Karen Farbridge

An unwavering change maker seeking a just, democratic and sustainable world.

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5 Comments on “The Benefits of Municipal Investments”

  1. Dave Says:

    The good thing is the Federal Conservatives have already set up a build Canada program in which 33 Billion dollars over 7 years is allocated for infrastrucure. Despite the fact that infrastructure is a provincial responisibility.
    I was amazed how the FCM pressed so hard for 1% of the GST. If all their efforts were instead used to press provincial politicians to raise their PST as the GST fell, I suspect Cities would have got the funding they wanted.Shame really because I think a little bit of politics got in the way.

    I wonder the total tax money received by the city of Guelph if we added in all the funding the city receives from federal and provincial sources as well.
    I would imagine it is alot greater then the 8 cents cited by the FCM.

  2. Mike Wisniewski Says:

    My apologies your worship, but I can’t help but get the feeling that municipalities just aren’t willing to pull their fair share.

    If municipalities were in such dire straits, they should start narrowing their services and focusing more on infrastructure. THEN, and only then, should a municipaltiy be able to go hat-in-hand to another government and say “See? We’ve done all we can, now we need your help” And that’s just it, I don’t believe municipalities are doing all they can.

    Practice what you preach, your worship

  3. Doug Says:

    I am at the point now where I can no longer act surprised at the attitude of Governments at all levels.
    Cries of poverty and alligations of misdirected funding never seem to end.
    The sad truth is that regardless of how much taxes go up, it will never be enough.
    The psycology which exists in Government and with those working in the public sector is a simple one.
    The taxpayer is there to service Government.
    The fact that budgets are created on the basis of how much taxes should go up illusrtates this point only too well.
    Governments should only provide required services within their jurisdiction and not get involved in matters outside their control.

  4. Chandan Says:

    Too litle, too late,
    If i was driving on Wyndham st between Wellington street and Carden st i would feel i am in a 3rd world country.
    If i were driving on Elizabeth st between Victoria and Steven it would be worst then being in a 3rd world county.
    To make matters worst these streets have been like this for years.
    Based on what i read above i dont think these streets will be fixed anytime soon and all roads will keep getting worst till we become a 3rd world country infrastructure wise

  5. Katherine Says:

    A fairly lengthy response, but a broader, more comprehensive view is justified on such a significant issue…

    To weigh in on the question of whether Canadians believe municipalities have the ability to cover municipal costs within our current resource base and taxation system, the results of the largest ever on attitudes on municipal issues released in April 2008 by FCM that The largest-ever survey of Canadians´… “attitudes on municipal issues shows they believe municipal governments do not have the resources they need to meet the challenges facing them, and they want the federal government to play a major role in fixing the problem”.

    Excerpts from the FCM press release are included below.

    The poll of 2,000 Canadians, …”found that Canadians believe their municipal governments are under-funded in relation to the services they provide to their communities. However, they do not see raising property taxes or reducing municipal services as ways to fix the problem. Most believe provincial and federal governments should provide the additional funds”.

    “The poll shows Canadians overwhelmingly want the federal government to provide greater financial support to municipal governments. More than 90 per cent say the federal government should help municipal governments deal with infrastructure issues, a view shared across the country, including in Quebec and Alberta”.

    “They are so concerned about municipal under-funding that they would have preferred the federal government kept the GST at 6 per cent and used the funds to help municipalities. A strong majority (67 per cent) want to see the federal surplus used for spending on areas requiring additional funding”.

    Not surprising that the response to these questions was so definitive as FCM currently represents through membership almost 90% of all incorporated towns and municipalities from coast to coast to coast. The message is clear- the Federal Government needs to provide a permanent source of funding to address a number of infrastructure deficit areas as well as a national transit strategy, affordable housing, early learning and childcare programs- the list goes on…

    As well, further research my FCM on behalf of it’s membership, released at the end of May indicates that the lack of infrastructure funding federally and the reliance of municipalities on Municipal taxes as a source of revenue will have very significant impacts on the health of our economy, locally and nationally.

    according to a study by economic forecasting firm Informetrica Limited… “Canada´s property-tax dependent municipalities have been stuck with a fiscal tool that drains more jobs from the economy than federal sales and income taxes.”

    This finding reinforces FCM´s position that municipal governments need access to stable revenue sources that grow with the economy to reduce their dependency on the property tax.

    “According to FCM President Gord Steeves, given the recent cycle of federal tax cuts, growing municipal responsibilities, and growing property tax burdens due to offloading, this finding suggests that federal tax cuts can actually dampen the economy, if the costs are passed on to municipalities”

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