Transport Committee on Oct. 3rd, 2011

[Brock Carlton]

First of all, despite what is in the Constitution, the government has for several years decided to work with the municipalities and it is going very well. But it does not operate outside the relationship with the provinces and territories.

There is a link between the federal government and the municipalities. Municipalities are important for Canada and for our economic growth. We do not get into details like toll booths. We are saying that infrastructure is vitally important; it underpins our economy and our social and environmental well-being.

In terms of infrastructure, it is quite important that we target public transit issues. We should focus all of the discussions on long-term infrastructure planning. The municipalities and the federal government, along with the provinces and territories, must find a way to work together in order to meet the needs of Canadians.

We need a long term plan, a plan for resources, either an indexed gas tax, a program such as the Building Canada Fund, or something else. We have to find a way to put the resources on the table so that we can deal with long-term infrastructure issues. This is not a matter that can be dealt with in a few hours.

[Denis Coderre, Liberal, Bourassa, QC]

But we still must be specific. Earlier, you talked about traffic jams. This is a reality.

We can philosophize as long as we like, but I am trying to understand what specifically is meant by a national public transit strategy. The relationship between the federal government and the municipalities is not bilateral. The provinces are involved as well.

Anyway, how are we to implement a national strategy when we want standards? We cannot establish national standards. You talked about Toronto. In Montreal, it must take 95 minutes to get back and forth to work, what with all the holes you have to drive around.

Do you think that we can really look to a national strategy to deal with problems such as traffic jams? Aren't you really saying:

“Give us the money and we'll take care of it”?

[Brock Carlton]

I think that the strategy is not necessarily the most important aspect; the principles are. If we have strong global principles, we can get strong local results. So that means that we base the strategy on principles, and long-term planning and funding. That is an important principle.

The second aspect is predictability. If we want to finance infrastructure or public transit, we need to have a long-term, predictable funding process, like a gas tax. We know that a gas tax is predictable.

[Denis Coderre, Liberal, Bourassa, QC]

Yes, you know what to expect.

[Brock Carlton]

The third principle is that there must be some flexibility so that we can have national principles and a national perspective, but also the flexibility that lets us have different solutions for Toronto and Vancouver. We can try to obtain results at the local level, but within the context of national principles.

[The Chair, Conservative, Merv Tweed]

Thank you.

Mr. Poilievre, it is your turn.

[Pierre Poilievre, Conservative, Nepean—Carleton, ON]

Thank you very much for appearing before us today.

I can tell you the percentage of GDP that the federal government represents. It's between 13% and 15%. The variation is due to the economic action plan, which was a 2% increase in federal government spending on a temporary basis, but now that that has lapsed we're back in the neighbourhood of 13% of GDP. What is the present percentage of GDP that is constituted by municipal government spending?

[Brock Carlton]

I can't give you a percentage; I don't have that figure. But in a general sense, procurement at the municipal level is about $100 million per year.

[Pierre Poilievre, Conservative, Nepean—Carleton, ON]

Not procurement. Spending.

[Brock Carlton]

I don't know. I don't have the answer to that question.

[Pierre Poilievre, Conservative, Nepean—Carleton, ON]

Can you commit to getting it for us?

[Brock Carlton]

I think we can probably get it, yes.

[Pierre Poilievre, Conservative, Nepean—Carleton, ON]

What is the per capita spending of the average municipality in Canada?

[Brock Carlton]

I don't know. We'll get that for you as well.

[Pierre Poilievre, Conservative, Nepean—Carleton, ON]

Has the spending of local governments increased or decreased over the last number of years?

[Brock Carlton]

Spending of local governments would have increased, I would imagine, as the costs increase for delivering of services, the upgrading or maintenance of infrastructure, and the downloading of responsibilities that have meant that municipalities have had to put more resources into things that were not the original intentions of the property tax.

[Pierre Poilievre, Conservative, Nepean—Carleton, ON]

The statistics I have acquired from the Library of Parliament indicate that revenues of local governments per capita have risen from $1,947 in 1985 to $3,881 in 2010. I'd be interested to ascertain the impact of inflation there, but we do know that revenues for municipalities have grown dramatically. They've grown because of the unprecedented contribution of the gas tax rebate to the municipalities and because of increases in municipal tax rates, which typically have outstripped inflation.

We also know that the federal contribution to overall infrastructure is now at a record high. So I'm just curious as to why the financial crunch. If revenues have exploded, how is it that municipalities are in such dire straits?

[Brock Carlton]

I don't have the figures you have. I would also question the percentage increase in revenues of the federal and provincial governments and how those increases are seen in proportion to the increase in the municipal revenues. I believe we could probably get that figure as well, but I can't respond to the figures you're putting on the table.

With respect to the question, it is evident to everyone that the demands on municipalities for infrastructure, for policing and community safety, for housing, etc., continue to go up, if one wants to put financial value on it, at a rate that is larger than the revenues they have and increasing at a rate that is faster than that of the revenues you say are increasing over time.

[Pierre Poilievre, Conservative, Nepean—Carleton, ON]

I'm curious how that's possible. You mentioned just roads and policing. Fair enough. But roads and policing existed in 1985, so you had to pay for them then. I'm not sure why policing is more expensive today than it was in 1985. Why are roads more expensive today, other than inflation, which is accounted for by property tax increases? All of the infrastructure you've just mentioned had to be financed in 1985. So why do you say there's an inordinate increase in the cost?

[Brock Carlton]

Adam will answer part of that, but I would say that it is not fair to say that costs have increased on roads, etc., at around inflation rate and property tax has increased by inflation. The demand on the property tax has increased more than inflation, because more things have been downloaded onto municipalities as their responsibility. So the property tax is now serving a lot more services and expectations of the citizen than was the case when it was originally conceived or was the case in 1985.

For example, if you take a look at a report we did a year or so ago about the social safety net in Canada, you'll see there are a lot of issues in that report that are about municipalities delivering services that are now part of the social safety net, which were never conceived of to be part of the property tax base. So there is an expanding demand on the property tax base.

[Pierre Poilievre, Conservative, Nepean—Carleton, ON]

It's true, there has been some downloading by provincial governments. The federal government has more than provided its share, even an absence of federal downloading.

[Brock Carlton]

I'm not going to get into who's downloading on what, because you're right: there's a lot of downloading from the provinces. My comment is more that the property tax is being stretched farther for more things now than it was in 1985.

Do you want to...?

[Adam Thompson]

Yes.

I apologize, because our latest data is a little out of date, based on 2008 data, but what we found was that from 1996 to 2006, through that 10-year period, the full suite of municipal revenues grew at about 17%, whereas federal revenues grew at about 29% and provincial and territorial revenues at about 34%, I believe. That shows a big increase, although at the same time economic expansion and inflation grew by about 30%.

What it shows is that as a total figure, municipal revenues grew during that time. But when you match it against the rate at which the economy was expanding and the population was growing, it actually grew less. We lost some spending power. And then, in addition, the services that were—

[Pierre Poilievre, Conservative, Nepean—Carleton, ON]

I get a lot of complaints about property tax. Even though I'm a federal MP, people complain about it to me. What they say is that consistently, for as long as they can remember, property taxes have gone up faster than inflation. Population growth should pay for itself, because there are development fees paid by the builder, and then every time there's a new house built there's a new property taxpayer sending a cheque to city hall. Then on top of that, you've had the gas tax transfer, which is a brand-new contribution. It's been in place now for about six years, roughly. That's a whole new revenue stream that didn't exist before. And then there were record contributions to infrastructure by the federal government on top of that. And then when we discuss the state of municipal finances, we're told that they're still not paying the bill, not able to meet the obligation. That's the overall question we're getting.

[Brock Carlton]

As we said before, the degree of downloading since 1985, the date you mentioned earlier, is a significant burden on the municipalities. It stretches the property tax beyond what it was intended to do and stretches the municipal coffers so they can't continue to provide the kinds of services and the range of services that Canadians expect--and deserve, frankly. As I said before, I'm not casting stones at one order of government or another with respect to downloading, and I'm not wanting to diminish the value of the gas tax or the value of the economic action plan, but the downloading has been significant.