Re-envision the Prov/Municipal Relationship

It’s fun to bash Al and Bernie but after a while it’s a bit like eating too much candy. It starts to taste bad and it makes you feel worse.

So, to add a little fibre to the discussion, my lunchhour blog will be about the fascinating subject of provincial/municipal relations – particularly as it relates to economic development.

If you experience deja vu, don’t worry, I believe I have blogged on this topic several times in the past.

I did some research for a client a couple of years ago and found out that the average Canadian municipality (specifically Atl. Canadian municipality) spends somewhere between 4-5 times less than the average similarly sized municipality on economic development (tightly defined as efforts directly designed to grow the economic base of the community).

As part of this research, I had to interview a few city managers and do some other research into the subject.

First, I came across an excellent study from Winnipeg that looked at what how the various levels of government benefits from economic growth. The study looked at the economic growth in Winnipeg over a period of time (I can’t remember/find it) and concluded that the Feds benefited the most -with something like $900 million more in total taxes. The province was second with something like $400 million more in taxes and the poor old City of Winnipeg got something like $30 million.

Then I had a chat with the City Manager of one of the big three cities in New Brunswick (won’t tell you which one) who said this. He said, Look it, David, if I go out and spend $1 million on economic development and as a result we attract 100 more jobs to the city what do I get out of it? Well, he said, the Feds will get about $1.6 million in various taxes, the province will get about $1.3 million in various levels of taxes. And the City? If they’re lucky, 30-50 new housing starts and a minimal amount of property tax on the building. He estimated the City would get around $100k from this fictional 100 job project.

Then he continued. That’s not all. I will have to spend on new infrastructure between $100k or more for city services to these new facilities.

So, essentially, the economic payback from these 100 new jobs to the city will be about 16 years (The future value of $1 million econ. dev. costs + the $100k in city infrastructure).

So, why, he said do it? Why invest municipal dollars in economic development? Let the province do it and I’ll (somewhat reluctantly) build city infrastructure as needed and hope I have enough dough to do it.

After reflection on his assessment, I went back to the US cities in the studies and found, in fact, that they were able to charge sales tax, property tax, taxes on accomodations, hefty fees to register vehicles in the city, entertainment taxes, and in a couple of cases the municipalities actually charged income tax.

So, in a nutshell, the US municipality (the one’s I studied) has a highly vested interest in economic development while the Atl. Canadian municipality actually loses from economic development.

Now, it’s not that cut and dry. There are other benefits from being a ‘growing city’ and as such the cities are investing some money in economic development – but not too much.

That’s the money issue.

Then there’s the issue of the relationship in general.

This same City Manager (hence why I can’t say his name) told me he hadn’t had a conversation with his provincial contact in nine months. They had requests in to the province that had been waiting for years for a response. He felt frustrated and a bit confused.

I think the municipalities deserve much mroe respect in the grand scheme of things. I think they should be engaged by the province and energized to support initiatives to grow New Brunswick. They should be full partners at the table discussing the important issues of the day.

So my recommendation?

I think there should be some form of commission set up to explore ways that municipal revenues could be tied more closely to their efforts to growth their communities. There has got to be some direct link between the efforts of the municipality and the fiscal rewards.

Secondly, I think that municipalities large and small should be much more engaged in their future. It’s easy to whine about hospital closures but they need to take some responsibility for the decline in the community that necessitated those closures.

The buck stops with the municipality. The province has to look out for the interests of the province. The municipality is the only level of government uniquely interested in the people in that specific community.

And as for the respect issue, I think the Premier should have some form of Mayor’s council that opens a direct dialogue between the two on issues of economic development. Further, I think the City Managers need to have an effective voice in the provincial system. Not just to ask for more money or complain but a real dialogue about the key issues of the day and envisioning ways to address them in a healty bilateral relationship as opposed to a oneway paternal relationship.

If the province wants the feds to start treating them with more respect, it should start treating its municipalities with more respect.