Politics - Federal

Flaherty Dismisses Problem He Helped Create

By Ben Bull
Published December 03, 2007

Good column in the Toronto Star today about Federal Finance Minister Jim Flaherty's ongoing bout of flatulence.

In case anyone has forgotten, Flaherty, who has recently resorted to mocking Ontario's municipalities over their cash crisis, was part of the Mike Harris government that re-jigged the Provincial/Municipal downloaded equation ten years ago.

As Carol Goar notes:

Either Finance Minister Jim Flaherty has a very short memory or he thinks Ontarians do.

A decade ago, he was a senior minister in the Ontario government that imposed a massive restructuring plan on the province's cities. It forced municipalities to assume half the cost of welfare, disability payments and an array of social services. It downloaded the province's aging stock of public housing on local governments, with a one-time repair grant. And it cut off funding for child care and public transit.

The consequences? We know them too well:

In the late 1990s, municipalities started experiencing chronic budgetary woes. They delayed sewer, water and road maintenance to pay for basic services. Some raised property taxes, others drained their contingency reserves. Traffic congestion worsened, the homeless population swelled and the province's urban infrastructure deteriorated.

And what is Flaherty doing about it?

Flaherty, who now controls Ottawa's purse strings, accuses municipal leaders of profligacy. He lectures them about expenditure management. He mocks them for whining, sulking and being grumpy.

In other words - nothing.

Some RTH posters have suggested that the Feds are right to stay out of this debate. Municipalities make their own messes, they claim. Let them straighten it out themselves. To this Goar points out, "all the savings that sharp-pencilled municipal accountants can find won't put cities on a sound financial footing."

All the programs that penny-pinching councillors can cancel, from street festivals to tree planting, won't make up for the costly obligations that Harris downloaded on them.

Two things are clear to me on this subject:

  1. Something has to change in the current funding formula equation, and

  2. It's going to take all three levels of governments to do it.

Ben Bull lives in downtown Toronto. He's been working on a book of short stories for about 10 years now and hopes to be finished tomorrow. He also has a movie blog.

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By peter (anonymous) | Posted December 03, 2007 at 17:26:52

i don't know why but politicians hate cities. must be all the poor, homosexual lefties.

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By suzie (anonymous) | Posted December 03, 2007 at 19:37:52

Politicians are people too...but Flaherty may make me change my mind about this.

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By Genghis (anonymous) | Posted December 03, 2007 at 20:33:14

accurate but not so accurate from mzz.Goar.

Yes the Tories D/L on the municipalities.. as did many other provicial governments at that time across Canada

She forgot to mention Mr Paul Martin LIBERAL balanced his budgets on the backs of the Provinces years ago with Federal funding cuts in Equalization payments.Dont blame Harris, Charest,et al or if you do..look up.. LOOK WAY UP to the Feds,and Il call Rusty..

The shit just slides downhill is all. rightly or wrongly

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By Ryan (registered) - website | Posted December 04, 2007 at 08:22:45

You're quite right, Genghis. The systematic starvation of cities has been a bipartisan, federal/provincial partnership.

In Martin's defence, he did begin the process of reversing a decade of underinvestment in 2004 when he announced the "New Deal for Cities", which established the gas tax transfer, which Ontario more or less matched in provincial funds. It wasn't nearly enough, but it was an admission that something needed to be done.

Similarly, in Harper's defence, he allowed the gas tax transfer to continue. However, he hasn't built on it and his party refuses to acknowledge any federal role in fixing the municipal infrastructure deficit, even as it doles out a $16 billion surplus in tax cuts.

Essentially, provincial and municipal governments have no choice but to raise taxes, which claws back the cuts from higher levels and makes them look like the 'bad guys' with voters. As citizens we end up borrowing from Peter to pay Paul.

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By Humanist (anonymous) | Posted December 04, 2007 at 09:04:21

Agree with Ryan. Harper's government isn't interested in a city agenda, really. Didn't he just veto a nominated candidate in Toronto because he wanted to talk about poverty? Doesn't that tell the story?

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By Tom Cooper (registered) - website | Posted December 04, 2007 at 10:06:45

I agree with many of the comments (and thanks Ben for highlighting the column - it was a good read). Couple of thoughts though:

We have to remember Harris' rationale for downloading - basically placing funding for human services onto the plates of municipal taxpayers. Ontario remains the only jurisdiction in North America that funds these types of social services from property taxes. It is a completely regressive system and leaves cities extremely vulnerable during periods of economic downturn. Despite federal cuts to provincial transfers in the 1990s - no other province followed that example.

Why?

Harris' reasons for imposing local service alignment (what we've come to know and loathe as 'downloading') never made any financial sense - but then again it wasn't supposed to. Saddling property taxpayers -especially in older, high needs cities- like Hamilton and Toronto with those costs was a political decision. I don't think anybody in that government expected the exercise to be revenue neutral, but Harris knew his support base lay in outlying GTA municipalities with lower social service costs than those of the inner cities. Taxpayers in Oakville, Mississauga, Durham, York saw a net benefit (even with GTA pooling) - voters in Toronto and Hamilton who weren't voting Conservative anyway, were hammered by downloading. Harris was able to impose massive provincial income tax cuts as a result -despite the fact that it was just a shell game, with residents of high needs cities having to pay a bigger share (through increased property taxes or decreased municipal services) in the end.

Another line of thought follows: the process of downloading social services/social housing/transit/ambulance services also allowed Harris to upload education costs off the residential tax base. Harris wanted to control the education purse strings so as to more directly control the local Boards of Education. We can all remember the strife that existed within the education system during those years.

While I agree that the feds certainly didn't help matters for cities in the 1990s - and they shouldn't be let off the hook (eliminating all new federal social housing starts was one example among many other things), but downloading social services to municipalities was unique to Ontario - another failed component of the Common Sense Revolution.

I also think putting too much emphasis on federal responsibility in this matter allows the province to claim their hands are tied. They're not. Let's not forget the province has a pretty significant budget surplus too. Downloading must be rectified and it is the province's responsibility.

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By Genghis (anonymous) | Posted December 04, 2007 at 13:13:23

The Tories ( and to an extent, Liberals)have never done well in the inner cities so I think they tend to just write them off.

I could be wrong but they are mostly hard core left wing/NDP/Liberal, however,I think even the more Tony areas of Toronto vote Liberal

Dilemma for the cities and the Federal Tories.Unless they both make nice its a mexican standoff.Harper has much more to gain playing to the base and faithful.Blue Liberals and REd Tories will put him over the top if you can get that soft Liberal vote back from the 905 and Quebec.

Cities will NOT vote for them so he does not play to them.Credit where its due.At least he tells them to thier faces.Dont vote for me...Dont expect massive amounts of money.Go see Dalton hes your man.

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By Ryan (registered) - website | Posted December 04, 2007 at 14:41:37

I made a somewhat similar argument after the 2006 federal election:

http://raisethehammer.org/blog/179/

I ended it with, "Now it remains to be seen whether the Conservative minority government makes the effort to understand what urban voters value and want from government. To do so will force them to re-evaluate some of their assumptions about the value of public amenities and public services."

Needless to say, after nearly two years (a surprisingly enduring minority government, made possible through a combination of skillful maneuvering and the disarray of the Liberal camp) it's pretty clear that the Conservatives have not succeeded in reaching urban voters.

Their disdain for the crisis in municipal infrastructure is a facet of this failure. It's a shame they're so calculating that they would set their priorities based on raw politicking rather than on sound policy.

They should be funding cities because it's the right thing to, not based on whether they think they can buy votes. That triangulating mentality is what produced the such legislation as the non-refundable transit tax credit (which City Council just effectively clawed back), instead of simply funding public transit.

As for the provincial Liberals, naturally a certain amount of triangulating goes on at that level (and in that party) as well, but I've been surprised at the extent to which the provincial Liberals have rolled out sound policies: the Greenbelt, Places to Grow, Good Places to Learn, changes to the Ontario Heritage Act, and now MoveOntario 2020.

http://raisethehammer.org/article/593/

They haven't done nearly enough to address poverty (poor people don't vote, right?), the school funding formula is still broken, and they need to upload social services (in fact, this would almost single-handedly restore the strained municipal finances in Ontario cities); but the changes they've made so far have been for the most part sensible, pragmatic, and effective.

Finally, I think an argument can be made that the most important political problem in Canada today is the broken municipal funding system:

http://raisethehammer.org/article/567/

The accumulated infrastructure shortfall is estimated at over $100 billion, and the recent catastrophic bridge failures in the news are just a taste of what lies ahead if we continue to neglect needed maintenance.

On a broader level, Canada will begin to fall behind other industrialized cities as our decaying infrastructure interferes with business growth.

The concept of cities being funded exclusively by property taxes may have worked in the 19th century, but cities are the engines of economic growth and they require more infrastructure than property tax assessments can cover.

Again, the federal Conservatives sit on their hands and pretend they're passive victims of a Constitution that defines cities as creatures of the province, but it would be easy to start fixing things without opening a constitutional can of worms.

The Conference Board of Canada has been recommending taking one percent of GST and giving it straight to cities. This would do a lot to fix the fiscal imbalance without creating a politicized false dichotomy of good guys (federal tax cutters) and bad guys (municipal tax raisers).

This, of course, would require the federal government to make a decision based on sound policy rather than clever politics, something they have been reluctant to do so far. If they don't, they risk missing a crucial opportunity to demonstrate to voters that they can be trusted with a majority government.

Further, they risk squandering the political climate that earned them a minority government in the first place, as the Liberals regroup, reorganize, and present themselves as the party that can address these challenges head-on.

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By Genghis (anonymous) | Posted December 04, 2007 at 17:49:11

Ryan,I am not so sure it is blantant as "they should do it because it is the right thing to do" of course it is the right thing to do, but never politically smart.But no party will do it and not be seen to be doing it, or take credit for it.

Look at Dion.First against Veiled voting.. now the Tories are against it.. so he is FOR it.Swings and roundabouts.All liars.

This whole system of giving money has Mafia Family aroma to it.Everyone takes care of his own, and does nothing unless they get cresit for it.Giving money to cities via Liberals or(insert competitor here) is wasted in the vote scheme of things.The issue then.How to get the money into the Cities hands.. and the reciprocating votes in return.Not easy.but thats Politics..

ie If the Federal Tories could give the money directly to the Cities and by pass the Provinces( where it is cut and diluted and trickles back down to the cities) I am sure this would be more than acceptable to the Tories,but this intrudes on jusrisdiction.This is Capo McGuintys back yard.He wants his "cut"

Every party does the same optics and gymnastics.The Liberals were loath to give the Harris Govt any money unless they could be seen to get it to those that vote could be persueded to vote or hold "Liberal".

I am starting to wonder if there is a need for Municipal governments at all anymore.Pehaps the "City hall" of the Provinces should be extensions of,and merged with Provincial ridings during elections.

No need for GTA transit consortiums overlapping/colliding with PRovincial/Federal jusrisdictions.

There are too many levels of government with a "Goodfellas" mentality.Every local "Don" responsble to his constituents needs his "take" of the tribute until there is nothing left.




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By Ryan (registered) - website | Posted December 04, 2007 at 21:05:45

I think you got it exactly right in your previous comment when you wrote, "The Tories (and to an extent, Liberals) have never done well in the inner cities so I think they tend to just write them off."

I think the main reason the Conservatives don't have the polling numbers for a majority is that people in cities recognize the Conservatives have abandoned them. They can't get past their ideology long enough to do what it would take to win over enough of the country to win a majority in our first-past-the-post system.

As for being seen to do the right thing and taking credit for it, I have no problem with that - as long as they actually do what they're taking credit for. I take issue to vote-buying - doing things that have good optics but aren't based on sound policy.

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By jason (registered) | Posted December 04, 2007 at 23:36:21

for what it's worth, I don't think urban dwellers are "hard core left wing/NDP/Liberals". I think urban dwellers are, well, urban dwellers. They aren't going to vote for any party that so blatantly hates cities and will do nothing but steal and pillage from those cities in order to fatten their own pockets. City dwellers want to vote for a party that might actually pretend they exist. I don't think that party exists in Canada.

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By Ryan (registered) - website | Posted December 05, 2007 at 08:41:36

Jason,

In fairness, after over a decade of cost cutting that continued years after they balanced their budgets, the Liberals finally noticed cities in 2004 and actually did something - albeit not much - about the burgeoning crisis in city finances via the federal gas tax transfer to cities, which the Ontario provincial government matched. (So much for the argument that it's unconstitutional for the feds to give money to cities.)

Further, the provincial Liberals have been reasonably good to cities since the wholesale bloodletting of the Harris/Eves Tories, which was an unmitigated disaster by any standard - even the standard of "fiscal responsibility", since they crippled cities financially and still couldn't balance the provincial books after eight years of solid economic growth.

A big part of the reason why Paul Martin started to pay attention to cities is that the NDP agreed to prop up his government as long as he kept his commitment to help cities out. Think of the New Deal for Cities/gas tax, the revised 2004/5 budget, increased social spending, EnerGuide and EnerGuide for Low Income Houses - all benefits that help people in cities.

I've long argued that the best legislation comes from a Liberal minority with an NDP opposition to keep the Liberals honest. When the Liberals win a majority, they ignore all the centre-left promises that got them into power and play up to big business. When the Conservatives win any kind of government, they play up to big business more overtly, cancel meager positive programs, and deal out disingenuous vote-buying schemes that accomplish little of substance. They've highly politically savvy, but not at all interested in good, pragmatic policy.

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