Cash-starved cities unable to compete: Canadian cities don’t have the same powers to raise revenues that their competitors in the U.S. and Europe enjoy
(The Toronto Star, Toronto, Ontario
February 25, 2002)

When Finance Minister Paul Martin tells 20 big city mayors that Canada’s cities need a “new deal” from the federal government, as happened last Monday, it gives hope that Canada is finally focusing on the sustainability of its cities. And it’s good news for Toronto.

This high-level attention to our cities is coming none too soon. Canada, like much of the rest of the world, is becoming more urbanized every day. Within 10 years, well over 80 per cent of Canada’s population will live in cities – cities that need to compete globally to prosper.

As national trade barriers fall and information technology instantaneously moves money, ideas and information around the globe, cities are emerging as the hubs of the global, knowledge-based economy. This new economy is driven by human capital – the skills, creativity and know-how of people. The economic success of cities is dependent upon growing, attracting and retaining talented people.

While we cannot point to conclusive evidence that a city’s quality of life makes it a more competitive city, there is growing anecdotal evidence that this is the case. Who doesn’t want to live in a city that has accessible countryside, clean air, clean water, efficient transportation and green, safe neighbourhoods?

If Canada’s cities are to win their share of investment and jobs, we may have to compete on the basis of the quality of life they offer skilled people.

Portland, Oregon’s ticket to success has been developing and implementing a shared community vision of growth. The city planned its infrastructure development around this vision. Portland worked to keep its core viable by designing a superior public transit system and revitalizing its downtown. It maintains significant green spaces throughout the city.

The results have been phenomenal. Last year, Portland had the fastest growing economy in the entire United States. It attracted $24 billion in capital investments from high-tech industries alone. The city has been so successful that businesses have actually been turned away and encouraged to locate in other communities.

What stands in the way of Canadian cities doing the same?

The report Early Warning: Will Canadian Cities Compete? Commissioned by the National Round Table on the Environment and the Economy, found that our cities are hobbled in their efforts to compete because they are cash-starved. They need more money and new funding sources.

While provinces download responsibilities onto municipalities, from transit to welfare, they aren’t downloading fiscal powers.

Canadian cities simply don’t have many powers and mechanisms to raise revenues that their competitors in the United States and Europe enjoy.

One way to address this is to amend the Constitution to empower cities – a non-starter. Other options include the provinces authorizing new municipal revenue-raising powers. Or provincial and federal governments could provide a greater share of their tax revenue to municipalities.

There are tough choices to be made.

For example, basic municipal services are more costly to deliver in the sprawling suburbs than in densely populated city neighbourhoods. But you wouldn’t know it from the costs we are paying for key services, such as water and transit. We may need to adjust the tax system to send strong price signals that reflect this fiscal reality.

Cities and their suburbs aren’t islands. They exist within a context of working landscapes where industrial and agricultural activities take place, and of unfragmented wilderness areas farther afield. Nature can be a city’s economic ally.

In 1991, New York City faced a $4 billion to $8 billion bill to build a water treatment plant. Instead, it embarked on an innovative program in co-operation with upstate interests to protect the purity of the water at its source in the Catskill Mountains.

The Big Apple acquired undeveloped land in the watershed for long-term protection. It spent millions to help farmers and loggers adopt sustainable practices that have strengthened traditional economic activities in rural areas while protecting a basic resource – clean water – for $8 million New Yorkers.

And it paid for upgrading upstream sewage treatment plants belonging to other municipalities, as well as its own. The result was a more sustainable solution at about 25 per cent of the cost of conventional thinking.

Global economic competition is reaching a fever pitch. Increasingly, that competition is not between nations, but cities. In effect, we are witnessing the re-emergence of “city-states.”

The cities that we are competing with are well-funded and innovative. But Canadian cities have some advantages, and maybe just enough time to capitalize on them. Our cities are not constrained by Europe’s dated civic infrastructure. Nor have they suffered the precipitous decline that American cities faced prior to the recent fiscal rescue mission mounted by state and federal governments.

Canada’s cities are in a race to achieve balance and remain competitive. The prize is truly a gold medal – economically and environmentally vibrant cities with an added twist: Canadian city solutions that are exportable and can help us capture our fair share of the global $600 billion annual urban infrastructure market.

David J. McGuinty is President and CEO of the National Round Table on the Environment and the Economy.

Index to Articles