Ottawa needs to straighten out its tax and spending approach if Canada is to have healthy, wealthy cities

(Winnipeg Free Press)

Our cities are needlessly suffering environmental decline that has a direct bearing on quality of life and wealth creation – in good part because of Ottawa’s unfocussed approach to taxing and spending. That’s the message of a report being released today in Winnipeg at the annual conference of the Federation of Canadian Municipalities.

Ottawa’s influence on our cities’ development is largely unintentional and often runs counter to sustainability objectives. The result is misdirected government resources and programs that often under-perform.

That’s a sad state of affairs, but one we can turn around. The federal government could demonstrate leadership and make a tremendous positive contribution to the health and wealth of our cities simply by coordinating its tax and spending policies using an environmental focus.

In many cases, we’re not talking about taking in less revenue or spending more money – we’re talking about moving tax burdens from green economic activities to unsustainable activities, with investment shifted in the opposite direction.

Why is environmental quality particularly important to Winnipeg and Canada’s other major urban areas?

Because more and more Canadians are living in cities. Because environmental quality is an element in overall quality of life. And because urban environmental quality plays an important role in attracting and retaining the talent that drives wealth creation.

But most key indicators suggest negative trends in Canada’s urban environment. Population densities are declining from more than 1,000 people per square kilometre in 1971, to 800/km2 in 1996 as urban sprawl continues to chew up farmland. Car use is up and transit use down. Smog levels are increasing.

Sprawl-generated rising levels of traffic congestion are raising costs to business, reducing productivity, and impeding trade.

Planning has thus far failed to tame urban sprawl and move people from cars to transit. One important yet commonly overlooked cause of this failure is the inadvertent undermining of urban planning by upper tier government fiscal policies that pave roads to greenfield development sites, for example, while failing to adequately support existing built-up areas.

That needs to change, the National Round Table on the Environment and the Economy says in its new report entitled Environmental Quality in Canadian Cities: The Federal Role.

On the spending side, for example, the Round Table recommends that Federal infrastructure funding should be granted only for projects where the municipality can identify and quantify expected improvements to environmental quality, such as better air or water quality.

Similarly, Ottawa should make a substantial, long-term investment in public transit – but funding should go only to municipalities that adopt policies that encourage land use patterns that support transit use. Funded cities should be required to charge less for transit-accessible development when setting property taxes, user fees and development charges.

Transit is a crowbar our cities can use to spring themselves from the urban sprawl trap. As my colleague Michael Harcourt, Chair of the Round Table’s Urban Sustainability Task Force, and today in Winnipeg making his first major public appearance since his accident last fall, says: “Shifting from automobile travel to transit will likely have the single greatest impact on the environmental quality of Canadian cities.”

On the taxation side, the Government of Canada should use the GST to promote more sustainable cities. A 100% GST rebate should be granted for green infrastructure projects such as public transit, water and sewage treatment plants, renewable energy generation and community energy systems, for example.

As well, Canadians should be encouraged to make energy efficiency renovations on their homes with a partial (36%) GST rebate on the materials and labour. Individuals should be encouraged to buy new energy efficient R-2000 homes by increasing the partial (36%) GST rebate on new all homes to 50% for purchasers of R-2000 houses. Alternately, the existing 36% rebate could be gradually redirected solely to R-2000 new home buyers.

The Federal Government should further contribute to healthier, wealthier cities by putting it’s own house in order.

Ottawa should take a more aggressive approach – with numerical targets – to increasing its fleet of alternate fuel and low emission vehicles. Government properties should not be sold or leased to parties that would develop them in ways that contribute to sprawl. And when seeking new federal facilities, locations should be selected that are in built-up areas that are transit accessible and contribute to the sustainability of cities – not encourage car use and sprawl.

Urban environmental decline and sprawl are being driven by market distortions that are inadvertently created by government fiscal policies. Market forces are being altered by a complex web of direct and indirect subsidies and cross-subsidies stemming from local provincial and federal fiscal policies, the Round Table found.

Government fiscal policies have inadvertently encouraged many of the difficulties that are encumbering our cities’ progress. Now it is time to grab these fiscal tools by their handles instead of their blades – and put them to work building a sustainable urban future.

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

Index to Articles