The Picture is Becoming Clearer: Ottawa is Not AloneOttawa is one of the most desirable cities in Canada in which to live. Indeed, over the past 20 years, the City has seen its population grow by a staggering 41.6 per cent. These people, in turn, have propelled significant economic development in the City, particularly in the past five years. Population growth and economic development, however, have associated costs. As such, the City faces tremendous challenges: how will it continue to grow and thrive, sustain its exemplary quality of life, maintain its physical infrastructure, and be able to address unforeseen needs? City Services include:
Amalgamation has placed the City in a stronger position to meet these challenges. Indeed, amalgamation has enabled the City to provide many of its services more efficiently and effectively than ever before. Moreover, savings resulting from amalgamation have allowed the City to absorb significant costs associated with inflation and provincial downloading of services. Equally important, amalgamation affords City staff the opportunity to form a more realistic long-range picture of current and anticipated operating and capital needs than was possible with 12 separate, competing local governments. The advantages of amalgamation alone, however, have proven insufficient to allow the City to overcome this challenge. Ottawa is not alone in this regard. Other cities in Canada that try to accommodate rapid growth with aging infrastructure share the predicament. Edmonton, for instance, recently revealed that its ten-year capital funding gap is expected to total approximately $3.2 billion, with 58 per cent of that amount ($1.8 billion) directly attributable to population and economic growth. Meanwhile other cities, Toronto among them, are just beginning to assess their long-term needs. In all likelihood, they too will be facing significant funding gaps. Indeed, stories such as the one found in the September 24, 2002 edition of the Calgary Herald entitled "Budget Fears Revealed" appear in the media with increasingly regularity. Over the past decade, cities in Canada have been asked to do more with less. Over the past decade, cities in Canada have Canada's cities are unquestionably the economic growth engines of the nation. More than 60 per cent of Canada's total employment growth over the last four years has occurred in just ten urban regions. Population and economic growth in urban areas are critical to the national economy. They create significant tax revenue for both the federal and provincial governments but not, ironically, for the municipalities that drive the growth. Growth creates massive demands on services and infrastructure that cities alone must fund. A clear consensus has emerged among economic and policy experts that Canada's cities lack the legislative and financial tools needed to generate enough revenue to fund the services and programs they must deliver. Indeed, while federal and provincial governments raise revenue to pay for programs in a number of ways-including personal and corporate income taxes, payroll taxes, sales taxes, corporate taxes, and fuel taxes-municipalities in Ontario are permitted to raise revenue only through property taxes, development charges, and user fees. Moreover, while revenues from income and sales taxes are bolstered during periods of strong economic growth, revenue from property taxes is not. The City of Ottawa receives an estimated The figures that underlie the dilemma faced by the City are stark. In 2001, a KPMG study found that, between 1998 and 2000, economic growth in the City generated $753 million in additional tax revenue for the federal and provincial governments yet only $77 million additional revenue for the City itself. Put another way, today, the City receives an estimated seven cents of every new tax dollar generated in Ottawa; the federal and provincial governments receive the balance. Between 1995 and 2001, while federal government revenue across Canada climbed 38 per cent and provincial government revenue rose by 30 per cent, municipal revenue increased by only 14 per cent. For municipalities, this figure constituted a per capita decrease.
Over the past 18 months, several studies have been undertaken to examine the role played by Canada's cities, the challenges they face, and the options available to them. These studies include:
Program expenses and In recognizing that most of Canada's economic activity takes place in urban areas, these studies agree that Canada's cities must have the programs and physical infrastructure in place to sustain the population growth and development that comes from increased economic activity. Moreover, social programs and physical infrastructure are critical to strengthening overall national competitiveness. At this point in our history, the costs associated with these programs and with infrastructure development are borne primarily by municipalities. Increasingly, however, it is becoming clear that municipalities lack the stable funding, necessary authority and financial flexibility to fund these requirements alone. In order to sustain growth and deal with the effects of federal and provincial downloading, municipalities throughout Canada have employed several short-term financial strategies to address the needs of their citizens. These strategies have included drastically reduced funding of infrastructure maintenance, depletion of reserve funds, delayed construction of required infrastructure, use of one-time revenues, operating costs charged to capital, and conservatively estimated operating costs. Indeed, the TD Economics report graphically conveys the predicament faced by Canada's municipalities:
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