Towards Home Rule For Urban Policy

Towards Home Rule For Urban Policy* DAYID M. NOWLAN 1. The Challenge With almost indecent passion we have come to embrace over the past decade a new Canadian frontier. Canada has discovered itself to be an urban nation with, as constant repetition reminds us, near-80 percent of our population now living in urban areas. The indulgent exploration of our social past, an ardent political present, and the foundation of our economic future all share common ground among our Cabbagetowns and Gastowns, our Scotia Squares and Commerce Courts. Recent witness to this new urbanism has been borne by a steady outpour - from the provinces and Ottawa - of locally oriented Royal-commission, official-committee and taskforce reports. Final and clinching confirmation that Canada's new horizon is not the unclaimed Prairie shale or Arctic tundra but redevelopment at Portage-and-Main is provided by the shifting emphasis of government spending. In a striking reversal of earlier patterns, goods-and-services and capital spending by local governments across the land has come to exceed - since the mid1960s - comparable spending by either the federal or the provincial governments. This local expenditure reached 11 billion dollars in 1974, close to 2 billion above the total provincial figure and almost 3 billion above the federal outlay on goods and services and capital items.I With urban matters having so recently come to occupy a central position we are still uncertainly casting about to define urban problems and to establish appropriate urban policies. Amidst this state of confusion. the financial imbalance of municipalities threatens to dominate all other considerations, undoubtedly because it is the easiest problem to display and understand. Between 1950 and 1974, the proportion of local revenue covered by local sources of finance - mainly the property tax - fell from 80 to 53 percent. In absolute terms, the gap between 70 spending and revenue has grown by more than twenty-fold, from one-quarter of a billion dollars to its present 6.2 billion. Most of this increasing shortfall has been covered by transfers from provincial governments (and, to a much lesser extent, from the federal government), but the final, net deficit of municipalities in Canada is now about 1 billion dollars a year, an amount that must be met by borrowing in the bond market. Urged on by outside events in recent memory, like New York City's near-bankruptcy, it is thus tempting to look upon urban problems in Canada primarily as crises of finance. However, the simplicity of this diagnosis is deceptive. To begin with, the element of crisis that bespeaks financial mismanagement is absent, in part because of the strict and conservative control that municipalities are legally required to exercise over their budgets. In fact, using accounting concepts much closer to methods in the private sector than to those of other levels of government , local corporations must cover with current revenue all current expenditures. In this sense, no deficit financing is allowed, and what we observe to be a net fiscal imbalance requiring municipal-bond financing is in fact borrowing to undertake expenditure on capital items only. The terms of this borrowing are subject to firm legislative control, frequently with different amortization periods specified for capital items having different assumed rates of physical depreciation. In place of crisis, there exists a more subtle set of individual issues, some of which may have financial symptoms while not themselves being financial problems. Compared to the situation ten or fifteen years ago, local governments now rely heavily on financial transfers from senior governments. Barely more than half their current revenue comes from local sources, while close to ninety percent of the remaining share is transferred by other governments in the form of conditional or specificpurpose grants.2 This naturally raises questions about the process of decision-making for urban areas and begins to direct our attention to some unresolved constitutional problems. Increasingly, the right to make municipal decisions is available to the highest government bidder, with the result Revue d'etudes canadiennes Vol. 13, No. 1(Printemps1978 Spring) that political responsibility for local matters is drifting rapidly upward. Since this is happening in the absence of any explicit policy and in the face of...