The State of Canada's Cities and Communities 2012 - FCM

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Chapter 1 Page 1 IN THE SIX YEARS SINCE FCM RELEASED BUILDING PROSPERITY FROM THE GROUND UP: RESTORING MUNICIPAL FISCAL BALANCE, MUCH HAS CHANGED IN CANADA AND ELSEWHERE. IN 2007, THE FEDERAL GOVERNMENT ESTABLISHED THE BUILDING CANADA FUND TO SUPPORT MUNICIPAL INFRASTRUCTURE PROJECTS ACROSS THE COUNTRY FOR THE PERIOD 2007–2014— A HISTORIC COMMITMENT. Chapter 1: State of Municipal Finances Similar to other countries around the world, Canada entered a recession in 2008. As the foundation of its economic stimulus plan, the federal government invested over $10 billion in additional funding in local infrastructure, creating almost 100,000 jobs. This chapter of the State of Canada’s Cities and Communities 2012 updates the information on the state of municipal finances across the country, focusing on trends in municipal expenditures and revenue since 2005. It also compares changes to the municipal bottom line to trends within the fiscal environments of the provincial, territorial and federal governments. Although some preliminary observations can be made regarding the impact of the federal government’s economic stimulus program on municipal infrastructure funding, available information only permits a discussion of municipal finances to 2008. In preparation for a switch from the Financial Management System (FMS) to the IMF (International Monetary Fund) reporting standard, Statistics Canada has terminated the release of government FMS data following the 2008–2009 fiscal year. 1 This chapter is structured as follows: • the first section presents trends in municipal expenditures from 1988 to 2008 • the second section describes trends in municipal revenue sources over the same period; this discussion is followed by an examination of changes in the mix of municipal revenue sources • the third section explores the reliance of municipalities on borrowing to pay for capital expenditures • the fourth section briefly reviews spending trends for the federal government and provincial/territorial governments • the fifth section discusses revenue trends within the federal and provincial/territorial governments • the sixth section concludes with a summary of findings 1 This policy change at Statistics Canada will have a tremendous detrimental impact on the quality of municipal financial data in the years ahead. FCM, along with other stakeholder associations, business and industry, and academia will continue to face challenges when attempting to tell the municipal fiscal story in the years ahead. For more details, see: http://www.statcan.gc.ca/pub/13-605-x/2010001/article/11155-eng.htm .
Chapter 1 Page 2 FIGURE 1: TOTAL MUNICIPAL EXPENDITURES PER CAPITA, CANADA, 1988–2008, CURRENT AND CONSTANT (1988) DOLLARS 2,400 2,200 2,000 1,800 1,600 1,400 1,200 1,000 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 Current $ Constant 1988 $ SOURCE: STATISTICS CANADA, NATIONAL ECONOMIC ACCOUNTS, CANSIM TABLE 385-0024. 1. MUNICIPAL EXPENDITURE RESPONSIBILITIES AND TRENDS Municipal expenditures in Canada generally increased between 1988 and 2008. Figure 1 shows total municipal spending per capita (including operating and capital expenditures) 2 over this 20-year period in both current dollars and constant (1988) dollars. 3 Although average per capita expenditures for all municipal governments in Canada increased from $1,039 to $2,230 during this period, when adjusted for inflation, per capita expenditures only increased from $1,039 to $1,383, representing an increase of an average 1.4% per year. Since 2004, per capita expenditures adjusted for inflation have been increasing more rapidly than during the earlier period: an average annual increase of 3.9% from 2004 to 2008, compared to 0.9% per year from 1988 to 2004. Table 1 shows the relative importance of expenditures by function for 1988 and 2008. Municipal governments in Canada are responsible for transportation (roads and transit); protection (police and fire); environment (water, sewers, and solid waste); and social services. They are also involved in public health, social housing, recreation and culture, and planning and development. Distribution of expenditures did not change significantly during the 20-year period, with a few exceptions. Spending on housing 4 and social services increased as result of a 1998 realignment of local services in Ontario. 5 Expenditures on the environment (water, sewers, and garbage), protection (fire and police), and recreation and culture also increased as a proportion of total expenditures during this 20-year period. Debt charges decreased in relative importance, as did spending on transportation (roads and transit), and regional planning. 2 FMS data combines operating and capital expenditures. Municipalities are not permitted to run a deficit in their operating budgets, although they are allowed to borrow to make capital expenditures. Operating expenditures generally increase steadily over time; capital expenditures tend to rise and fall. The construction of a major road in one year, for example, will increase capital expenditures significantly for that year. Capital expenditures in the following year could be much lower. 3 Expenditures per capita in constant dollars take into account the population growth and inflation during this period. 4 Although the annual average growth rate for housing is relatively high, housing only accounted for 3.8% of total expenditures in 2008. 5 Many social services costs in Ontario are being transferred to the provincial government during the period 2010–2018.
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Page 7 and 8: Municipalities were collecting just
Page 9: Introduction IN THE LAST FEW YEARS,
Page 13 and 14: Chapter 1 Page 4 2. MUNICIPAL REVEN
Page 15 and 16: Chapter 1 Page 6 SIGN TAX Since 201
Page 17 and 18: Chapter 1 Page 8 In absolute values
Page 19 and 20: Chapter 1 Page 10 FIGURE 6: FEDERAL
Page 21 and 22: Chapter 1 Page 12 FIGURE 9: GOVERNM
Page 23 and 24: Chapter 1 Page 14 for provinces, fo
Page 25 and 26: Chapter 1 Page 16 All of the positi
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Page 29 and 30: Chapter 2 Page 2 next two decades.
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Page 39 and 40: Chapter 3 Page 8 How the gas tax wo
Page 41 and 42: Chapter 3 Page 10 FCM strongly supp
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Page 45 and 46: Chapter 3 Page 14 8. tomorroW—and
Page 47 and 48: Chapter 4 Page 2 policing needs in
Page 49 and 50: Chapter 4 Page 4 Front-line communi
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Page 53 and 54: Chapter 5 Page 4 THE SQUEEZE ON HOM
Page 55 and 56: Chapter 5 Page 6 CONDOMINIUMS AS CO
Page 57 and 58: Chapter 5 Page 8 RENTAL DEMAND PUSH
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Chapter 6 Page 2 Approximately 34 m
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Chapter 6 Page 4 to warm several ne
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Chapter 6 Page 6 REFERENCES Canada
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