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A New Deal for Cities

These days, hardly a day goes by when there isn't some talk in the media about a "New Deal for Cities". While it sometimes feels like wishful thinking to imagine that anything is actually going to happen, I have to acknowledge that the New Deal agenda has been moved forward quite a bit in the past year. It has gone from an idea that a few people and groups were talking about to a policy platform of major power figures in this country.

If someone had been paying attention to this issue just peripherally, I wouldn't blame them if they didn't understand what it was all about. It is easy to interpret this "New Deal" talk as a cry for special treatment. Discussion has focussed on two issues: 1) why Canadian cities are important, and 2) the trouble that Canadian cities find themselves in.

There hasn't been so much talk about the causes of this trouble, but understanding the causes brings some perspective to the issue.

Of the top of my head, I list below some of the underlying problems I can think of. I'm mostly building off what I know about Toronto's situation, so these may not generalize as well as I hope they do. They're numbered merely for convenience.

  1. Cities frequently are left with much of the responsibility for financing social services.
  2. People in need of social assistance tend to naturally gravitate toward major cities, whether they be from out of town, out of province, or out of the country.
  3. Cities derive most of their revenue from property taxes.
  4. Cities are surrounded by competiting municipalities that often do not face the same financial burden in terms of social services.
  5. Some federal and provincial programs tend to have a bias towards newer communities over older ones.

And some comments on each of these...

  1. It is easy to download responsibilities onto lower levels of government. In fact, I think it frequently makes sense to have programs like housing administered by the municipality. But once a province is funding locally-administered social programs, people start talking about downloading the funding responsibility as well.
  2. I have no complaint about the needy heading to the city to find opportunity. There are many reasons why they have better chances here. But the responsibility to support those in need of assistance should not be based on who their closest neighbours are, but rather the broader community.
  3. Cities frequently are great centres of economic innovation and wealth generation. In theory, cities like Toronto have more than enough ability to pay for the intense level of social services. However, property tax is a poor vehicle for raising these monies while income tax is a good one. Higher levels of government are collecting income taxes for various purposes while leaving cities with the responsibility to help those in need solely through property taxes.
  4. Suburbs that surround cities don't face the same burden of social responsibility that cities do, and yet cities must compete with these other municipalities in terms of tax rates. This increases the pressure to keep property taxes down. Nevertheless, social service costs in cities result in higher property taxes and the flight of some significant taxpayers to other jurisdictions. This reinforces the problem. Even giving cities the ability to tax income won't necessarily solve a lot, since they still will face this same sort of competition.
  5. This last point is somewhat independent of the others. It is often easier to build something new in an open space rather than refit an old space for a new purpose. This is part of the reason that we have sprawl. When it comes to infrastructure development and funding formulas it seems like governments are frequently supporting this condition rather than countering it.

As I said, much of this analysis is based on the example here in Toronto. The Harris-era restructurings followed this pattern to the letter, downloading social services onto the cities and leaving them holding the bag for that expense. Meanwhile urban income taxes were happily spread around the province.

In my view, the optimal New Deal for Cities would feature two main themes:

  • Uploading social services spending to higher levels of government. They belong there because they are the responsibility of the broader population and because income taxes are the fairest way to pay for these programs.
  • Implementing new programs and adjusting old programs to support smart development and urban renewal instead of unsustainable sprawl.

Change is always difficult.



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