No Santa Claus, Please


A few years there was a semi-popular (provided you were paying close attention to municipal issues) campaign called “one cent”. It advocated redirecting 1 cent of the GST to “the cities”.

My problem with the old “1 cent” campaign, and probably its main attraction to municipal politicians, was that the money was raised by one level of govt (the feds) and spent by another (the city). What a delight: free money.

And a convoluted responsibility trail that meant the mayors would be unaccountable. If you don’t like the tax, or feel taxes are too high (or conversely, that you do like the tax, and maybe want it higher) who do you mark your ballot for? Vote for Harper because you want more municipal spending? Or vote out your mayor because of a Federal tax?

The best taxes are those raised visibly, where the taxpayer can see who is dinging him for how much, and relate it to the value — or lack of value — being received.This promotes citizen oversight and control over spending. 

I did notice one “strange” element in the old 1 cent campaign. During it, the feds lowered the GST. Damn, said certain mayors, they should have given it to us. But, I did not notice any of them saying “Hey Province, move into that space, raise the PST a percent and give that to us; the taxpayers will still be getting off lightly…” No, there seemed to be a subcurrent in the whole campaign that it was designed to score political points and if it raised money, that was a lucky bonus.

In the last few months I have seen fresh mutterings of “sustainable funding” (read: new tax) for the cities. This time it’s advocating an additional 1% on the HST.

If new proposal consisted of an additional % on the HST, only to be levied on a metropolitan area upon request, this might fly. (Lots of US cities have municipal or county sales taxes, sometimes dedicated to a single fund, for eg for transit). The HST might be x% in Ontario but x+1 in the GTA or Ottawa.

 It may look innocuous, a 1 cent or 1 per cent tax. But a single percent increase on the HST is an 8%  increase in the tax. This will make it a much harder sell. And Canadians are presently inundated with stories about bank and investment fees, how a simple 2% management fee can wreck your investment, given enough time. The proposed tax will be given a lot of scrutiny by a less credulous populace.

IMO, a main problem for cities is that they have a huge disconnect be what they spend and what they charge for it. How many new roads would we build if we had full life cycle costing? How many more low density areas would we have if we knew their long term cost/revenue ratio instead of the short-term Ponzi scheme we may have now? How many fewer dilapidated bridges would we have if users paid for each use, for their maintenance, repair, and paid down their mortgage?

Municipalities are in trouble because they give away too much stuff. It’s easy being a fairy godparent; much less fun balancing the books.

I am reminded here of condo associations, which are like little municipalities. For the first thirty years of condos in Ontario things went along quite blissfully. It took a number of condos in financial trouble, faced with big bills and inadequate reserve funds, to bring the problem to the fore. The eventual result were rules requiring condos to have reserve funds that were based on proper estimates of future repair costs.

Now new condos should never get deeply under water. But older condos are still periodically faced with unexpected bills for parking garage repairs, or rebricking the exterior. Like municipalities, they fix their cash problem by raising taxes, ie imposing a sudden, one-time levy on unit owners, payable now, please and thanks. What, you don’t have $30,000 kickin’ around?

Of course, during the time the condo wasn’t stuffing money into its reserve fund for major repairs or elevator replacement, the then-owners of the units were enjoying irresponsibly low condo fees. Rather like city councillors who blithely spend spend spend on nice things today without considering the repair and replacement costs*. Those will belong to some other mayor and council, long down the line, when the current ones are remembered only as names on bronze plaques affixed to glorious monuments.

I wonder what the city budget and tax structure would look like if there had to be a fully detailed reserve fund to sock away money to pay for each road repaving, that overpass rebuilding, that building refurbishment? Would municipalities spend differently today?


In retrospect this Star article is rather hilarious:

* do you sense another post coming soon? could this really be foreshadowing??