Canada News
Canadian cities need a new funding model and the national capital is a prime example
The government is also responsible for national museums, the Rideau Canal and other landmarks that attract millions of visitors. (Pexels Photo)
More than 80 per cent of Canada’s 41 million people live in a city, more than double from a hundred years ago, yet the way we fund cities hasn’t changed since the 19th century. And while cities are responsible for 60 per cent of Canada’s infrastructure, they only collect 10 per cent of tax dollars. This needs to change.
The COVID-19 pandemic exposed poor long-term planning. For decades, many cities including Ottawa, designed their downtowns around the Monday-to-Friday commuter. They built expensive public transit systems that underserved everyone except the 9-to-5 crowd and failed to account for the rising costs of suburban living. We set ourselves up for failure.
Ottawa Mayor Mark Sutcliffe’s recent campaign for financial bailouts from the provincial and federal governments is, in part, understandable. Given its large share of federal offices downtown, Ottawa has been hit hard by a shift to hybrid work in the aftermath of the pandemic.
A study by the Canadian Urban Institute acknowledges this challenge and calls on the federal government to “work with us to best leverage these assets [downtown federal office buildings] for their next incarnation.” But most of our problems are of our own making. Waiting for the federal government to start moving fast is not a realistic option. Leaders need to seize the moment and work on the changes needed to shape the city we envision.
Other Canadian cities have shown remarkable willingness to change and have moved away from the Monday-to-Friday office worker model. Montreal, Toronto and Vancouver are bringing forward policy changes that focus on quality of life, cost effective design and incentives to improve use of past investments in public services.
By contrast, Ottawa has made little or no effort to change how it plans and operates. We’ve cut transit service and increased fares. We’ve ignored creative ideas for housing affordability and buried proposals for pedestrian streets in bureaucratic red tape or, at best, have initiated one-off or pilot projects.
Ottawa: The biggest footprint of Canadian cities
Ottawa has unique challenges, one of which is its size. It is geographically larger than Calgary, Edmonton, Toronto, Montreal and Vancouver put together.
Half its million-strong population lives inside the 13 per cent of territory that’s inside the roughly 200-square-kilometre Greenbelt. This half of the population generates almost 60 per cent of the city’s property tax revenue. Rural farmland covers the majority of Ottawa’s land area and generates the least amount of taxes. It is naturally difficult to make policies that are fair to everyone and respond to the needs of drastically different demographics.
With approval from the previous council, reinforced with recent decisions by the current one, nearly $600 million is being spent to create a new suburb called Tewin on the city’s southeast fringes, thereby adding to the “forever sprawl” problem. And that money is just the capital upfront cost. Expenditures to maintain roads, sewers and other services — let alone build schools, parks, community centres and other social infrastructure — will weigh heavily on future city budgets.
A previous term of council agreed to throw more public money to the private, for-profit development of Lansdowne Park. The first phase of this project (managed under a public-private partnership, or P3) has chronically underperformed and never met its financial goals. Yet the current council agreed to an additional $419-million subsidy that the city’s auditor general has said is likely to grow to at least half a billion dollars. No effort has been made to consider alternatives or address the bankruptcies of small sub-contractors that resulted from the original development.
Other cities, such as Montreal, have seen their economies boom in recent years after investing in public space and opening streets to pedestrians. Ottawa has done little to entice its citizens to explore urban environments, support local businesses or have healthy fun outside. Much-needed sprucing up of the historic ByWard Market remains unfunded. This after receiving unanimous approval nearly four years ago for what is, at best, a mediocre plan that hinges on yet another public-private partnership the city can ill afford.
Cities that have invested in public transit by increasing frequency and quality of service have seen growing use as a result. Ottawa has, instead, cut back on service and raised fares, making it one of the most expensive places to ride in the country. Election promises to “fix transit” have translated into cuts, service reductions and a poorer user experience.
Yet Ottawa never seems to have a problem spending $100 million or more a year on road expansions, especially outside the core. Current financial commitments to roads is approaching $900 million in the next eight years.
Mayor Sutcliffe may have a point when he says the federal government’s payment in lieu of taxes (PILT) model lacks accountability and fairness, because the government gets to decide what it wants to pay the city. But this situation is neither new nor accurate in isolation of the larger context.
The federal government is funding billions of dollars in construction in the city, bringing jobs and long-term stability. The government is also responsible for national museums, the Rideau Canal and other landmarks that attract millions of visitors. Together, these contribute to the local economy in a way other Canadian cities never see.
Arguably, this could be considered a balanced approach. While Ottawa is more dependent on the federal government than others, it benefits in the form of jobs, attractions and public spaces. Fair or not, that has been our reality since Queen Victoria picked this spot to be the capital of Canada. We shouldn’t blame our long-standing practice of not investing in our own high-quality public amenities on anyone else.
Investments require money and cities have one lever: property taxes. The rate of tax increase in Ottawa is significantly lower than in other cities. In the last decade, taxes in Ottawa rose less than 27 per cent compared with nearly 40 per cent in Edmonton and Calgary. Unachievable election promises of low taxes, built up over decades, have deprived the city of hundreds of millions of dollars in revenue. False austerity has created the crumbling fiscal and physical mess that Ottawa is today.
Toronto is raising taxes significantly under the leadership of Mayor Olivia Chow, who recognizes that decades of austerity budgets have had damaging consequences on public infrastructure and quality of life.
Ottawa, like other Canadian cities, may well need a new funding model. The ability to raise direct tax revenue through a municipal income tax or impose congestion charges would allow cities to do more. Access to reliable federal and provincial funding to build transit, housing and other necessary physical and social infrastructure is crucial and should not depend on annual largesse or one-time payments.
But even with limited budgets every city can make decisions that will improve the lives of its residents while supporting businesses.
Opening streets to pedestrians and cyclists or transforming alleys into a public space lead to a safer, more inclusive and beautiful city. It also improves the bottom line for businesses as more people are attracted to those streets. If Montreal, Vancouver and Toronto can do this, so can Ottawa.
The city could also start holding design competitions that don’t depend on privatization or expensive, risky partnerships (one suggestion for the ByWard Market) for parks, public pools and beaches, community centres and libraries.
As Sutcliffe recently said: “If Ottawa is going to be a city in accordance with its national significance, it needs real dollars.…” The city appears to have the financial means to invest hundreds of millions in roads and professional sports franchises. Maybe we need to prioritize core issues that affect people’s quality of life and befit the capital of a G7 country.
Alex Bozikovic, architecture critic for the Globe and Mail, has written that if we want to create sustainable and noteworthy cities, municipal leaders need to guide funding decisions with design and public interest in mind.
That’s certainly true of Ottawa. The mayor and council need to take responsibility for past decisions and start spending wisely and within our means. That means doing the hard work of budgeting for what we need and using tax dollars wisely.
Perhaps once we’ve demonstrated fiscal responsibility, commitment to excellence and dedication to sustainable outcomes, we’ll be worthy of a bigger investment from other levels of government.
But it starts with us.
This article first appeared on Policy Options and is republished here under a Creative Commons license.
