B.C. municipalities must get their fiscal priorities straight

Municipal auditor general should help local governments refocus their spending habits

  • Dec. 19, 2012 5:00 a.m.

“Infrastructure deficit” has become the established buzzword from municipal leaders who want more money from senior levels of government-either in the form of new taxing power or more transfers.

Infrastructure-roads, water supply and sewers – is a core responsibility of the local level of government. So why is Ottawa being asked for a handout?

The argument that municipal leaders use to justify the call for additional money is that municipalities were squeezed by reduced transfer payments during the 1990s. This caused them not to maintain and expand infrastructure properly-thus the “infrastructure deficit.” In addition, municipal leaders are very fond of pointing out that property taxes only comprise eight per cent of Canadian tax revenue, far too little in their view.

It is true that transfers from senior levels of government were cut during the 1990s – Ottawa was focused on getting back to balanced budgets and reducing Canadian debt, which was unsustainable. Both the provincial and municipal levels of government had to deal with cut backs to transfers.

It is also true that from 2000 to 2010, transfers to B.C. municipalities from senior levels of government increased by a very healthy 273 per cent – more than making up the lost ground from the 1990s.

Other sources of revenue for B.C. municipalities also have increased.

Property taxes account for roughly half of total municipal revenue and have increased 69 per cent over that same period. Fees from parking meters, fines, and business licences have increased 135 per cent. Development cost charges, another source of revenue, have increased by a staggering 798 per cent. All this additional revenue has fuelled big increases in municipal operating spending. Spending adjusted for inflation in B.C. has increased 50 per cent between 2000 and 2010.

Meanwhile, population growth over the same period, which could be considered a good benchmark for reasonable spending growth, has increased by only 14 per cent.

All this raises some important questions: Do municipalities really have too little revenue or is too much spending on the wrong things the problem?

With such big revenue increases, why weren’t municipalities setting aside some money to maintain and replace infrastructure? That’s a standard good business practice as well as basic common sense.

If B.C. municipalities had held their operational spending to population growth over those 10 years, they would currently have had over $4 billion to spend on infrastructure.

Instead, revenue increases have been used to do things like increase salaries and benefits for municipal employees to a degree that they are now wildly out of whack with those in the private sector. Municipal demands for more money for infrastructure have largely gone unchallenged. It’s time to change that, which is why the provincial government’s decision to create a municipal auditor-general gets five gold stars for good policy.


Laura Jones is executive vice-president for the Canadian Federation of Independent Business.