Fiscal framework: It’s about more than revenue

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Star forum - By Vaughn Hammond

Dear Editor: Recently, the provincial government has been engaged in a consultation process on the fiscal framework. If you didn’t already know, this is basically a new financial arrangement between the province and our municipal governments.

Municipalities claim they are unable to maintain current service delivery with their existing revenue sources. The Canadian Federation of Independent Business (CFIB) questions whether municipalities in Newfoundland and Labrador truly have a revenue problem. In fact, in a recent study, we noted that municipalities as a whole across the country generated twice as much revenue in 2012 than in 1981.

A new CFIB report shows that Canadian municipalities have been excessively overspending our tax dollars.  It makes sense that spending would increase with population growth to provide the same services to more citizens. It also makes sense to adjust spending for inflation to keep up with rising prices. But over the past decade, major cities from coast to coast have increased their inflation-adjusted operational spending two to six times as much as population growth.

In St. John’s, for example, operational spending between 2001-2011 has increased 47 per cent, while the population has grown by eight per cent. In Corner Brook and Mount Pearl, operational spending increased, but their populations declined. In our view, this is unsustainable and needs to be brought under control.

This doesn’t mean that some municipalities don’t recognize this is an issue, because they do. For example, Corner Brook city council went through extensive effort to find savings and did an excellent job. According to its 2014 budget, the city forecasted operational spending to decrease by 1.5 per cent, so taxes on residents and businesses did not have to increase as a result. We hope that city council will be able to maintain this in the future and other councils will take notice.

It is necessary to keep all of this in mind when it comes to the fiscal framework. We should not kid ourselves — the fiscal framework is fundamentally about how municipalities can generate more revenue. But the major question is: where is the money going to come from?

A few weeks ago, the provincial government released a fiscal framework discussion document based on a series of meetings held with municipal leaders across the province.

It shows that nearly 70 per cent of municipal leaders think residents should not have to pay more for services. On the other hand, just a little over 50 per cent of municipal leaders surveyed suggested that businesses should not be paying more for services.

This will be concerning for small business owners.

They already feel a huge tax burden and often wonder, for all the municipal taxes they pay, where the money goes. To put this into perspective, in Newfoundland and Labrador, a recent CFIB survey found that nearly 75 per cent of our members describe the value-for-money of municipal services as poor. Depending on the municipality, small businesses can pay between two and five times more in municipal taxes than residents in the same community and they know they are not getting the same services a resident gets. Moreover, for the municipal services they do receive, they have to pay an additional fee, which often does not apply to residents.

This is absolutely unfair and there is no indication it will change any time soon.

What’s more, 75 per cent of municipal leaders feel new revenue sources should come from the federal or provincial governments. The main problem with government transfers is they lessen the accountability of the municipalities to the taxpayer because they are spending money they did not collect.

In 2013, the provincial auditor general highlighted the lack of accountability in municipal finance. It is obvious that our cities and towns should be held more accountable for the money they spend and this should be addressed in any new fiscal framework. It doesn’t matter who collects the taxes and fees, it is coming from the same pocket, as there is only one taxpayer.

To this point, the discussion on the fiscal framework has been focused on revenue. But there is more to it than that. Spending and accountability need to be given serious consideration.

Vaughn Hammond is director of provincial affairs for the Canadian Federation of Independent Business in Newfoundland and Labrador

Organizations: Canadian Federation of Independent Business, Dear Editor, Corner Brook city council

Geographic location: Newfoundland and Labrador, Corner Brook, Mount Pearl

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