Low Expectations For Municipal Amalgamation In Ontario

Commentary, Frontier Centre, Local Government, Uncategorized

Guest commentary by David Barber, Director, Cordillera Institute, a Toronto-based research organization dedicated to excellence in local government.

When it comes to municipal restructuring, the Harris government has bought into the myth that having fewer and bigger municipalities is the answer. While this government deserves its share of the blame for jumping on the amalgamation bandwagon, the real advocates of having fewer and bigger municipalities are a group of civil servants in the Ontario public service. In the 1950s, they managed to engineer Canada’s first monster municipality – Metropolitan Toronto. When there was no major public outcry, they made eliminating all remaining smaller municipalities a priority on their agenda.

Operating behind the scenes, the officials found their first champions in the Bill Davis Tories. During their tenure, regional government, with all of its accompanying amalgamations, was imposed in most of Ontario’s major urban areas. The Petersen Liberals slowed the pace of regionalization, presumably because of the backlash in some regions. Their solution was to proceed with the agenda but they called their product – restructured counties. When Bob Rae and the NDP took over, they continued regionalization under that same cloak of restructuring counties. So, all 3 political parties contributed to the crippling of local government in Ontario. Now with the Harris Tories, we have come full circle.

The sad thing is that much of the business community has encouraged this destructive process. The Metropolitan Toronto Board of Trade was a prominent advocate of mega-city here in Toronto. Since many in the business community had direct or indirect experience with mergers in the private sector, they assumed that it should work just as well in the public sector. In fact, there are major differences. The following examples illustrate two.

Bud is employed by Company A and earns $40,000. Joe does the same job for Company B but earns only $35,000. When Company A and Company B merge, Bud is called into the manager’s office. The manager tells him that his work is fine but his pay is too high. The result is that Bud and Joe each earn $35,000 after the merger. Now, suppose that Bud and Joe work for municipalities. After the merger of their municipalities, the manager calls each, in turn, to his office. To level the playing field, he raises Joe’s salary. However, he doesn’t want Bud to feel left out, so he raises his salary too. The result, which is called ‘levelling up’, is that Bud and Joe each earn $45,000 after the merger. Later that year when the manager realizes that a rivalry has developed between Bud and Joe, he brings in someone else to supervise them at a cost of $60,000. Can you imagine something like this happening in the private sector?

How about this? Municipality A has a full-time firefighting force. As members of a firefighters’ association, they earn among the highest wages in the field. All of their equipment and training are purchased from the municipal budget or by municipal borrowing. Municipality B relies on a volunteer fire company. Their token compensation, as well as much of the cost of their training and equipment, is paid from funds which the firefighters themselves raise through barbeques, bake sales, and other local fundraising activities. When these municipalities merge, the volunteer fire company is disbanded and the fundraising activity ceases. In its place, the full-time paid firefighting force is expanded.

These examples illustrate why amalgamation hasn’t achieved the savings that its boosters keep predicting. When you hear the advocates claiming savings in a particular municipality, see if they have included the transition costs. They can be huge. (Our estimates for the new City of Toronto are in the order of $400 million). The Province created a huge slush fund for the alleged purpose of easing municipalities through the changes. Of course, it also has the effect of shielding local ratepayers from seeing the full impact of amalgamation on their tax bills, at least for the first 2 or 3 years. The other excuse we often hear from amalgamation boosters is that higher costs are the result of downloading responsibilities from the Province or the result of the new market-value assessment system. Weren’t both of these initiatives supposed to be revenue-neutral?

The precedent to the Harris Government’s mega-city strategy of better government through bigger government has been Winnipeg, which merged 13 smaller municipalities into one large entity called Unicity. The evidence shows the policy there to have been an abject failure. Levelling up and weak accountability on spending have wreaked havoc on that city. The result is a deadly mix of high taxes, high debts, and unresponsive government, all factors which helped contribute to that centre’s relative decline against other cities, falling from third largest city in the late 1960s to the eighth largest today.

Halifax and Dartmouth were also amalgamated recently. The early results have been underwhelming. Again transition costs were underestimated and projected savings have not materialized.

The tragedy is that none of this is necessary. Forced amalgamation is the wrong solution but, then, solutions imposed from above usually are. What the provinces should do is to present municipalities frankly with the details of their financial dilemma and then stand back and let locally-driven initiatives solve the problem. There is a tremendous ability in our local governments to find innovative solutions. We have seen countless examples. Using local solutions may be messy and some may fail but, in the end, we will have undergone a discovery process which will expose a variety of successful remedies. Those solutions will be locally developed and tested and, ultimately, tailor-made to address the specific challenges in each municipality.

What about those municipalities that have been merged already? Their challenge is to find ways to make these new monster municipalities respond to the citizens they are supposed to serve. However, the odds of producing innovative and customer-responsive government are not good in inherently large and complicated structures. A better long-term solution is to revitalize the legislation that permits citizens to create new municipalities – to make their local communities self-governing. This remedy is producing remarkable results in California. In spite of that success, this solution will be met by strong opposition from those with a vested interest in big and unresponsive government. Overcoming that opposition will take every ounce of ingenuity and tenacity that we can muster. However, we have too great a stake in the success of our local institutions to do anything less.