Capital’s Cities Keep Competition Alive, Taxes Down

-- (historic), Crown Corporations, Local Government, Manitoba, Uncategorized, Winnipeg (historic), Worth A Look

In her column on Victoria councillors' struggle to deal with property-tax breaks for charities that benefit the whole region, Carolyn Heiman suggested that one possible remedy was amalgamation. She noted the fractured state of municipal governance and the "overly cherished local autonomy" residents possess in the multiple cities that now make up Greater Victoria.

I won't address the issue of non-profits, but when it comes to amalgamation, count me in as one in favour of fractured governance.

A preference for many independent cities over a megacity runs counter to the usual wisdom, including the claim taxpayers would be better served with fewer municipal politicians to support.

True, some cost savings would accrue if more politicians were put out to pasture. But residents of Victoria, Esquimalt, Saanich and Sidney and all the other hamlets shouldn't rush together quite yet (or ever) for a big group hug.

One reason is that the savings that come from fewer councillors and their staff are relatively tiny set against a city's overall budget.

The big money is spent elsewhere in service delivery. For example, whether one or multiple departments (in multiple cities) is responsible for trimming trees and planting flowers, the need for the actual number of tree trimmers won't much change, not unless there is competitive pressure to increase productivity, a pressure that is absent in a megacity.

On that point, whatever savings might be found by a reduction in the size of the political class will be outweighed by the higher overall costs that accompany non-competitive, monopoly government. Competition for homeowners, business and tax dollars is a great spur for cities to experiment on policy and service delivery and then on tax rates.

For example, on policy, Victoria can refuse big-box stores all it wants.

Langford allowed them in and now has a much heftier tax base – one reason it could spend extra money to beautify previously ugly areas and rely less on residential property taxes.

Beyond the spur to competition on policy, monopolies will always act like monopolies, whether in the private or pubic sector. When Ontario's Conservatives dumbly forced amalgamation on Greater Toronto back in 1998, they wrongly predicted savings. They never considered that the contracts with individual city unions would all ratchet up to the highest salaries previously in play, not the lowest.

This is unsurprising. If you lived in expensive downtown Toronto, would you accept the lower salary for that same position previously given to your equivalent, someone who lived further out in some less expensive suburban city? Would your union? And for municipal politicians, once they govern in a megacity, where's the pressure to reform service delivery, city spending and tax levels? It's not as if residents and businesses can flee to a lower-taxed city five, 10 or 20 kilometres away, not if the megacity now has its tentacles over most of the area that's within a reasonable daily commute.

The same problem applies to services. In cities such as Winnipeg, Toronto and New York City, services are almost impossible to reform because vested interests in the form of powerful public-sector unions fight to prevent competition. It's in their natural interest and one helpfully guarded by the institutional constraints that accompany the fortress of a monopoly.

The result is an inevitable decline in service precisely because there is no threat of competition from either a neighbouring city or a private contractor to replace an in-house service provider should it become fat and lazy, which monopolies and their in-house providers almost always do without real competitive pressure. Higher property taxes are then also the end result.

It's not that amalgamation is always a bad idea. Depending on natural geographic boundaries and other factors, it might make sense to have fewer cities in Greater Victoria, but not just one or two: That would lead to service-delivery sclerosis.

Nor is co-operation between cities unwise: That's the point in having regional districts and delivering water services on behalf of all rather than having each build their own water system. But that co-operation can occur without a megacity.

A megacity looks good in theory but only in theory. Three cheers for fractured local government and local autonomy.