Media Release – New report compares municipal government’s financial performance

Press Release, Taxation, Frontier Centre

The average municipality in Canada raises $1,937 in taxes, $4,869 in total revenue, and spends $4,557 for every household under its jurisdiction, according to a new report from the Frontier Centre for Public Policy, released today.

These total revenues and expenditures account for approximately one dollar in thirteen of household income.

The second annual Local Government Performance Index (LGPI), takes financial statistics from 79 of the most populous municipalities in Canada and compares taxes, areas of expenditures, and standards of disclosure. It is, said David Seymour, one of the authors, the most comprehensive comparison of municipal government financial performance ever undertaken in Canada.

“Local government typically accounts for six to seven per cent of economic activity in most western economies,” Frontier Local Government Fellow and co-author Larry Mitchell said. “Yet because the sector is fragmented into so many municipalities instead of just one big government, it rarely gets the attention it deserves.”

Seymour said that the LGPI reveals that all municipalities have a long way to go if they wish to approach the level of accountability practiced internationally. For example, he said, “in terms of accounting for capital assets – that is, everything that the city owns – all municipalities we surveyed have their work cut out for them if they want to approach international standards.”

The Public Sector Accounting Board, he added, has mandated that municipalities must report the value of their capital assets on their balance sheets by next year, but “this year’s LPGI shows that, for 2006 and 2007, only roughly half have reached this standard, with Ontario municipalities being a significant and unfortunate exception.”

Under the LPGI municipalities are assessed according to compliance, additional disclosure, and timeliness. There are large variations across the country, Mitchell said. Some municipalities fail to produce easily understandable financial statements; others provide only photocopies with columns of numbers running at an angle across the page; while still others produce professionally presented reports with detailed commentaries of their activities in relation to the financial statements.

The LPGI also evaluates spending as either ‘Core’ (relating to infrastructure and safety) and ‘Non-core’ (relating to administration, recreation, and social services) roles of municipal government. “Most of the calls for greater funding for municipalities claim an inability to fund vital infrastructure, but the LGPI shows only half of municipal expenditure is directly devoted to such activities,” Mitchell said. “Perhaps a funding debate should incorporate a debate about the roles and responsibilities of local government as well?”

Each city in this year’s LPGI has a single page statistical report expressing important statistics in dollars per household, and as a percentage of the average for other cities in its province or region.

“We hope that, by comparing most of the major municipalities in one Index,” Seymour said, “we can bring attention to the importance of local governments to our standard of living. While municipalities are facing great challenges, they are also facing great opportunities to contribute more to Canadian living standards.

To download a copy of Local Government Performance Index, click here

For more information:

David Seymour
Senior Policy Analyst
Frontier Centre for Public Policy

Larry Mitchell
Senior Fellow
Frontier Centre for Public Policy

Gary Slywchuk