3rd/4th Annual Local Government Performance Index

Publication, Municipal Government, David Seymour


Executive Summary
  • The 2009 Local Government Performance Index (LGPI) assesses the financial health and public accounting disclosure of 88 of Canada’s municipalities based on those municipalities’ audited financial statements.
  • This assessment reveals large differences between the financial health and disclosure standards of Canadian municipalities. While these differences can often be explained by differences in provincial legislation, city size or geography, it is up to the municipalities to provide these explanations.
  • The Individual City Reports reveal figures and percentages for each city. By looking at the report for any city, it is possible to see how its financial statistics compare with those of the average city in its region. The regions are British Columbia, the Prairies, Ontario, Quebec and the Maritimes.
  • Dollar figures from the audited financial statements were averaged over the number of households that are listed for the municipality according to the 2006 census. This allows very large cities such as Toronto to be compared with very small cities such as Cornwall.
  • In most cases, the LGPI reports 2007 and 2008 figures; however, in some cases only the figures for one year were available. As can be seen in the city reports, we were unable to acquire audited financial statements for some of the cities by the October 1 cut-off date.
  • Significant efforts were made to acquire all reports, including web site searches, phone calls and emails. That it should be so difficult to access financial statements is a serious indictment of those cities.
The LGPI evaluates the relative financial health of municipalities
in five topics:
The Financial Position presents the overall assets and liabilities of all Canadian cities. The average municipality held $4,892 of financial assets and $4,278 of liabilities per household for the 2008 financial year. This $614 surplus in assets per household shows that most municipalities are in good financial health. The average municipality also held $1,963 of long-term debt and paid $102 per household in interest charges on this debt. While a handful of municipalities are free of long-term debt, Montreal holds a whopping $9,186 of long-term debt per household while its residents paid $548 on average in interest expense for this debt in 2008.
Revenue evaluates the revenue sources that Canadian municipalities have used to fund their activities. In 2008, the average municipality raised $4,971 per household in revenue. However, behind that average, revenue varied from $1,160 to $16,900 per household. Municipalities in the Prairies raised the most revenue, usually due to significant holdings in commercial operations.
The majority of this revenue (46 per cent) was raised through taxation, followed by user charges (23 per cent) and grants from other governments (16 per cent).
The Expenditures by Object section provides insight into how municipalities spend their money in order to deliver services. The average municipality spends over half of its operating expenditure and approximately 40 per cent of its total capital and operating expenditure on
salaries and benefits for staff. Compared with other Commonwealth countries, this figure is almost double the norm.
The Expenditure section analyzes the kinds of services that municipalities spend money delivering (Core/non-core). The average municipality spends $731 per household per year on recreation and culture, $518 per household on administrative costs and $873 on protecting persons and property. Overall expenditure at $4,952 equates to approximately $1 in $13 of the average household income.
The average municipality spends approximately 74 per cent of income on operating expenditures (purchases that are used up immediately) and approximately 27 per cent on capital expenditures (expenditures with benefits delivered over more than one financial year).
The average municipality spends approximately 58 per cent of all expenditure on genuine public goods. It spends approximately 42 per cent on non-core activities that have substitutes in private markets or that are not directly linked to the delivery of a public good or service.
On this core/non-core measure, municipalities in the Prairies and Quebec (both 66 per cent to
34 per cent), the Maritimes (75 per cent to 25 per cent) and Ontario (57 per cent to 43 per cent) spend more on average on core activities, while municipalities in British Columbia (46 per cent to 54 per cent) spend more on non-core activities. (Some figures do not add up due to rounding.)
For the Disclosure Standards section, only 75 of the 88 municipalities are covered. Quebec cities apart from Montreal are not covered due to language. Annual reports were studied for completeness of accounting, additional useful accounting information and general reporting
on non-financial activities. 
There is a vast gap between the best and worst cities. While some were unable to produce audited financial statements in compliance with GAAP or supply any financial statements whatsoever, others presented full annual reports with financial statements and measurable-goal data on the efficacy of their services. Generally, the best reporting is found in British Columbia and Alberta, the worst in the Maritimes. 
Individual City Reports give a report for each city. Data for each city are presented on an individual page. The format of these reports is explained in the “Guide to Interpreting Individual City Reports.”
Note: It has come to our attention that in the initial release the Reporting Assessment score for Maple Ridge was lower than it should have been.  This error was the result of a subsection of the annual report being used instead of the entire report.  The Frontier Centre regrets the error and has uploaded a corrected version of the 2009 LGPI.  (Monday February 8th, 2010)