Municipal Governments Best in West: B.C. governments spend less and report better.

Commentary, David Seymour, Local Government, Uncategorized

 

Of all the fields of government, local government is perhaps the least sexy. “Anarchist” youth will riot wherever international leaders meet each other and provincial governments might prompt the odd protest but municipal activities seldom make front page headlines. That’s all the more unfortunate considering the how much municipal government is responsible for and the level of variation in their performances across Canada.
In 2008 the average Canadian municipality took in $4,971 of revenue per household. It also managed $18,228 worth of capital assets (mainly infrastructure like roads and sewers), backed by $1,963 dollars of long-term debt for each of those households, which paid $102 each in interest charges. When put beside household balance sheets, these figures start to bring the economic significance of local government into perspective.
If you’re in favour of smaller government, municipalities in B.C. compare favourably to these national averages. It’s true that the peculiarly British Columbian entities of regional government take up some of the responsibilities that fall on municipal governments elsewhere. However the comparative figures for the average B.C. municipality are $4,199 of revenue, $20,263 of capital assets, and $1,066 of long-term debt serviced at an interest cost of $76 per household.
British Columbian municipalities were the biggest chargers of user fees, which made up 27 per cent of revenue compared to a Canadian average of 23 per cent. They were also lighter on staff costs, with $48 per cent of expenditure on salaries and benefits compared to a Canadian average of 51 per cent. That might be partially explained by a greater propensity to contract services out, with a B.C. average of 22 per cent against a Canadian average of 16 per cent.
Perhaps the biggest difference between B.C. municipalities and others, though, is the quality of reporting that citizens can expect when it comes to finance and service performance. In my review of 75 municipalities across Canada, six out of the top ten were from British Columbia (the rest were from Alberta). 
When it comes to questions of providing disclosure on the value of capital assets, whether those values are depreciated according to best practice asset management, whether definitions are given for the line- items that money is spent on, and whether those expenditure areas are associated with measured performance compared to numerical targets, municipal reporting is the best in the West.
And the worst? Some municipalities present photocopied financial documents where the rows and columns run at an angle to the rest of the page and the auditors opinion runs something like “These statements, which have not been and were not intended to be prepared in accordance with Canadian generally accepted principles…” Such second-rate reporting practices are gestures of indifference from such municipalities toward the residents they ostensibly serve.
As with most governments, municipalities are a natural monopoly, where a single provider is generally the most efficient market structure. The implication is “consumers” meaning the people who pay taxes and user fees and use roads, garbage collection, and recreational services, don’t have the same level of choice in who provides these essential services as they would in a competitive market.
In the absence of real competitive pressure, it is important that municipalities help residents understand what services are being provided and at what cost with numerical performance targets and actual performance achievements that are linked to areas of expenditure. For example, residents of Prince George can see that emergency services dispatch has a target of notifying the appropriate service within 60 seconds of receiving a call 90% of the time. Comparisons with performance targets and prior years’ performance are the best substitute that residents can have for the absent option of shopping somewhere else for their municipal services.
In competitive industries, competition forces all producers to reach a standard in order to remain viable. Alas, there is little competition in the municipal sector. The vast range of difference in performance and even the way that performance is reported on suggest that the natural monopoly status of municipalities has left considerable efficiency gains on the table. 
Taken together, Canada’s municipalities represent a roughly $65 billion per year industry, or about one dollar in twenty of GDP. At five per cent of GDP, a 20 per cent increase in the productivity of municipal government would add a full percentage point to the national wealth. With these figures in mind, it might be time for some rioters elsewhere to focus their attention closer to home on City Hall, and ask their municipality to follow the example set by most Western Canadian  municipalities in 2008.