Creating Proper Incentives for Canada’s Cities Through Smart Provincial Legislation: A best-practice model of local government legislation for Canada

Publication, Municipal Government, Larry Michell


Executive Summary

Recent research conducted by the Frontier Centre for Public Policy has established that Canadian local government is controlled by outdated legislation.
It is clear from the evidence that:
• Canadian local government law is unsuited to modern conditions of life and;
• the law does not ensure cost-efficient delivery of the complex range of municipal services that are currently demanded.
The Canadian problem
Canadian municipal law is characterized by its prescriptive rules-based codes of compliance. These contrast starkly with other jurisdiction’s local government law.
Modern local government laws of other countries:
• seek to facilitate best-management practice by setting outcomes rather than rules;
• they construct a performance and service-delivery framework designed to effectively and efficiently meet the needs of local taxpayers and residents.
Good local government law promotes good local government.
Modern management practices, when incorporated into practically based laws that govern local government behaviour, will invariably include current best-practice asset and financial management coupled with democratic decision-making processes.
Practical legal provisions that incorporate best-management practices into the law can directly influence local government and will achieve the following:
• Better performing local government that will contribute to the economic, social, cultural and environmental state of the nation;
• Economic gains in particular will flow from the reform of the present antiquated Canadian local government law.
Municipal management will rarely of its own volition set performance targets that reach optimal outcomes. To achieve best practice and optimal municipal performance, suitable law that sets performance objectives and that is supported by rigorous audit processes has to be put in place.
Benefits of a new Local Government Act for Canada
Municipal managers mandated to perform to measurable targets can utilize all available best-practice methods to deliver the most cost-effective services. Taxpayer and resident satisfaction will improve as will local government’s contribution to both local and national economic and other goals.
Asset-management regimes, principally those of the engineering and financial disciplines, are amongst the most significant of municipal activities and stand to benefit greatly from law reform. Infrastructure assets are the publicly owned network facilities and systems that contribute to local and national economic activity. For optimal results, these assets need to be properly deployed and maintained. This can only occur if the legal framework of municipal operations is specifically designed to mandate best-practice asset management as measured by performance-based systems.
Present Canadian law makes scant reference to the use of modern management practices including the engineering and financial accounting dimensions of asset management. Local government performance is diminished as a result.
The disturbing infrastructure asset-maintenance deficit within the Canadian economy is not being fully addressed, as municipalities are not required by law to deal properly with these issues. A model for the achievement of better local government is needed.
A New Zealand model Local Government Act
Modern local government legislation that is best suited to Canadian conditions exists within the New Zealand Local Government Act 2002. This legislation is the product of extensive public sector reforms that commenced in the late 80s.
The New Zealand Act provides for the following:
• It sets local government outcomes that can be achieved within practically based best-practice management processes;
• These include asset and financial long-term planning, consultative process and democratic decision-making;
• All of these processes are constructed to comply with good local government principles of transparency, accountability and the separation of operational and policy activities.
The result of this approach is a municipal form of a performance-based framework, one that motivates highly skilled modern management to make better decisions and to achieve better outcomes.
In practical terms, one important effect of the better law has been the accurate measurement and full funding of optimized asset-management plans. Such plans directly address asset capital and renewal and maintenance requirements including asset-maintenance deficit issues.
Another effect has been the recruitment of highly trained managers at all levels. These people are attracted to fulfilling careers in a local government that uses many modern management techniques. They are further stimulated by the incentives provided by performance-based pay.
Canada would do well to adopt much of New Zealand’s local government legislation. This adoption would have the following results:
• It would improve local government performance. There is no argument that improvements are necessary, as Canadian municipalities score poorly when measured on a number of international performance scales;
• The national economy would benefit directly from local government law reform. Much of the economy’s vital arterial economic lines of production and supply, the nation’s roads and the water and waste-water systems, are owned and managed by the municipalities.
The culture change and improved standards of management performance that would occur with the change of law will give rise to positive benefits for local taxpayers and residents. The productive and supportive liaison between communities and their local municipalities, based on New Zealand experience, will be significantly enhanced. Good public information can be supplied and consultative processes that lead to improved decision-making can be conducted within a better-balanced dialogue that caters to citizens’ information needs.
Provincial legislatures set Canadian local government law, and it is provincial
legislators that must act:
• Federal support for local provincial government law reform could be an impetus for change for the provinces. This might take the form of linking federal infrastructure funding to the required improvements in law;
• The benefits of reform could be enormous.
A ready-to-run model, the New Zealand Local Government Act, already exists. This paper concludes that many relevant sections of the New Zealand Act should be incorporated into Canadian municipal law.
Significant savings in legal and other costs can be realized by adopting this model, which was developed only after negotiating many difficult blind alleys and pitfalls. The learning curve has now been established and traps for the unwary may be avoided. Canadian local government policymakers, lawmakers and the municipal sector can benefit from this hard-earned experience.
If the performance of Canadian local government is to be improved, then the New Zealand model Local Government Act 2002 could well be the blueprint.