Preville on Politics

The genius of Dwight Duncan

Posted on March 13, 2008 by Philip Preville

Mayor David Miller has, for years, repeated that cities need “revenues that grow with the economy.” The unfortunate reality is that the economy doesn’t always grow. A bad year can leave tax coffers dry, and an unexpectedly good year can leave them nice and flush. So Ontario Finance Minister Dwight Duncan’s announcement yesterday was a clever way of sharing both risk and reward: if Queen’s Park has a good year, the city will share in the surplus, but if it has a bad year or a just-OK year, the city gets nothing.

News reports focused on a $40-million windfall for the city, which is peanuts. But look at the upper end of the scale: if the provincial surplus is $2.6 billion or higher, Toronto would stand to net about $400 million from the deal, which, for the city, is a sputteringly huge, are-you-kidding-me? amount of money. Some, like John Tory, complain that this is not stable funding. But it is: the amount will change from year to year, but the formula is stable, which means it can be worked into projections. What it doesn’t do is shield cities from economic downturns, but why should it? You’d think a Conservative would support a plan that ties municipal revenues to market forces, which is essentially what this formula will do.

Meanwhile, we municipal policy wonks are still awaiting a report from Queen’s Park on municipal uploading. Educated guess: yesterday’s announcement probably means that the uploading package will be less generous than Toronto would prefer. Instead of fully uploaded costs, cities will get a combination of a partial upload plus this boost from any surplus. The risk will be greater, but so will the potential windfall. I have said repeatedly that the McGuinty government would change the rules of municipal finance. Yesterday’s announcement is our first glimpse of the future. And there may be more surprises yet.

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Mark Dowling March 13, 2008 at 2:07 p.m.

I disagree. Ontario infrastructure renewal needs has progressed beyond the point when you can do it when you're flush and defer it when not. This merely moves the conversation to what defines a surplus, and will encourage the Finance Ministry to play games by low-balling or crash-spending or transferring into "trust funds" and presto we're back in the land of "looking for handouts".

You tell us - "What it doesn’t do is shield cities from economic downturns, but why should it?"

Because cities have great difficulty in influencing the course of the economy and their tax raising is circumscribed by Queens Park and thus why should they be exposed to "risk" from a downturn which isn't their doing?

Is Duncan going to tell us that provincial employees and even MPPs are going to have their compensation dictated to in part by whether there's a surplus?

Philip Preville March 13, 2008 at 2:55 p.m.

I see your point, Mark, but stick to mine nonetheless. Economic downturns, for the most part, aren't the province's doing either -- yet its tax revenues can drop sharply as a result of them. You cannot make individual compensation dependent upon a surplus, but you can make fiscal transfers between governments dependent upon them. That strikes me as a false comparison.

If the city wants "revenues that grow with the economy," it must be willing to accept that those revenues might also decline, or even be non-existent, in bad years. That's what it means to tie revenues to the economy. If that's not what the city wants, then it should be more careful about what it asks for.


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Philip Preville

Veteran freelance writer Philip Preville lived much of his life in Montreal and Edmonton before he was lured, like so many Torontonians before him, by the promise of more work and a better living. A National Magazine Award winner and former Canadian Journalism Fellow at the University of Toronto’s Massey College, Preville writes Toronto Life’s politics column. He lives with his wife and one-year-old son in Riverdale, just close enough to the Don Valley Parkway that he can hear it when he steps outside his house—but just far enough away that it doesn’t keep him awake at night. On his office wall hangs a 1938–39 press pass belonging to his grandfather, Elias Gannon, who wrote for the Montreal Star.


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