The genius of Dwight Duncan

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.