Federalism

Federalism is a system of government wherein power is divided between a central authority with responsibility for matters of national concern and constituent political units with jurisdiction over local concerns. It claims to nurture tri-level development of strong policy, further actuated through horizontality, sub-governmental relationships, consultation, partnerships, and engagement. Examples, at varying levels of effectiveness, include Canada, the United States, Mexico, Brazil, Argentina, Germany, Switzerland, Austria, India, Australia—and the European Union.

Federalism is said to be particularly suited to multinational and multicultural states intent on the sustenance of individualities. Supremacy rests in the constitution, and in Canada the constitutional order is comprised of federalism—the Canadian Parliament and the ten provincial legislative assemblies—, responsible government, and the Charter of Rights and Freedoms.

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The Purpose of Local Government

Historical Context

Municipal governments, such as those developed in the Nova Scotia and Lake Ontario Loyalists’ communities that were founded after the American Revolutionary War, originally were established to provide services and regulations. Municipal governments were seldom established for the purpose of local democracy, as local attitude exhibited indifference or hostility—largely stemming from dislike of property tax—and colonial or provincial authorities’ interest sought a downward shift of costs.

Although population, topography, and geography influenced the pace and nature of municipal development, the great similarity of municipal systems of the 18^th and 19^th centuries was separation of urban and rural municipalities, with fiscal focus and base on property. This parallel development was first evident in central and Atlantic Canada, with later derivations in the western parts of the nation.

During the 20^th century, major strain on this structure arose from rapid population gain and urbanization, producing increasing demands for better housing, water, and sewerage. Consequent reforms sought business efficiency within municipal planning by replacement of the ward system by election at large (Montréal 1857, Toronto 1871, Saint John and Fredericton, 1894, Vancouver, 1936), introduction of boards and commissions (typically for police, health, and transit), and the use of the chief administrative officer model (Guelph, Ontario, 1919; province of Québec, c. 1920); all of which diluted council control.

Persistent and sprawling urbanization generated increased demands on municipal services (especially in southern Ontario’s Golden Horseshoe (the most densely populated and industrialized region in Canada, at the western end of Lake Ontario, and including Metro Toronto and Hamilton), Montréal, British Columbia’s Lower Mainland (comprised of Metro Vancouver and the Fraser River valley), and the Calgary-Edmonton corridor).

This later also produced a heightening of local jurisdiction through annexation, amalgamation (Toronto, Montréal, Ottawa, Miramichi in northeast New Brunswick, Halifax, and others), intermunicipal agencies, and broader upper-tier governments (the Greater Toronto Area, Communauté urbaine de Montréal, Metro Vancouver, Winnipeg’s Unicity, Victoria’s Capital Regional District); both annexation and amalgamation typically justified by unfulfilled claims of savings, reduction of inequities, elimination of intermunicipal clashes, improved competitiveness, and reduction of bureaucracy.

The rapid urbanization of Canada during the last century is also the major cause of the problems of fiscal sustainability. Four out of five individuals in this country now rely on local governments for the delivery of services. By contrast, a century ago, four out of five individuals lived in a rural environment.

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Orders of Government

Although municipalities have long been the third and lowest tier of governance in Canada, and although they remain by legislation the artifacts of the province, it has become clear that municipalities are distinct entities in their own right that provide major services to citizens and compete economically on the international stage, as much in their way as nations do.

They are, thus, no longer agents that deliver decentralized services on behalf of a paternalistic provincial government.

The massive broadening of municipalities’ roles has brought into the forefront the issue of the fiscal sustainability of municipalities, expressed particularly in the sense that municipalities do not have access to and the right to use financial resources clearly needed to sustain funding of responsibilities that have been expanded by urbanization and international markets, and assigned through downloading by senior government.

The current system of municipal government is not sustainable without access being granted by the provinces, and being supported by the federal government, to more diverse and greater sources of revenue.

Municipal Finances

In New Brunswick, as example and where I have worked in local government, the largest, or first tier, municipalities (Fredericton, Saint John, Moncton, Miramichi, Edmundston), as well as the second tier municipalities (St. Stephen, Sussex, Woodstock, Sackville, Tracadie-Sheila), in generalized terms obtain approximately 55% of their revenues from the property tax; 20% from user fees; 9% from grants; and the remaining 16% from other sources, such as services to the province, rentals, and fund transfers.

However, costs continue to grow while revenues stagnate or decline. Moreover, demand for new or improved services persists in its increase while the capacity and resources necessary to respond generally remain static or shrink.

Although the current system is able to provide water, sewer, solid waste disposal, road maintenance, and some recreational programmes (municipalities in New Brunswick do not fund educational or social services), the system’s greatest defect is its inability to ensure effective maintenance and improvement to infrastructure, particularly in regard to transportation and utilities.

Provincial and federal budgets consistently have provided no new financing means for the municipalities. Increases to property tax, densification of development (typical of Vancouver, for instance, and where I live), additional user charges, and economic subsidy all have only variable and insufficient possibilities for revenue generation. Alternative service delivery, particularly those that are intermunicipal or private-public in nature, may hold some promise, but only over the long term; it seldom if ever offers adequate solution in the near term.

The provincial budgets have also supported the return of the notion of amalgamations (which has been much used in Ontario) as the solution to the financing woes of municipalities. This is a particularly interesting dynamic in New Brunswick, where all the rural areas, the so-called local service districts, had no local government and were governed directly by the Province. Regional reorganization favours economic development at the expense of the amalgamated communities’ identities.

The most recent example of one-tier amalgamation in New Brunswick was the formation, by the McKenna provincial government, of the City of Miramichi in 1995. This amalgamation was based on the arguments that administrative efficiency, coordination, and integrated service delivery would be improved, and the equity of the existing tax system enhanced. In addition, it would strengthen urbanized regions through increased self-sufficiency, and counter the diminished accountability resulting from the emergence of new intermunicipal special-purpose bodies.

Some operational efficiencies may be gained, but are accompanied by the loss of both the number and nearness of elected representatives. In the instance of New Brunswick’s local service districts, elected representation disappeared in 1966. And in the case of Miramichi, the benefits of single-tier aggregation stayed unclear, as no evidence supported the claim that consolidation produced savings, but evidence indicated that the new city’s operating costs increased by some $1.5 million annually.

Amalgamation, to succeed, needs to rise from the citizens, not from a senior government’s planning office. Nowhere in Canada has it been demonstrated that amalgamation is the solution to fiscal imbalance.

This is an adaptation of a chapter in Surviving Government in a small town.

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