When I became President of MNL after the 2011 Convention, there was one issue which I thought was easily the most important facing municipalities, and that was the fiscal framework.
During my time in municipal government I’ve watched the fiscal condition of municipalities get weaker and weaker. There were a variety of reasons for this decline – the reduction in MOGs, the decline of local tax bases, aging infrastructure, and increased standards. And over the past two decades, municipalities have been encouraged or funded to pursue a variety of solutions – regionalization, gas tax funding, and cost share capital works projects – that have in some ways helped, but which have not come close to addressing the real fiscal problems affecting municipalities.
See, absolutely everything in municipal government flows from its fiscal condition - from how infrastructure is built and maintained, to how staff are recruited and paid, to how services are provided, to how regionalization is pursued, managed, and maintained, and to the tax rates that municipalities set. The fiscal status of a municipality is paramount. I think we can even say that the fiscal strength of a municipality affects interest in running for council. Look at Long Harbour-Mount Arlington Heights during the last municipal election, where a town with 249 voters had 19 people run for 7 seats. These people were most likely interested because their town is now fiscally sustainable; it is much more difficult to encourage people to run so they can manage a declining and desperate situation.
In short, the fiscal condition of a municipality is the lake that provides the water for everything a municipality does. There can be no greater priority for the municipal sector. A solution to all of our problems – from infrastructure to bylaw enforcement – will be hampered without a fiscal framework solution.
So this has been mine, and the MNL Board’s, top priority. Last year we released the Wade Locke report on municipal finance and this garnered much attention and a bit of controversy. And we commissioned Dr. Locke to write this report not to launch MNL’s position that we want a share of the income tax or sales tax, but just to show that small changes in provincial tax policy can have a major impact on municipal finances.
The provincial government may not have liked the work of Dr. Locke, but the provincial government could not ignore the common voice of the municipal sector. And in March of this year, when it was apparent that the needs of municipalities were not going to be addressed in the budget, we convened an emergency meeting of the MNL membership, and many of you answered the call. With the voices of over a hundred municipalities, we placed the provincial government on notice that the status quo was no longer acceptable and that we will do everything in our collective power to achieve a better, secure, and sustainable fiscal environment for all municipalities.
The momentum from the emergency meeting did produce results. Our collective voice helped ensure that MOG levels remained consistent with the intended one-year increase of 2011. That’s an important step, but there are many more to take.
One important step is dialogue with the provincial government. We have to be partners, not adversaries, with the provincial government on this issue. We will never be able to humiliate or anger the province into fixing the municipal fiscal framework; our focus is on constructive and honest discussions.
With this in mind, we’ve held two meetings with Municipal Affairs on improving the MOG formula and we have a further meeting scheduled for later this month. It is crucial that MNL be at the table for any changes to the MOG formula. MOG’s are important for municipalities, and any changes to the formula must be completed in a transparent manner. Most importantly, MNL will not stand for a change in the MOG formula that merely reinforces or justifies current MOG levels. That is not acceptable.
But the MOG is just one part of the process, and MOGs are not the long term solution to municipal fiscal sustainability. We need a broader examination and consideration. Therefore, we have made good progress towards conducting a fiscal framework review, with cooperation and support from the provincial government. Such a review needs to be conducted if we are going to create a better fiscal framework. All options must be put on the table and properly considered.
Municipal government is an interconnected structure, much like a wheel, with a hub and spokes, which represent the various different things that local governments do. Now, you may be thinking that council is the hub of local government, and to some degree we are. But the real hub is a municipality’s fiscal position. That is the hub that will support every other aspect of local government.
So lets look at municipal infrastructure, a crucial spoke in the wheel of local government. MNL has worked hard on a provincial and national level to address the current and future infrastructure issues facing municipalities. Multi-year capital works funding has been reinstated for certain projects, which provides a degree of predictability for municipalities. We’ve also worked closely with the Federation of Canadian Municipalities on their target 2014 project, which aims to develop a new national infrastructure program to replace the expiring Build Canada Fund. FCM will be sending its target 2014 document to the federal government very soon, and while I’m not at liberty to discuss very much, I can tell you that a significant amount of the proposed fund has been devoted to assisting municipalities in complying with the new wastewater regulations, particularly those municipalities classified as high risk. Every municipality in this province has received a template of a resolution in support of FCM’s work, which I would encourage all municipalities to pass and forward a copy of it to the MNL office. We need you to play an active role in securing future infrastructure funding.
Still, new infrastructure support programs are being built on a municipal sector with an unsettled foundation. With new programs more towns can afford more infrastructure, but they cannot afford to maintain this infrastructure. This makes no sense, and turns the solutions to current municipal issues into future problems. Municipalities need the resources to maintain their infrastructure – this makes fiscal sense at both the provincial and municipal level. The current approach, with all the important support programs, is not a sustainable model for municipal government.
Another important spoke in the municipal wheel is regionalization. MNL has been one of the largest proponents of regionalization and we think it is the future of local government. But what we have come to realize is that regionalization takes money. Regionalization is neither free nor easy. Certainly several municipalities can come together to share a fire department, and that will save some money, but such a step is not building a more sustainable community. Regionalization takes work and it takes time. But under our current fiscal system, most municipalities can do neither. Most municipalities do not have the staff resources and expertise to initiate and manage the complex arrangements created by regionalization. It is no coincidence that the most regionalized part of the province is the northeast Avalon, where the municipalities with greatest resources are located. We can’t expect a municipality of one staff member to achieve the level of regionalization needed for local sustainability. The clerk of that town is most likely already overworked. Regionalization will never reach the heights it should in rural Newfoundland and Labrador under the current fiscal framework.
The analogy of the municipal system as a wheel underscores the point that everything a municipality does is connected, largely in a fiscal manner. And it is this connection that brings home how illogical it is to address every municipal issue separately. These issues don’t function separately, and we shouldn’t imagine that they do.
That is why MNL has been asking the provincial government for over a year, “What’s the plan?” The provincial government has to address, in a comprehensive manner, the purpose, function, parameters, and responsibilities of local government and how local governments are to fund managing these obligations. And only the provincial government can create these plans because they are responsible for local government. That is a fact that needs to be acknowledged fully at all times.
We safeguard the needs of residents, for which the province is ultimately responsible. For the sake of our residents the provincial government needs to create a comprehensive plan for local government. To do otherwise, is to allow the current vulnerabilities to continue, impacting 90% of the people in this province.
I’ve been saying that the fiscal framework and a plan for municipal government are urgent issues, and they are, but they have been urgent for some time. And the MAA assessments that municipalities received over the past week only highlight this urgency. I’m not saying that it is bad that property values go up – it is great when people’s homes appreciate - that helps create wealth. But it is not real wealth; it is hidden in the structure of your house. An increased house assessment doesn’t mean you have more money in the bank or your pay cheque has increased. So why are we forced to ask the residents of our towns to pay dramatically more? It is not fair to us, as municipal leaders, and it is not fair to residents. We have been burdened with an unjust, regressive tax.
The funny thing that I don’t think the province considers is that there will never be a fiscally sustainable property tax rate. To achieve such a rate the municipality would have to tax residents so high that the tax would become an overwhelming burden. A fiscally sustainable property tax will be an unreasonable property tax. We will never snuggly fit the round peg of property taxation into the square hole of municipal fiscal strength. That is impossible and has not yet been achieved.
We are not seeking handouts or short-term solutions. Municipal governments are too important in the governing structure of this province and country to be treated in such a way. We are seeking a solution to the fiscal framework issue that benefits the province and municipalities, and provides fiscal relief for municipal governments and residents.
We have to be prudent and practical in our timelines with the fiscal framework issue. The comprehensive improvement of the current fiscal structure will take time, but we are pushing this issue with a great sense of urgency, while knowing full that our only goal is the right solution. We hope the MOG aspect will be settled earlier, but we cannot be certain. So, please support our work, but be patient. And if you have ideas, please put them forward. We will listen to and assess everything put forward by our membership.
We are undertaking this difficult task for all municipalities. I do not know what a new fiscal framework will look like, but MNL will not let this issue rest until we have created a framework that will build a more sustainable municipal system.
Mayor Churence Rogers
President, Municipalities Newfoundland and Labrador