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JIM GUY: Municipalities struggling to overcome financial hardships

['Jim Guy – Political Insights']
Jim Guy – Political Insights

Budget cuts are usually detrimental to the sustainability of anything

The issue of sustainability, and possibly the survivability of the Cape Breton Regional Municipality (CBRM), is the rubber hitting the road for all businesses and residents.

The simplistic gut reaction to enable sustainability is to initiate cuts against the operational budget of the municipality. The number '10 per cent' seems to surface so quickly as the percentage to cut without much thought or debate. That immediately raises suspicions about its credibility.

But what begs the question is: What are the policy responsibilities of the provincial government towards municipal governments outside of Halifax? Instead of addressing the fundamental problem of the province's obligations to all 42 municipalities, the government very quickly moves to reduce the service capabilities of the CBRM.

That imposes a serious threat to all residents who rely on this municipal government. Cuts to the CBRM budget will inevitably affect matters of public safety, crime prevention and all the other essential services of their local government. It will diminish the property values of our homes and businesses and feed into the dynamic of population decline. It will make us collectively poorer. And, as is already happening, families will have to make painful decisions about where they will work and live.

Cuts are consequential to all services. Among other things cuts alter our ability to respond to repairs on infrastructure, paving, snow removal and street lighting for residents and businesses. Cuts will also affect our ability to invest in our own economic development - usually cost-shared with the provincial and federal governments. In short, the declining financial condition of this municipality will demonstrate to residents and visitors that we may not be the best place to live and do business.

In this regard there is a constitutional obligation on the part of the provincial government to make sure its municipalities can provide essential services at comparable levels of taxation. That's what makes all of us "Canadians" under the constitution: Someone living is Cape Breton has the same comparative advantages to someone living in Quebec or Halifax. Are we a national community with comparable advantages or are we an amalgamation of many communities in competition for national resources?

Canadian federalism has indeed been unkind and unresponsive to municipalities. They are the bottom feeders in our galaxy of municipal governments. Remember the Ivany Report? As controversial as it became in different parts of the province it made two major recommendations that seem to have been ignored by successive provincial governments. Ignored perhaps because the recommendations require major policy changes as we approach another provincial election in the not-too-distant future.


“Property taxes would be high on the list of needed reforms.” — Jim Guy, Political Insights


Called "game changers" by the Ivany Commission, they are Municipal Reform and Provincial Tax Reform. Both would alter all aspects of provincial prosperity and require the government to reset its priorities. So what government is willing to take the political plunge?

Thus far municipal reform has tended to focus only on governing structures: amalgamation, reducing the size of councils, sharing services. But reform has not embraced the significant matter of provincial funding to sustain municipalities. A strategy to sustain the CBRM would need to be entrenched in a municipal charter between the CBRM and the provincial government.

It would involve a larger supportive transfer of financial supports to all rural communities in a new policy of sustainability. The real questions is: Does the province value its rural communities? Are they worth being sustained by provincial monies in addition to their tax revenues?

The reforms would require tough negotiations because they would impact the provincial budget in its totality. Thus far the province has not shown much enthusiasm for providing lifelines to endangered municipal governments.

Then there is the uneven tax burdens on rural governments which can eventually smother them. Generally, municipal taxation is glaringly disproportional across the province such that the advantages of living in the HRM dwarf those within the CBRM and other rural municipalities.

Municipal tax reform would provide a levelling effect on municipal budgets everywhere except in the HRM. We know that tax burden affects population decline and local growth. It affects housing and the affordability of lifestyle. It should not be ignored much longer.

Property taxes would be high on the list of needed reforms. The financial underpinning of our municipalities are the taxes based on property. The property tax is a limited and regressive way of raising money for the many services of local governments. It has been the fiscal culprit responsible for keeping municipalities in the perpetual condition of what some have called "puppets on a shoe string." Our tax system has been in use in Nova Scotia for centuries. Local governments have relied heavily on property taxes for self-generated revenue.

But the economics of the system leads to decline. It enforces the law of diminishing returns, eventually leading to what is happening to the CBRM. Because of the wide range of property values in Nova Scotia, local governments are often unable to provide the same standard of municipal services. Tax reform would address this.

Nova Scotia's provincial relationship with the federal government also needs to be reset. It is based on 19th century thinking - strict provincial jurisdictions against powerful federal entitlements in the national interest. Changes need to be implemented to provide a greater share of federal tax revenues redirected to small municipalities losing their tax base. And the reform of equalization is essential to balance the gross inequities between rural and urban communities.

Dr. Jim Guy, author and professor emeritus of political science at Cape Breton University, can be reached for comment at jim_guy@cbu.ca.

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