MaRS

Cities are the engines
It’s now widely acknowledged that cities are the engines of the knowledge economy. They possess the density, the population size, the diversity and the innovation assets (from universities to hospitals to colleges to incubators) that germinate new research and new companies. If this is true (and 20 years of research from the likes of Michael Porter, Richard Florida, Roger Martin and AnnaLee Saxenian says it IS), how can Canada adapt its archaic fiscal and economic structure to give its cities the best chance to succeed?

The problem
Writing for the Institute for Research on Public Policy (IRPP), Queen’s University fiscal federalist savant Tom Courchene offers some important answers in a piece aptly titled “Global Futures for Canada’s Global Cities.” (PDF) Courchene vividly describes the challenge facing this country’s global city regions (GCRs) as “fiscally weak and jurisdictionally constitutionless.” Canadian cities tend to derive the bulk of their revenues from property taxes, whereas European and US cities can enjoy a much broader funding base that includes income and sales taxes.

The results of this funding difference are striking: innovation hubs like Stockholm and Copenhagen spend between two and three times as much per capita as Toronto does, and Denver’s spending doubled Calgary in the decade from 1990-2000. Why is this important? Because “Canadians’ living standards will to a large degree depend on how our GCRs fare relative to American GCRs.”

The fix
So how to even the playing field? Courchene has a number of ideas, from greater use of existing revenue sources (like user fees and properly priced local public services) to leveraging the investment potential of cash flows from municipal utilities, to “piggybacking” municipal taxes on the back of provincial taxes (as the provinces and Ottawa already do).

The outcomes
With competitor GCRs already enjoying far greater power and responsibility than their Canadian counterparts, a realigned fiscal federalism across all three orders of government is both long overdue — and starting to emerge. Courchene writes approvingly of a number of positive indicators, from the gas tax revenue sharing initiative that came out of the 2004 budget to the recent “City of Toronto Act.”

Until provincial and federal elections are won by the party voters deem the most “pro-city,” however, let’s hope Courchene and his fellow travellers continue to beat the drum for the potential and promise of great Canadian cities.