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The $68 billion question: How can cities cry poor while spending so much?

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  • The $68 billion question: How can cities cry poor while spending so much?

CFIB’s latest report on municipal spending shows that Canadian cities combined to spend an excess $68 billion between 2003 and 2013. This excessive spending inevitably leads to increases in taxes and fees, and we all know that small business owners already shoulder a disproportionate share of that load.

Overspending is a coast-to-coast trend across 14 major cities included in the report – Victoria, Vancouver, Calgary, Edmonton, Regina, Winnipeg, Toronto, Ottawa, Montreal, Quebec City, Moncton, Halifax, Charlottetown and St. John’s.

The problem is especially pronounced in Victoria, where the increase in real operating spending was six times population growth. On the bright side, Ottawa has kept its real operating spending close to the benchmark, Toronto has actually reduced spending in recent years to meet the benchmark, and Montreal has shown a commitment to reduce personnel costs.

What causes cities to overspend?

The main source of overspending is what is paid out to city workers.

  • The lion’s share of total operating spending goes to employee wages and benefits.
  • Local governments have inexplicably grown their workforce faster than the private sector.
  • Including wages and benefits, municipal employees in Canada are paid 22% more than someone doing the same job in the private sector.

 

And local politicians don’t help with their yearly spectacle in which they beg senior levels of government for new taxation powers or more transfer payments. Instead, they should acknowledge the real problem, and address it.

How to rein in spending?

  • Limit increases in operating spending to no more than inflation and population growth.
  • Bring city workers’ pay and benefits in line with those of private sector workers.
  • Consider contracting out some municipal programs/services to improve efficiency of service delivery.