Financing Local Government and Development in Canada in the Aftermath of a Global Pandemic:Continuity and Change
36 Pages Posted: 29 Mar 2023
Date Written: February 1, 2023
In the post-pandemic environment, local governments must confront a challenging fiscal environment. Drawing on insights provided over the years by Richard Bird, the author re-examines certain pervasive themes found in discussions and analysis of municipal finance, such as the merits of benefits-based taxation at the local level, the hierarchical constraints on municipal fiscal decision making, and the reality of a perpetual fiscal crisis at the local level. The underlying issue of having to finance a broad set of expenditures on public services from a narrow revenue base has resulted in intergovernmental tensions and continuing debate over the capacity of the property tax base to meet the demands placed on it.
Financing local government can be described in terms of borrowing, spending, and taxing. Each of these areas of municipal fiscal decision making was affected by the COVID-19 pandemic. Borrowing rules remained hierarchically constrained, pressure to increase expenditures grew, and tax and fee-based revenues were adversely affected. Further, it seems likely that the municipal fiscal base will be narrowed given the controversy around development charges. The author uses data from Ontario to illustrate the impact of the pandemic on municipal fiscal health. In addition, the paper includes the Richard Bird Urban Fiscal Health Dashboard to illustrate aspects of the long-run fiscal health of Ontario’s local governments. Throughout the paper, the author raises questions that merit further research informed by the perspective that Richard Bird brought to our understanding of the mechanics and implications of local fiscal decision making.
Keywords: Municipal Finance, Municipal Taxation, Debt, Property Taxes, Provincial-Local
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