Canada offers its people an
array of local governments
By Nick Swift

8 July 2003: Local government in Canada is acknowledged to be an under-reported and under-studied phenomenon. The primary reason is that local governments in that enormous country vary so much, in terms of both function and form, that a consistently accurate portrayal, beyond some generalities, is difficult. The present article nevertheless attempts to provide as comprehensive as possible an overview of the subject.

The division of responsibilities, especially at the local and provincial levels of government, has been obfuscated by the inconsistent nature of the responses of government to the demands of the public for more government services and better performance by extant ones, and it is no longer possible to define as originating locally the fulfilment of most crucial government services. The need for many local services to be partly funded by provincial sources has obscured financial responsibility for those local services, and the functional interrelationship of local and provincial governments has been rendered even murkier by changes in the responsibility for the actual performance of all or part of a service.

The federal and provincial forms of government in Canada are structurally more or less uniform. The appellation ‘local’, however, applies to a whole spectrum: municipal, school boards and various other boards, agencies and commissions. ‘Municipal’ can be said to apply to governments in cities, towns, villages, townships, counties and improvement districts or special service areas, inasmuch as it is they who are responsible for things like bylaw enforcement, policing, roads, tax collection, garbage collection, parks, sewers and water and, in some cases, health and welfare.

Municipalities
All municipalities are created by the province (or territory) through a clause in the Constitution that allows them to delegate some responsibilities to another government body. Whether a local municipality in Canada is termed a city, a town or a township is determined by its size; when there is another level of municipal government, such as a county or region, involved in providing services to residents, those three (cities, towns and townships) are also referred to as ‘lower tier’ municipalities. The ones called ‘separated’ towns and cities are those that are only geographically within a given county.

The head of a local – that is, lower or single tier – municipal council is the Mayor or the Reeve. Members of council are known as Councillors or Aldermen. The head of council is invariably elected at large by all the voters in the municipality.

The method by which Councillors are elected also varies from one municipality to the next; they may be elected at large, or by ward.

A ‘single tier’ municipality is where an area has only one level of municipal government.

Counties & regions
Counties – usually ones in rural areas – or regions may be involved in the provision of services to residents and businesses when it is more efficient, or legislated for whatever reason, to provide some services over an area that encompasses more than one local municipality. A county, or regional government, is a federation of the local municipalities within its boundaries. Districts are like counties (or regions) in the sense that they contain local municipalities, but they do not discharge any municipal government functions. A very small number of districts provide services on the regional scale.

The head of a county council is the Warden; the county council itself comprises designated elected members from the lower tier municipalities. The Warden is selected by the county council from among its members.

The head of a regional council is the Regional Chair, who is usually chosen by a vote of the members. In some cases, however, the Regional Chair is directly elected.

Among the variety of ways by which the other members of the regional council are selected is direct election by the voters. In some cases, they are elected to both the regional council and the local municipal council; and members of some local municipal councils are appointed by their respective councils to serve at the regional level. The head of council in a local municipality is a member of the regional council.

Education, health and social services
Elementary and secondary education are provided by school boards; school authorities are, in general, independent of municipalities, and responsible to their own electorate for the administration, financing and standards of education. They usually do not collect taxes directly, and instead requisition funds from the municipalities that collect property taxes in their jurisdiction.

The agencies, commissions and special boards that are also regarded as components of local government in Canada are created either to administer functions common to a number of separate municipalities or to provide special services that are usually considered outside the mandate of ordinary city or town government.

An example of the changing patterns of responsibility for performance of a service (mentioned earlier) is in the provision of health care and welfare. In some provinces in Canada, health providing units function locally under provincial control, and have almost completely taken over that responsibility locally. In the field of welfare, care for the aged (or, as they tend to be called in Canada, ‘seniors’) in the form of old age pensions has developed as a federal government function since the 1920s. Greater responsibilities for other welfare services have gradually been accepted by the federal and provincial governments because the demand for them simply exceeded what local authorities could provide.

Finance
Local governments derive all their authority from provincial legislatures, and thus have the least autonomy of any levels of government in Canada. It is both a weakness and a strength for them. Local government is usually thought to be the financially most prudent of any because of the stringent balanced budget requirements and debt limits placed on them by provincial governments, and by the latter’s usually only permitting borrowing on capital account.

In most provinces there are municipal boards or commissions, appointed by the provincial government, that review some aspects of the actions of municipal governments, such as capital expenditures, public borrowing, certain local bylaws and community planning.

In terms of the spectrum, among advanced countries, of the ratio of local government expenditure to gross domestic product (1993 figures), Canada was approximately in the middle, at 9.6 per cent, between Australia at 2.6 per cent and Denmark at 32.9 per cent. These figures, of course, reflect the range of responsibilities accepted by local government in the respective countries.

A parallel diversity is found in financing of local governments: in Canada, almost 55 per cent of their revenues were, in 1993, derived from their own sources (40 per cent taxation, 15 per cent nontax revenue), and about 45 per cent from transfers. Variations in school and municipal finance, however, make international comparisons here of doubtful value. In 1998, municipal government in Canada got about 58 per cent of its revenue from taxation, 26 per cent from nontax sources and 16 per cent from transfers.

About 15 per cent of local government revenues in Canada are nontax revenues: only slightly below the average for major OECD countries. Nontax revenues for Canadian municipalities, however, account for approximately 25 per cent of total revenue; of that, 77 per cent is from sales and services, 18 per cent from investment income, and 5 per cent from fines and penalties. Many of the nontax revenues are user-related charges; it has been asserted by some that the latter could and should be increased, perhaps to take the place of some local business taxes, which are relatively high in Canada.

The circumscription of its revenue base is probably the most serious limitation on Canadian municipal governments. Property taxes are a major part of their own-source revenues, and they have increased since 1988.

Transfers, the last main category of local revenue, for Canadian municipalities represent about one-sixth of total revenue. Other governments may provide them to enhance efficiency (by correcting for benefit spillovers), to minimize fiscal gaps between local expenditure requirements and local revenue generating capacity, to equilibrate fiscal capacities among local governments, or to a number of noneconomic or political ends. The purposes of transfers are often multiple and indistinct.

Decades of fiscal restraint on municipal governments by the federal and provincial governments in Canada have reduced transfers and almost certainly increased the ‘downloading’ of responsibilities on municipalities; at the same time, they have, in concert with slow income growth, induced an environment that is hostile to increases in local own revenues. The result, obviously, has been an exacerbation of fiscal pressures for Canadian municipal governments.

Most of Canadian municipalities’ resources are expended on transportation (20 per cent), protection (16 per cent), social services and health (15 per cent), environment (water, sewerage, solid waste) (15 per cent), and recreation and culture (11 per cent).

On 1 January 2003, in Ontario, a new Municipal Act came into effect that gives municipalities new flexibility to deal with local circumstances and to react to local economic, environmental and social changes. Quebec’s municipal system has experienced substantial changes in the past two years, but provincial legislation continues to recognize two levels of municipal organization, the local and the regional. As an example of a provincial idiosyncrasy that makes generalizations hazardous, Alberta is the only province that contains incorporated urban municipalities, the town of Banff and the specialized municipality of Jasper, within the boundaries of national parks. Alberta also contains eight Métis (descendants of native and European interbreeding) settlements that are in the process of becoming local governments. In British Columbia, the 2000 Local Government Act reformed the legislative framework for local government in that province, and the distinctions between municipal classes have consequently been reduced.