Feature

Brighter Lights, Bigger Cities

Cities are the bloated elephants in Stephen Harper’s Cabinet room. Will he have the courage to look them in the eye?

Prime Minister Stephen Harper faces numerous challenges, not the least of which is addressing the critical needs facing Canada’s largest cities. He could choose, of course, to be constitutionally correct, noting that under the British North America Act provincial governments are responsible for cities. To this jurisdictional truth, he might also argue that fragile minority governments like his do not have a mandate to negotiate constitutional reform. However, great prime ministers of the past have not shied away from tough issues, and some have engaged in seminal nation-building exercises from minority platforms. And for Canada, making sure that our large city regions are optimally competitive is key to the country’s future economic prospects. Time has wasted as Harper’s predecessors either did nothing or took baby steps while other nations acted.

Politically, Harper needs to build a governing coalition if he is to replace the Liberals for anything but an interim period. His January 23, 2006, victory returned no seats from Vancouver, Toronto, and Montreal, and while he made strides elsewhere, the biggest cities remain Liberal and ndp strongholds. Harper and his colleagues can see this as a problem or as an opportunity for growth. If they want to build a coalition that will sustain them for a number of elections, and take them into majority-government status, those three urban regions offer fertile ground.

Capturing that ground would require the Conservatives to develop a cities agenda that addresses the differences in values between urban and rural Canadians; the relative efficacy of investing in cities as opposed to resource extraction in non-urban Canada; the choosing and settlement of immigrants; and, perhaps most importantly, the fiscal imbalance facing Canada’s largest cities. It is estimated that the Toronto region, for example, sends between $15 and $20 billion more to Ottawa and Ontario than it receives back in tax-paid goods and services.

Harper might also take a position on the fact that urban ridings have considerably more population than rural ones. On average, urban ridings are represented by one Member of Parliament for just under 120,000 residents, while rural ridings get a federal representative for just over 86,000 people. (And there are the true anomalies, like Prince Edward Island with a population of 138,000 and four seats, and the sparsely populated north, where there is one MP for every 35,000 residents.) As it stands, an urban vote is worth almost one-third less than a rural vote. An equal distribution of votes per constituency would result in many more urban seats, making them much more valuable to contest.

The city regions will be waiting for cues to know how to respond in the next election, and urban constituents clearly want more attention directed their way. According to a comprehensive 2003 study conducted by Cameron Strategy Inc. of Calgary and Probe Research Inc. of Winnipeg, 77 percent of Canadians in major cities believe that their civic governments are more accountable than the federal or provincial governments. After years of seeing the costs of services downloaded onto municipal governments, the majority of big-city residents want their mayors to be formally included in the federal budget planning process.

Harper has named his five priorities: passing the Federal Accountability Act; cutting the gst; cracking down on crime; increasing financial assistance to parents; and working with the provinces to establish a wait-times guarantee for hospital care. He has also consistently said that the constitution establishes that cities are a provincial matter, and that he doesn’t intend to tread on that hallowed turf. But the historic constitutional architecture of Canada, now nearly 140 years after Confederation, has become an anachronism. When Sir John A. Macdonald and his contemporaries began to cobble the country together, adding Nova Scotia and New Brunswick to the union of Upper and Lower Canada and, in turn, the other provinces, it was only through assurances of sovereignty that each joined up. Thus a considerable list of powers resides with the provinces, ranging from education and health care to cities, towns, and villages, making Canada one of the most decentralized countries in the world. But this constitutional architecture was designed for an era when the primary economic pursuits were the extraction and selling of natural resources, and towns and villages were simply conduits or way stations for this rudimentary trade and commerce.

Today, traditional resource-based industries represent only about 13 percent of Canada’s total economic output, and cities—particularly large urban regions—are anything but outposts at the service of the resource extractors. Instead, they are economic engines, where more than 80 percent of Canadians now live. Wealth once derived from the land, in the form of furs, wood, minerals, and food, now derives from information and design, the centres of which are in the cities. Large urban regions have become diverse economies featuring complex human networks and the vibrant interaction that leads to innovation and wealth creation. Financial services, construction, entertainment, media, design (urban, architectural, and industrial), education and training all take place on a significant scale in our largest cities.

Under the Canadian system, this city-generated wealth gets distributed across the nation in a government-centred system of transfers that sustains the regions. All is not necessarily copacetic in this system, as many commentators will attest, but it is the way we currently do things.

City regions have become the foci of international competition, eclipsing the importance of nation states. Following World War II, Toronto’s challenge was to become the main economic, social, and cultural centre of the eastern Great Lakes, a challenge it won by surpassing Buffalo, Cleveland, and Detroit, each of which was equally competitive in the middle of the twentieth century. That objective was never a national ambition; it resulted from the province engaging directly with the city. Today, globalization, the information and service-based economy, and, even, the Bilbao Effect are all directing the world’s major metropolises to invest heavily in cultural capital and modernization, and encouraging cities long regarded as in decline—from Dublin to Cleveland—to compete with megacities. Toronto’s recent cultural investments (redesigns of the Art Gallery of Ontario and the Royal Ontario Museum, as well as the new ballet and opera house), and the Quartier international de Montréal project illustrate the fact that cities are dynamic entities that must continue to innovate in order to compete.

As prime minister, Harper has a comprehensive responsibility for all of Canada, and he has inherited a genuine problem. Over the course of the twentieth century, the country experienced a two-stage urbanization process. The first was the steady movement of people from rural and hinterland areas to villages, towns, and then contained cities. These cities were regional centres, and places like Moncton, London, and Saskatoon grew. The second stage saw people moving from these cities to Montreal, Toronto, Vancouver, and, with the development of the oil industry in Alberta, to Calgary. By the beginning of the twenty-first century, it was clear that there were three large urban regions with diverse economies that embraced a large number of surrounding municipalities: Montreal, Toronto, and Vancouver.

Harper’s problem is that the growth of Canada’s largest cities has been achieved, in good part, at the expense of the next tier of cities. In 2001, Winnipeg’s then-mayor, Glen Murray, pointed out that he, like many of his fellow mayors, was watching the steady erosion of tier-two cities like Winnipeg as successful businesses, media, and government people moved to one of the larger cities for greater opportunities. Murray looked at the space between Toronto and Calgary—with Winnipeg, Regina, and Saskatoon shrinking—and called it a great national concern, something that demanded federal government attention. The great observer of cities, writer Jane Jacobs, noted the same trend and warned that the hollowing out of parts of the country would be problematic for national prosperity and unity. Indeed, given current migration patterns and immigrant settlement trends, one can forecast a population picture of Canada in the very near future where the overwhelming majority of Canadians will live in one of three major urban centres, all separated by vast and relatively unpopulated regions.

This concern led to a number of initiatives, including the meetings of the C5 Mayors (from Vancouver, Calgary, Winnipeg, Toronto, and Montreal) beginning in Winnipeg in May of 2001. These meetings were aimed at highlighting the ways in which the world and Canada had changed. The astute Don Stevenson, a former Ontario senior public servant, called for fresh attention to urban matters in Canada. He also alerted us to the fact that although the majority of Western society lived in cities for most of the twentieth century, the twenty-first century would be the first “urban century,” when a majority of the world’s population will live in cities.

Along with the powerful trend toward urbanization, immigration has added great potency to large cities. Canada, of course, has always been a country of immigrants. Our first prime minister, Sir John A. Macdonald, was from Scotland. But during the last quarter of the twentieth century, two big changes occurred. First, immigrants came from many different regions of the world other than Europe. They came from South America, Asia, Africa, the Caribbean, and the Arab world, and most of them were people of colour. Second, they moved from cities to cities. Unlike many previous waves of immigrants, they did not have the skills, experience, or interests that would make them successful in rural Canada. Nor did rural Canada have the concentrations of people like them to make life welcoming and familiar, the economic opportunities, or the programs and support networks to expedite successful settlement. While perhaps not sufficient, to a far greater degree such programs and supports are already features of big cities.

To put this in perspective, since 1991 over 3.2 million immigrants have arrived in Canada, the vast majority of whom have come from urbanized areas in Asia, the Middle East, Africa, the Caribbean, and Latin America. The Greater Toronto Area alone absorbs nearly half of Canada’s immigrants, and the percentage of foreign-born Canadians in the country’s three largest cities is growing at a much faster rate than Canada as a whole is growing. By the time Canada celebrates its sesquicentennial in 2017, up to 23 percent of Canadians will be visible minorities, with 75 percent of those living in one of Canada’s three largest cities. And by this same year, Canada will have, for the first time in its history, more citizens over the age of sixty-five than under fifteen years old. In short, our rapidly ageing population will be concentrated around the health-care and other services that cities provide, placing even heavier governance burdens on Canada’s largest metropolises.

Past governments were not oblivious to these trends, nor to the imbalancing effect that increased urbanization through immigration was having on the rest of the country, but they were puzzled about how to respond. To fill population holes, a succession of federal immigration ministers contemplated policies that would require newcomers to settle outside of the large urban regions for a period of three to five years, after which they could move. Such notions met protests from immigration advocates who said that even if such policies survived inevitable Charter challenges, social engineering of this kind wouldn’t work. The settlement trends are driven by positive attraction—i.e., people move to cities because that is where they find opportunity, wealth, education, friends, and even love. And the trends are further driven by readily available health care and publicly funded schooling. Forcing new arrivals to live away from where they were inclined to live would delay successful settlement and, in any event, it would be hugely expensive to create settlement programs on smaller scales across the country. Urban advocates simply asked, what is so wrong with large and larger cities

If Harper is of the view that the health of our cities is critical to the health of the nation, he will want to know how to best support them. While not a businessman by training, he is no doubt aware of the basic precept that investing in strength is the best strategy, and most economists would advise him that investing in city regions would produce the greatest returns. Returns, by the way, that can be invested in the many other objectives of government, including, if he chooses to continue the “Canadian way,” sending money to the non-urban parts of the country.

This brings Harper face to face with the so-called New Deal for Cities. There is a lot of confusion about what the New Deal actually is, and on particularly confusing days it seems to be not much other than more federal or provincial handouts for cities. It might be helpful, therefore, to parse this out a bit. If there is a New Deal, there must have been an Old Deal. The Old Deal was firmly in the grip of the constitution. Cities were the creatures of the provinces and they depended on provincial or, occasionally, federal money for big-ticket items, like transportation infrastructure. Under the Old Deal, there were good days and bad days. On the good days, the money arrived. When Prime Minister Pierre Trudeau created a ministry of municipal affairs, there was attention and money. Under the Davis government in Ontario, cities in the province generally had a friend at Queen’s Park (as they do today in Ontario Premier Dalton McGuinty). On the bad days, the money didn’t come, or came in small amounts with hard conditions. The prevailing moods of hostility (the Harris government in Ontario) or indifference (the Chrétien government in Ottawa) made for bad days during the Old Deal.

What good and bad days shared under the Old Deal is that the decisions weren’t made in the cities. It was what the other levels of government wanted that counted. The city in question lacked the decision-making power and the financial resources to do what it wanted (and its structure of governance often exacerbated the problems). For example, Toronto has known for some time that it wants to improve its waterfront, an area in rather ugly transition between its industrial past and a more appealing future. But it has neither the resources nor the powers to change it without the approval and participation of the federal and provincial governments. It has been unable to do what Vancouver has done so wonderfully to its False Creek and Coal Harbour areas and Montreal to its historic buildings.

This led urban advocates to insist that waiting for handouts, constantly being the supplicant, is no way to build great cities. What that takes is more money, more power, and governance systems that lead to effectiveness and accountability. Money, power, and governance. Most people agree that these are the component pieces of the New Deal, but there is a lot of debate on what should constitute each. A simple concept can help to clarify: control of destiny. What, within each of these categories, would contribute to greater control of destiny for our large urban regions At the end of the day, if reforms are just about being better supplicants, what Jane Jacobs has called “opportunistic beggary,” then we probably only need more charming mayors.

The powers that would yield greater control of destiny would be akin to the powers of a province. Some would include power over both the education and health-care systems. In Toronto, Montreal, and Vancouver, for example, the large immigrant populations put unique demands on the school system because of language and cultural issues that are fundamentally different than in the rest of Canada. Local control would provide more appropriate curricula. Similarly, these populations have different health-care requirements.

A province would be reluctant to cede this much power to an urban region because, in effect, it would create a province within a province. But a very interesting negotiation has just concluded between Toronto and Ontario over the new City of Toronto Act, which brought into focus the idea that where there wasn’t a clear provincial interest the city should have the power to act. The onus is now on the province to articulate the provincial interest in a persuasive way.

Money is the difficult issue. For control, the power of the purse is vital. To tax is to govern, and Canadian cities have limited access to taxes as revenue sources. There are various kinds of tax, some that grow with the economy, such as income and consumption (sales, liquor, tobacco, gasoline) taxes, and others, such as property tax, that are less growth-responsive. Compared with other jurisdictions, Canadian cities are overreliant on property taxes: such levies make up about 53 percent of their revenues, compared with 23 percent in the US and substantially less in Europe. US and European cities have access to a much broader array of tax instruments, including sales and income taxes. Provincial governments have traditionally not allowed Canadian cities the same tools, but being able to raise revenue gives a government more control over how it is spent.

The problem is that in our current environment, it is popular not to tax, and politicians of all stripes are drawn to popularity like bees to honey. So when premiers and mayors object to the “fiscal gap,” what they really want is simply more money from Ottawa. New Deal advocates, on the other hand, are proposing a redesign of Canada’s fiscal arrangements to better align the obligations of a level of government with its ability to raise the money it requires. In effect, given the current allocation of obligations, the federal government could tax less and the provinces and cities tax more. As the TD Bank put it in its seminal report, “A Choice Between Investing in Canada’s Cities or Disinvesting in Canada’s Future,” the federal government could do “less with less.” And as the federal government lowered its taxes, the provinces and cities would move into the “tax room” that had been created. Taxpayers would pay roughly the same amount, but their tax dollars—under such a form of asymmetrical and reduced federalism—would stay much closer to home.

There is a problem with this scenario—one that Harper had a good hand in creating. Canadian governments have become as tax averse as some Canadians, thanks to the anti-government, anti-tax crusades of Preston Manning’s Reform Party and its successor, the Canadian Alliance, and of their consultancies like the Fraser Institute and the National Citizens Coalition—all of which Harper has been associated with. The result is somewhat paradoxical: while to tax is to govern and both provincial and municipal governments consistently demand more powers and greater control, both also reject occupying the tax room that would be left open by a diminished federal government. Provincial and municipal governments are simply afraid that they’ll be seen as “tax and spenders.” So, when Harper lowers the gst by 1 percent, don’t expect any other government in Canada to say they’ll replace the attendant losses with alternative levies. (Even though the big federal surpluses that prompted Harper’s largesse were created by a chain reaction of downloading initiated by Paul Martin when he was the finance minister a decade ago, and the provinces and ultimately the cities are saddled with more obligations than they once had and that they cannot afford, few are willing to engage the issue.)

If Harper were in a position to take a radical approach he would recognize that one of the great problems facing Canada is regional disparity. Large parts of the country simply lack the economies of scale to generate wealth and are depopulating as a result. On the flip side, one of the most noteworthy aspects of life in big urban centres is that size permits diversity and diversity permits a certain protection from economic downturns.

So, if the four Maritime provinces were to unite as one political entity, for instance, the new governance structure would represent approximately 2.3 million people. Similarly, a union between Manitoba and Saskatchewan would produce a political unit representing just over 2.2 million people. A concurrent move would be to extract the three largest metropolitan areas—Toronto, Montreal, and Vancouver—from their provinces, making them separate political units whose economies would sit in the nation’s cockpit. A city-state of Toronto would have approximately 5.3 million people, leaving the rest of Ontario with just over 7.2 million. British Columbia would become a province of two million people, roughly equal to the new enclave of Vancouver. Quebec, without Montreal’s 3.6 million inhabitants, would now be a province of four million.

While ostensibly radical, this redesign of Canada’s map would actually resolve the anachronism that is our political structure and better prepare our economy for the challenges of the twenty-first century. A new Canada, with nine provinces—each with between two and seven million people—adds demographic balance to a new fiscal strength. The big cities, as de facto provinces, would have greater control over their destinies through financial controls and equitable electoral representation. The rural areas would be kept from the penury of isolation by uniting into larger entities, and in doing so they would not be a drain on the dynamic urban markets that now undoubtedly drive our national economy.

This reconstitution of the country is likely politically unpalatable to Harper, but it vividly highlights the difficulties of Canada’s current confederation. At the very least, Harper can go well beyond his predecessor in convening a truly national conversation about the place of cities in Confederation, which would include premiers and the mayors of our largest cities (probably nine or ten). Such a process might help break a logjam on redesigning our fiscal arrangements and take some of the negative politics out of reassigning taxing duties. If the creation and occupying of tax room was seen as a mutual exercise in the service of nation-building—and, in a famously discredited phrase of the Ontario Harris government, “revenue neutral” —it might be carried forward more agreeably.

If this seems a little too much of a high-wire act, particularly for a government with a narrow minority, Harper might consider the appointment of a royal commission on the state of our large cities. He should be cautioned against repeating an error made by Paul Martin, that of broadening the mandate to include every part of the country. Martin’s original task force on cities very quickly became a task force on cities and communities and, as a result, became significantly diffused in its considerations.

A lot of work has been done on these issues—by experts like Anne Golden at the Conference Board of Canada and Enid Slack at the Institute on Municipal Finance and Governance—so this need not be a royal commission that exists forever. In fact, it could report in about two years, about the same time that we are told some parties might be prepared to push the minority parliament into an election. What an exciting set of issues for the country to discuss during an election campaign!

One way or another, Canada needs to answer the question of how the power of urban regions can be maximized in the national interest. While constitutional issues are sometimes eye-glazing, they are critical. We must ensure that the constitution serves the country’s needs in the future, not just the traditions of our past. A New Deal for cities would be a powerful contribution by Harper’s government.