Municipalities need support to do the job
Canadians understand something Jack Mintz doesn't: Cities matter. Mintz suggests that the federal government has no place in Canada's cities. When I talk to Canadians, I hear differently: they want all governments working together to create jobs, to grow the economy and to protect our high quality of life.
Until recently, federal and provincial governments largely ignored cities and communities, except when it was convenient to balance their books by downloading responsibilities. These new responsibilities pushed municipalities to the tipping point, where responsibilities outstripped revenues and cities were forced to balance their budgets by reducing infrastructure investments. The result: a crippling $123 billion municipal infrastructure deficit, and an erosion in the foundation of our economy's competitiveness -core local infrastructure and services that we rely on to reduce congestion, to support affordable housing and to keep our streets safe.
Municipalities need support to get the job done and are looking to parties in this election to talk about their vision for cities and communities. All parties have made welcome and significant commitments: for example, the NDP and Liberals have each made new funding commitments to cities and communities worth billions in the next two years. All parties have committed to working with municipal and provincial governments to develop a longterm plan to fix the municipal infrastructure deficit and build the cities and communities Canadians expect, and our economy needs to stay competitive. We look forward to getting on with it, with the new government and indeed all parliamentarians, starting on May 3.
Hans Cunningham, president of the Federation of Canadian Municipalities, Ottawa Jack Mintz has needlessly attacked our cities and communities. No matter how big or small, our cities are the places where we raise our families and they are the engines of the Canadian economy. From the schools we attend, to the parks and arenas we visit, to the roads, buses and trains that we take to work, these are the real, tangible things that determine the quality of life of all Canadians.
Our cities and towns are under increasing pressure to invest in infrastructure and services while keeping property taxes under control. In 2004, a federal Liberal government recognized this challenge and proudly committed to transfer $2 billion annually in gas-tax revenue directly to Canadian cities and communities.
The Liberal party believes more must be done to support our municipalities, not less. While Stephen Harper and Jack Mintz think the priority should be giving billions of dollars in tax breaks to the largest corporations in the midst of a $56-billion deficit, a Liberal government would make a different choice, we would invest in families and partner with our municipalities to invest in priorities such as education, health care, affordable housing, public transit and the improvement of local infrastructure.
John McCallum, Liberal candidate for Markham-Unionville, Ont.
It is time that government was considered subordinate to taxpayers, not the other way around. We don't need mayors to tell us how much another level of government "owes" them. It's our money and our responsibility. If municipalities need more money, they can raise taxes and see what that does at the ballot box. Similarly, if other levels of government have too much money, it's our responsibility to remedy that.
There is the issue of urban deterioration due to inadequate funding and/or attention. It is unlikely that the situation is the same in all urban municipalities, but it is an argument which has merit.
Then there is the issue of who is best positioned to address any urban deficiencies and how this is to be funded. How many elected municipal officials have anything in their background that would remotely prepare them for management of utilities? Are they skilled in waterworks? Do they have engineering backgrounds in construction of sewers? How about roads and bridges? They appear to endorse public transportation. Have any of them ever driven a bus, subway or streetcar? There is an element of management philosophy embraced by business schools that if you can manage, you can manage anything. Is there something similar about politics?
The planning and development of physical properties of municipalities are well beyond the capabilities of the vast majority of successful municipal politicians. If our municipalities are deteriorating due to neglect, this is a reflection of the manner in which they have been managed. It's time that some agency was developed with responsibility for municipal physical assets -probably at the provincial level of government -where expertise consistent with the requirements of the task may be developed with a minimum of duplication. Municipal politicians might then be more fully engaged with the tasks for which they are qualified.
My figures were from Calgary website
Jack Mintz replies: Mayor Nenshi is refreshingly open to debate and discussion, which is a highly appreciated. No doubt he makes a great mayor doing that. If he agrees with me that cities should get their own funding and be politically accountable to their own electorate, then we are on the same page.
Given that municipalities are creatures of the province, it is my view that a province should be dealing with municipal affairs. The federal government should not, except in those areas of federal jurisdiction. That is why I caution against federal transfers to municipalities that extend beyond federal responsibilities. It has not worked well in some federations like Brazil.
As for my figures on the increase in Calgary's property tax, I lifted those from the City of Calgary website: www.calgary. ca/portal/server.pt/gateway/PTARGS_ 0_0_104_0_0_35/http%3B/content.calgary.ca/CCA/City+Hall/Business+Units/ Finance+and+Supply/Property+tax/ Statistical+data/Tax+Levy.htm
If Mayor Nenshi is now convinced that he should no longer plead for federal GST revenue, I am even that much happier coming to Calgary, which is a great city for sure.
The $10-billion gap
I was thrilled when Jack Mintz moved to Calgary, and I am looking forward to outstanding things from the new School of Public Policy at the University of Calgary. It's clear that Dr. Mintz is really enjoying himself in our great city, with all its amazing services and endless vistas under a big Prairie sky, not to mention the incredible cultural scene. What else but urban distraction could explain how he manages to get nearly every number wrong in his muddled and messy piece published last Wednesday?
Let's start with the facts: Mintz suggests that between 2005 and 2010 Calgary increased its property tax an average of 8.3% annually. False. The city's share of the property tax rose an average 6.5% during this period. Since these figures include one extraordinary year when the province ceded (and the city accepted) some tax room, it may be fair to look at the combined provincial and municipal property tax rate. That rose by an average of less than 5% annually -all while Calgary's population increased by 115,000 people. Five per cent annually is, in fact, quite close to the rate of municipal inflation plus population growth.
Mintz states that local government spending increased 55% between 2000 and 2009, which is higher than the total of all governments. I can't speak to all governments, but I can speak to Calgary. It's true that our operating expenditures increased significantly over this time period -as did our population and inflation during the boom. However, so did the spending of the government of Alberta; indeed, we were almost in lockstep. It seems that his characterization of "bloated municipal governments" needs a bit more nuance.
Mintz further states that Calgary has "warned it will need to raise property taxes by almost 25% in the next three years." Also false. The closest I can come to figuring out what he's talking about is a PowerPoint slide that highlights various scenarios for Calgary's operating budget, ranging from a three-year tax freeze to a very large increase that no one wants. Nothing has been advocated or warned of.
Although Mintz glosses over the difference between capital and operating expenses, this is the heart of the argument cities are making. We'll handle our operating costs and service delivery, even with the horrible, regressive, inelastic property tax as our main source of revenue.
Capital, though, is a whole other matter. In Calgary, we have somewhere between $6-billion and $10-billion in infrastructure needs -from fixing roofs to building new roads and LRT lines. Mintz criticizes our council for "splurging" on building a $25-million bridge. Fine. I agree. The prior council should not have done that. That leaves us with $9.975-billion to go. Next?
The numbers are this: Calgary's total operating budget for 2010 was $2.5-billion. Of that, our total property tax take was about $1.2-billion. A single new LRT line costs between $1-billion and $3-billion. So, no matter how much waste is cut (and we are cutting waste, believe me), it's impossible to fund these kinds of investments with only the property tax.
He also argues that taxpayers in smaller cities and rural areas should not fund infrastructure in larger cities. One could argue that, in fact, they should. Cities do form the economic heart of the country and are where growth happens. People in smaller centres use services in big cities far more than the reverse. But this is the reddest of red herrings.
In fact, Calgary taxpayers send over $10billion a year more to Ottawa than we get back in the sum total of all federal services. This is the true fiscal imbalance in the country. So, to turn Mintz's question on its head, why should the people of Calgary pay for services in Belleville or Halifax?
What mayors are asking for is not a tax grab but a rebalancing. The services that cities provide -police, fire, clean water, roads, transit, recreation, parks -are the ones that Canadians use every hour of every day. Yet they are provided by the level of government with the least ability to pay for the infrastructure needed to provide them. Worse, we can engage in a never-ending game of buck-passing, since we have divorced the responsibility for services from the authority to pay for them.
I'm asking that we fix the system so that I can take full credit, or blame, for providing the infrastructure and paying for it. On that, I think Dr. Mintz and I agree.
Everyone benefits from TFSAs
A sleeper in the upcoming federal election is the Conservative proposal to double contribution limits for Tax Free Savings Accounts, once the deficit is eliminated.
The left is opposed to this, with some suggesting "caps" be imposed on contributions so the "rich" will not make undue tax-free gains. What critics don't seem to comprehend is how more TFSA room equally benefits the poor and middle class.
Those who think the TFSA overly "generous" clearly don't realize how mercilessly investors are taxed, when you add income tax to taxes on investment income, property taxes and ultimately consumption taxes. Mercer partner Malcolm Hamilton says saving outside tax shelters is "futile" because of the twin evils of tax and inflation.
Having toted up all my T-3 slips for my 2010 taxes, I agree it's futile holding interest-bearing instruments outside RRSPs or TFSAs. And while Canadian dividends generate a dividend tax credit this is partly negated by the requirement to "gross up" the dividend income received: a tax on phantom income.
To appreciate the benefits of more TFSA room, let's examine how investment income is taxed outside tax shelters. Worst case is the fixed-income investor in top tax brackets (which could very well be today's risk-averse seniors). We'll assume, however, someone still working, whose last dollar earned is taxed at 46%.
Let's say this person wants to invest $5,000 in a GIC paying interest (if you can get it) of 4% a year. To come up with that much capital in the first place, this person must earn $9,259, paying $4,259 income tax.
Even the most ardent socialist must admit this person has "done her bit" in supporting the welfare state. After earning $9,259, she gave up almost half to income tax. In a fair world you'd think the remaining $5,000 would be hers to allocate as she sees fit. Indeed, if she splurged the remaining $5,000 on a cruise or a large-screen home theatre system, beyond upfront consumption taxes, Ottawa would not dare "tax" the resulting enjoyment.
But that's exactly what it does if instead of consuming, this person chooses to save or invest. Watch what happens over time if the after-tax $5,000 is invested in a bond or GIC. After a year, at 4%, this yields $200 in interest. Remember, if the original $9,259 had not been subject to income tax, this person would have been able to invest the whole amount in the bond and it would have paid $370.36 in interest every year rather than $200. So when she paid that income tax to come up with the original capital, she not only lost the $4,259 on income tax but also the extra $170.36 per year the investment would have yielded if the whole amount could have been put to work.
It gets worse. Not content with the upfront tax and the confiscation of the extra interest that might have been earned, the $200 of annual interest that remains is taxed in this case at the same 46% tax rate. That's another $92 of tax paid on capital acquired in the first place with after-incometax dollars. So our investor each year nets just $108 of interest on an investment that would have yielded $370.36 in a world without tax.
But this still isn't the end, since you must also consider the hidden tax of inflation. As Hamilton puts it, "even the $108 of interest the saver keeps after paying tax first on employment income and then on interest income is entirely bogus." At 2% inflation, $100 of the $108 simply compensates the saver for the loss in the purchasing power of the $5,000 invested. "So at the end of the day, the reward for saving the $5,000 versus spending the $5,000 is $8 per annum after tax and inflation: hence the futility of saving outside tax shelters."
Even then, Ottawa isn't finished taxing. At some point the paltry sum that remains will be spent, at which 13% HST will be levied.
When TFSAs were first floated, the C.D. Howe Institute suggested the more descriptive term, Tax Prepaid Savings Plan or TPSP. In our example, the investor "pre-paid" tax of $4,259. After that, the investor has a fighting chance to grow her capital with what remains: she becomes like our cruiser or TV watcher: she's no longer taxed on her enjoyment of her remaining capital.
Yes, the affluent would also benefit from higher TFSA limits, but for the rich the proposed $10,000 a year maximum contribution is a drop in the bucket. For the middle class, TFSAs are an absolute boon: last week's columns showed how almost any full-time worker can save $2,000 a year, which if saved in a TFSA would generate more than $2-million by retirement age.
As a final blessing, when you withdraw money from TFSAs in old age, it won't result in clawbacks of the Guaranteed Income Supplement (for the elderly poor) or Old Age Security benefits (for middle-income seniors). This is a benefit unavailable to the "rich," who won't be drawing either OAS or GIS.
A museum that Canadians support
As the National Post reported earlier this month, Michael Marrus, professor emeritus of Holocaust studies at the University of Toronto, is skeptical of the Canadian Museum for Human Rights being built in Winnipeg. "This is supposed to be a human rights museum and it has started off by being highly divisive," he told the Post. "The only thing they can do is to start all over. I am despairing of the whole thing."
It is most unfortunate that Mr. Marrus would take this position. The very fact that he believes the museum "started off by being highly divisive" shows that he is unaware of how long this project has been in development, and the kind of grassroots support it always had.
The museum was first conceived over 11 years ago and was announced publicly on April 17, 2003, by my father, the late Israel Asper, who invested $22-million of his own money to support its development. Prior to that time, detailed presentations had been made to several ethnic and human-rights groups to ensure that they understood the project and endorsed it. After the announcement of the museum, these groups wrote enthusiastically to Jean Chrétien to express their full support for the project. This includes many aboriginal groups whose human rights stories are still being told and resolved, francophone organizations, ethnic groups whose communities had faced discrimination in Canada, as well as groups representing the disabled, women, gays and lesbians, labour and many more.
Over the past eight years, the Friends of the Canadian Museum for Human Rights have made over 1,500 presentations to individuals, groups and corporations to explain the museum and raise funds to build it.
The museum has been brilliantly designed by world-renowned museum developer Ralph Appelbaum & Associates, creators of dozens of awardwinning museums around the world. Although this is a national federal museum, which would normally re-ceive all of its funding from the federal government, Ottawa is contributing less than a third of the capital costs of $310-million. We sought and received support for the museum from the city of Winnipeg, province of Manitoba and over 6,000 donors from around the world who have contributed $130million toward a $150-million privatesector campaign goal.
There has been virtually no acrimony among the dozens of groups who understand the museum's objectives, mostly because they are excited that something, for the first time in Canadian history, is actually being done to explore their human-rights stories. This is something which is being celebrated, and is in fact greatly appreciated, notwithstanding Mr. Marrus' comments.
There will always be one or two groups that are determined to undermine a project such as the Canadian Museum for Human Rights, but they are few and far between. Of course, if we had received negative reactions from everyone with whom we spoke back in 2002, the Asper Foundation would have proceeded to simply continue taking Canadian students to Washington for its nationally recognized Human Rights & Holocaust Studies Program. My father certainly had better things to do with his time and money than waste them on something no one wanted.
Canadians can be assured that this museum will open and provide a transformational journey, starting in 2013. I think that all the Canadians who have supported this museum so far should be proud of what they will be creating for future generations.
? Gail Asper is a member of the board of trustees of the Canadian Museum for Human Rights.
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