MOWAT RESEARCH #187 | MARCH 2019

Rethinking Municipal Finance for the New Economy BY SUNIL JOHAL, KIRAN ALWANI, JORDANN THIRGOOD & PETER SPIRO Acknowledgements The authors would like to thank those who participated in this research project as interviewees for generously sharing their time, expertise and perspectives. Special thanks to Enid Slack and Reuven Shlozberg for their critical review and contributions, and Elaine Stam for her design work on this report. All content and any remaining errors are the sole responsibility of the authors. The Mowat Centre would like to thank the Region of Peel for commissioning and providing financial support for this report, as well as the regional staff for their helpful contributions. The content, conclusions and recommendations expressed in the report are the authors’ alone and do not necessarily reflect those of the Region.

Authors SUNIL JOHAL JORDANN THIRGOOD Policy Director Policy Associate Sunil is frequently invited to speak about the future of work, After joining Mowat in 2015, Jordann contributed to a variety technology and social policy at conferences in Canada and of projects on fiscal federalism, the sharing economy, and abroad. He has contributed expert commentary and advice the impact of technological innovation on Canada’s labour on regulatory and policy issues to a range of organizations market and social programs. Prior to this, she spent two and media outlets, including the G-20, World Economic years working in the financial sector and ran a pro bono Forum, Brookings Institution, The Globe and Mail, The policy consulting firm for non-profit organizations in the GTA. Toronto Star, CBC Radio and Television, CTV News, The Jordann holds a Master of Public Policy degree from the Guardian, Maclean’s, The Ottawa Citizen, Policy Options, TVO University of Toronto, and an Honours degree in International and the OECD. He holds degrees from the London School of Development Studies from the University of Guelph. Economics, Osgoode Hall Law School and the University of Western Ontario.

KIRAN ALWANI PETER SPIRO Policy Associate Policy Consultant Kiran joined the Mowat Centre in October 2017, and has Peter Spiro is a policy consultant with many years of since contributed to a variety of social and economic policy experience in quantitative modelling. Prior to joining the projects. Previously, she has worked in a range of research Mowat Centre, he had worked in the government, utility and and policy analysis roles, including with the Asia Pacific financial services sectors, and taught in the economics Foundation of Canada, the Canada-ASEAN Business Council, department at the University of Toronto. He is the author and the Conference Board of Canada. Prior to her Master’s, of numerous publications in peer reviewed professional Kiran worked in communications, public engagement, and journals, including the Canadian Tax Journal. development at the Institute for Canadian Citizenship. She holds a Master of Public Policy and Global Affairs degree from the University of British Columbia.

MOWATCENTRE.CA @MOWATCENTRE 439 UNIVERSITY AVENUE The Mowat Centre is an independent public policy think tank SUITE 2200, TORONTO, ON located at the Munk School of Global Affairs and Public Policy at the M5G 1Y8 CANADA University of Toronto. The Mowat Centre is Ontario’s non-partisan, evidence-based voice on public policy. It undertakes collaborative applied policy research, proposes innovative research-driven recommendations, and engages in public dialogue on Canada’s most important national issues. ©2019 ISBN 978-1-77259-082-1 Contents

Executive Summary 1

1 Introduction 3 Setting the Stage 6 2 Peel Region – Facts and Figures 6 Overview of Peel’s Fiscal Health 9 Context of Municipal Governance and Taxation 12 Shift in Responsibilities and Revenues 13 Primary Municipal Revenue Sources 17

3 Trends and Drivers of the New Economy 24

4 Implications for Fiscal Health 36

Plausible Scenarios 48 5 Scenario 1: Status Quo or Business-As-Usual 50 Scenario 2: Worst Case 52 Scenario 3: Best Case 55

Policy Options 59 6 Working at the Margins 59 New Revenue Tools 63 Innovative Approaches to Service Delivery 71 Planning and Economic Development 73 Economic Benefits from the Airport 76

Recommendations 80 7 Short Term 82 Medium and Longer Term 83

8 Conclusion 85 RETHINKING MUNICIPAL FINANCE FOR THE NEW ECONOMY only 9 cents. Ontario, they collect dollar paidin household tax pie – forevery of the economic the smallestshare continue to receive Municipalities trends continue, property taxestrends willbecome increasingly continue, property unaffordable forresidents intheyears ahead. increasing, revenue as non-residential oftotal property-tax tax-revenues asaproportion declines. Ifthese inexpecteddevelopment chargeshortfall revenue. Relianceontheresidential basehasbeen property-tax provincial growth forecasts have notbeen reflective oftheactualpacedevelopment, whichhasled to a of themanufacturingsector. Growth inemployment landconsumptionhasalsoslowed.Furthermore, the share ofrevenue isonadownward from dueto trend, industrialproperty thedecline inlarge part reliant onland-based approaches to value thatare becominglessrelevant inthedigitalera. InPeel, These trends are strain likely to municipalrevenues, further as municipalrevenue tools are inordinately mobile workoptionssuchastelecommutingandhot-desking are becomingincreasingly popular. shrinking, andtheaverage square footageperemployee hasdeclinedsignificantly. At thesametime, emphasisonknowledge-basedjobs.Workplacessector continuesto are expand, withaparticular warehouses anddistribution centres. E-commerce has reduced demandforretail spaces. The service from goodsproduction to goodsmovement, andmanymanufacturingplantshave beenreplaced by Like therest ofOntarioandCanada,Peel Region’s economyisintransition –there hasbeenashift every householdtaxdollarpaidinOntario,they collectonly9cents. growth hasnotkept pace.Municipalitiescontinueto receive thesmallestshare of theeconomicpie–for and userfees. Over theyears, municipalexpenditure responsibilities have alsoincreased, whilerevenue sources ofrevenueprimary includeresidential andnon-residential taxes, development property charges Revenue from sources provincial forCanadianmunicipalitiesare limited.Apart andfederal transfers, including theabilityto levy newtaxes, requires provincial approval. Adapting to emerging realities isachallenge,asevery powernotexplicitlygranted through legislation, Ontario, municipalitiesare governed by theMunicipalAct,whichenumerates every powerthatthey have. Canada are “creatures oftheprovince.” Inotherwords, provinces have exclusive authorityover them.In an additionalsetofchallengesasthey operate inauniquecontext.Constitutionally, municipalitiesin While thesetrends are puttingpressure ongovernment revenues globally, municipalitiesinCanadaface levels, andworkers increasingly engageinprecarious ‘gig jobs. economy’ the taxbase,traditional officespacesand stores becomeobsolete,societalinequality grows atalarming intelligence andautomation threaten jobsacross sectors, digitizationfacilitatesoutsourcing andshrinks Governments across theworldare grappling withachangingemployment landscapewhere artificial SUMMARY EXECUTIVE

1 | THE MOWAT CENTRE 2 | RETHINKING MUNICIPAL FINANCE FOR THE NEW ECONOMY » Peel’s thinkingontherevenue sideofthe ledger: following hierarchy ofapproaches shouldguide deal withtheongoingandemerging changes,the approaches andtacticsto solidifytheirfooting. To shifts, municipalitiesmustconsiderarange of demographic, technologicalandemployment pressuresservice andtaxbaseissuesposedby through anysinglemeasure. Given thehostof and othermunicipalitieswon’t beaddressed The fiscalchallengesfacingtheRegionof Peel responsibilities goingforward. require municipalitiesto shoulder even more challenges posedby climatechange)will increasing and demandforsocialservices, demographics (suchasanagingpopulation, new worldofwork,butalsobecausechanging to reflecttax basesisnotonlyimportant the spending obligations.Lessreliance onland-based to revenue generation andgovernance to meet municipalities mustmodernize theirapproaches municipalities adapt? This studysuggeststhat changing employment landscape,howcan Amidst theongoingdigitalrevolution and » » » are realistic and reflect exogenous trends. assumptions to ensure thatrevenue projections include areview ofplanningand forecasting higher thanhistorical patterns. This shouldalso taxes taxes atrates orhikingproperty property to taxleakage,aswellexplore progressive to ensure thatmisclassificationisn’t leading definitional review types ofvarious property from existingtools to Explore opportunities amongst levels ofgovernment. Canada’s taxes andresponsibilities are allocated meaningful dialoguewiththepublicaround how provincial governments existing revenues, withboththefederal and Advocate forandexplore a , includingacomprehensive and engageina raise more revenues realignment of promote shared prosperity. Taken together, these develop economicdevelopment approaches that collaboration withneighbouringmunicipalitiesto Finally, municipalitiesmustrecognize thevalue of that policiesare robust andforward-looking. utilize strategic foresight techniquesto ensure benefits from thedigitaleconomyaswell theyFurthermore, shouldexplore ways to realize efficiencies from existingexpenditures. further frameworkstheir service-delivery andwring Municipalities shouldalsolookto review » » footing intheyears ahead. approaches willhelpplacemunicipalitiesonsurer » » (e.g., salestax,share ofincometaxes). Finally, usesandusers particular Then lookto explore general purposerevenue tools new revenue tools specificto .

1 land consumption have placedpressures ontheir changes inpatternsofcommercial and industrial municipal governments taxes, reliant onproperty the fiscalhealthofalllevels ofgovernment. For This changingnature ofworkhasreal impactson entirely newskills demandsfortheneweconomy. leading to widespread jobdisplacementand threatens to disruptmultipleindustries,potentially intelligenceintheworkplace adoption ofartificial towards automation teleworking.Furthermore, and traditional office spacesandanincreased trend transforming as well,withdecreased needfor to lower-costjurisdictions.Workspaces are but alsoincreased digitaloutsourcing by firms mobile labour, providing flexibilityforworkers, frameworks. Technology hasalsoenabledmore shop forfavourable taxationandregulatory are more mobileandbetterableto jurisdiction- choices forconsumers,italsomeansthatfirms Whilethisprovidesgoods andservices. more helped facilitateamore globalmarketplace for new challenges.Inrecent years, digitizationhas accelerate theseongoingtrendsfurther andpose It isanticipatedthattechnologicalchangewill continue to sectors shrink, whileservice grow andtheknowledgeeconomygainsgreater momentum. temporary or“gig”part-time, jobs. The sectors inwhichpeopleworkare alsochanging:industrialsectors as fewer peopleare engaged infull-time,permanentemployment andmanyare increasingly workingin stagnate amidstrisingcostsofliving. The nature ofemployment itselfisalsofundamentallychanging, is anticipatedto slowdown.Incomeinequalityisathighlevels andwagesformanyworkers continueto economies around theworld,populationisagingwhileoverall economicandlabourmarket growth Canada’s economyandlabourmarket are experiencingtransformative shifts.Like manyadvanced INTRODUCTION of complex policy and service-delivery issues. of complexpolicyandservice-delivery increasingly at theforefront oftacklinganumber and taxationauthority, localgovernments are provincial transfers. Yet, despitelimitedresources charges anduserfees –inadditionto federal and three taxes, fiscal developmenttools –property municipal governments are heavily reliant on andchallenges. InOntario, of opportunities municipalities inCanadafaceauniqueset relationships mean thatlocalandregional Our federal structure andintergovernmental expectations oflocalresidents. to upendregional planningprioritiesandthe expenditures. Greater urbanizationmay begin may squeeze governments’ abilityto manage deteriorating jobqualityandanagingpopulation revenue. Growing demandsasaresult service of inanticipateddevelopment-chargesshortfall baseandcreatenon-residential a property-tax space required foremployment may erode the Insufficient job growth andtheshrinkingphysical obligations to provide core publicservices. ability to generate revenues andmeetspending

3 | THE MOWAT CENTRE Municipalities are, to a far greater extent than provinces and the federal government, equipped with an outdated set of revenue tools inordinately reliant on land that do not adequately capture the economic value generated in today’s economy, and that will become further antiquated as the digital revolution continues to reshape work patterns. As the economy and labour market evolve, how can municipal governments modernize their approaches to revenue generation and governance to reflect the new world of work?

This study begins with an overview of the context of municipal governance and taxation in Ontario, the primary revenue sources available to municipal governments, as well as the key characteristics of the Regional Municipality of Peel. A number of key macro-level economic and social trends and drivers are explored, with consideration of how these trends are reflected in Peel and other municipalities. In addition, the implications of these trends and resulting potential threats to the revenue base are analyzed using a scenario- testing exercise. Finally, a comprehensive set of policy options in response to these trends is presented and implementation challenges and key success factors to overcome them are discussed along with top-line short and medium-term recommendations.

This report is the result of extensive research, stakeholder consultation and economic modelling. This includes a literature review and jurisdictional scan, as well as key informant interviews with 29 internal and external stakeholders from the public and private sectors and academia. An econometric forecasting model for Peel was also developed to better understand the impacts of the changing nature of work on the fiscal health of the Region. While this report aims to inform the strategic planning of the Region of Peel, the findings are relevant to many municipalities across Ontario and Canada which face similar challenges. 4 | RETHINKING MUNICIPAL FINANCE FOR THE NEW ECONOMY FINANCE FOR 4 | RETHINKING MUNICIPAL Municipal revenue tools are inordinately reliant on land-based approaches to value that are becoming less relevant in the digital era. 5 | THE MOWAT CENTRE THE MOWAT 5 | 6 | RETHINKING MUNICIPAL FINANCE FOR THE NEW ECONOMY 2 Responsibilities responsibilities oftheupperandlowertiersare describedinFigure 1. (local) governments comprisingtheCityofMississauga,Brampton and Town ofCaledon. The The RegionalMunicipalityofPeel isanupper-tier(regional) municipalgovernment, withthelower-tier Governance andFinance Peel Region–Facts andFigures Source: RegionofPeel FIGURE 1 THE STAGE SETTING budget.pdf Source: RegionofPeel “2018BudgetDocument.” Region ofPeel budget overview the 2018operating expenditure budget.Development-charges revenue revenueProperty-tax makes uparound 44percent($1.04billion)of the Regionare $2.4billionandcapitalexpenditures are $0.7billion. According to theRegion’s 2018budget,theoperating expenditures of budget.pdf 1 RegionofPeel “2018BudgetDocument.” cent ofthe$2.7billionten-year capitalplan. covers 33percent($239million)ofthe2018capital budget and40per FIGURE 2 . . https://www.peelregion.ca/budget/2018/2018- https://www.peelregion.ca/budget/2018/2018- 1

7 | THE MOWAT CENTRE 8 | RETHINKING MUNICIPAL FINANCE FOR THE NEW ECONOMY which are recent immigrants (13.3percentof people (51.5percentofpopulation);94,105 Peel hasalarge immigrant community:706,835 134 percentby 2041. expected to more thandouble,andincrease by However, thepopulationofseniors(65+)is 38.1, compared to 41.3years fortheprovince. than theprovince overall, withthemedianageat The Region’s populationisconsiderably younger the provincial average. averaged only0.2percentage pointshigherthan the latestfive-year period,when Peel’s growth 2016 census,thisgrowth hasslowedsharplyin than theprovincial average. According to the about 1.5to 2percentage pointsperyear higher For manyyears, populationgrowth inPeel was million by 2041. projected thatthepopulationwillreach about2 added betweenQ32017and2018,itis Region sawanestimated18,700newresidents occupying atotal of430,180private dwellings. The Brampton (654,100)andCaledon(73,100), 1,481,400 spread across Mississauga(754,200), The RegionofPeel hasatotal populationof Demography peelregion.ca/planning/pdc/data/quickfacts.htm 6 Peel DataCentre “General Facts (2016Census).” https://www.peelregion.ca/budget/2018/Peel-Economic-Overview.pdf 5 RegionofPeel (2017)“Peel’s Economic Presentation.” Overview peelregion.ca/planning/pdc/data/quickfacts.htm 4 Peel DataCentre “General Facts (2016Census).” 3 MowatcalculationbasedonStatistics Canadacensusdata. 2 Datafrom Peel Data Centre. population). 6

2 5 3 . . https://www. https://www. 4

. employment than Ontario asawhole Peel relies more onmanufacturing Ontario asawhole. relied more onmanufacturingemployment than has beenonthedecline,Peel hasconsistently While manufacturingacross OntarioandinPeel Economy andLabourMarket 2018-spring.pdf 7. 10 RegionofPeel (2018)“Investor Presentation (Spring2018).” pp. 9 MowatcalculationbasedonRegion ofPeel data. presentation-2018-spring.pdf pp. 12. 8 RegionofPeel (2018)“Investor Presentation (Spring 2018).” 7 Datafrom theRegionofPeel. cent. people andanunemployment rate of6.9per 2017, theRegionhadalabourforce of873,000 total hasheldsteady(around 12percent). Peel Region’s employment asashare ofOntario’s Communications andHewlett-Packard. the Royal BankofCanada,SuncorEnergy, Rogers June 2018. A total of172,999businesseswere establishedin Statistics Canada Table 14-10-0202-01. Source: Created by MowatbasedonRegionofPeel dataand

Manufacturing as % share of total employment FIGURE 3 http://www.peelregion.ca/finance/_media/investor-presentation- 10 15 20 25 0 5 10 http://www.peelregion.ca/finance/_media/investor- 2001 7 2003 The largest employers inPeel include . Ontario Peel 2005 2007 . 2009 20 1 1 2013 8 2015 9 In 2017 sustainability thatprovide aholisticperspective Planning Strategy outlinesthree pillarsof The RegionofPeel’s 2013Long Term Financial Peel’s PillarsofSustainability Fiscal ofPeel’sOverview per cent)thaninCaledon(5.7cent). Mississauga (14.7percent)andBrampton (11.3 the population,andsimilarlymuchhigherin (based onLIM-AT) isaround 12.8percentof Mississauga ($72,657).Prevalence oflow-income ($96,009) thanBrampton ($77,156)and is $75,667,althoughmuchhigherinCaledon Median private householdafter-taxincome employment was46.7percent. for permanentemployment). Growth inself- was 33.5percent(compared to 19.8 percent per centforfull-time)andtemporary employment employment was48.3percent(compared to 17.1 time andpermanentpositions.Growth inpart-time time positions,andbelow-average growth infull- growth inself-employment, temporary andpart- growth from 2007-2017,withabove-average Non-standard work Planning-Strategy.pdf https://www.peelregion.ca/finance/PDFs/Long-Term-Financial- 14 RegionofPeel (2013)“Long Term FinancialPlanning Strategy.” peelregion.ca/planning/pdc/data/quickfacts.htm 13 Peel DataCentre “General Facts (2016Census).” 12 Datafrom theRegionofPeel. sub-contracting, multiplejob-holdingandself-employment. jobs, 11 Non-standard workincludes temporary jobs,part-time » include: on theRegion’s financialcondition. Thesepillars » in rates ordisruptive cutsto services.” tolevels unplannedincreases withoutresorting andinfrastructureand maintainplannedservice This canbedefinedasthe“ability to provide Financial Sustainability: Health . 11 ledPeel’s employment

12 .

https://www. 13 14 » » scorecard.pdf https://www.peelregion.ca/finance/pdfs/2018/2018-financial- 18 RegionofPeel (2018)“2018FinancialCondition Scorecard.” 17 Ibid. 16 Ibid. 15 Ibid. maintain adequatenon-residential taxrevenues. the changingnature ofemployment inorder to collaborating withlocalmunicipalitiesto address for taxpayer money. The scorecard recommended offeredservices by theRegionprovide goodvalue of theresidents saying thattheprograms and satisfactory level with75percent ofservices At thesametime,Regionhasmaintaineda targets, andhasmaintaineditsAAAcredit rating. the Regionisontrack withthemajorityofits Peel’s 2018FinancialScorecard indicatesthat substantial long-termassetsataffordable levels. in taxandutilityrates, andborrow onlyfor investments, mitigate significant fluctuations viability ofthecommunity, make prudent theeconomic area municipalitiesto support money, userspay where appropriate, workwith is sustainable,maintainassets,deliver value for tax andutilityratepayer, ensure thecapitalplan financial principles. These include: respect the Based onthesepillars,theRegiondeveloped nine » » obligations.” either debtlevels ortaxes to meetfinancial This showstheRegion’s “ability to change Financial Flexibility: adequate level ofservices. to fulfillitscommitmentsandmaintainan vulnerability canaffect theRegion’s ability which aren’t withintheRegion’s control. Such dependence onfederal andprovincial transfers base,aswell non-residential property-tax nature ofemployment anditsimpactonthe that itcannotcontrol, suchasthechanging is dependentonexternalsources offunding This indicatesthelevel to whichtheRegion Financial Vulnerability: . 16

15 18 17

9 | THE MOWAT CENTRE 10 | RETHINKING MUNICIPAL FINANCE FOR THE NEW ECONOMY annual average, 2010-2017 Growth inreal per-capita spending, spending over theperiod. growth rate ofabout1.2percentinreal percapita growth are factored out,thisrepresents an annual about $1.7billion. expenditures increased from about$1.2billionto is available, thePeel uppertier’s total current the historical periodforwhichconsistentdata to theaverage ofallOntariomunicipalities.Over had fairlyrapid spendinggrowth, ascompared Both levels ofmunicipalgovernment inPeel have Expenditure andRevenue Upper andLower Tier Historical Growth ofPeel’s period from 2010to 2017, inclusive. as thebaseyear, thepercentage growth canbecalculatedforthe figures refer to spendingin2009and2017, respectively. With2009 not have to be covered by current own-source revenue. The quote for transfers received are deducted,astheseare itemsthatdo obtained from Table 40ofeachmunicipality’s Return;theamounts fma.csc.gov.on.ca/fir/Welcome.htm Housing’s “FinancialInformationReturn” website: ofMunicipalAffairsand 19 Dataobtainedfrom theMinistry Return” website. ofMunicipalAffairsandHousing’sMinistry “FinancialInformation Source: Created by Mowatbasedondataobtainedfrom the Per cent FIGURE 4 0.4 1.4 0.2 0.6 0.8 1.2 1.6 0 1 Ontario Municipal A verage 19 Wheninflationandpopulation

Peel Lower . The spendingfigures are

T ier https://efis. Peel Upper

T ier spending changeof-0.6percentover theperiod). Toronto hadanaverage annualreal per capita rate ofmunicipalities;forexample,theCity significant differences intheexpenditure growth wide average may notberepresentative dueto was only0.2percent(notethattheprovince- the provincial average forallmunicipalities,which Both ofthesegrowth rates considerably exceeded spending. growth rate ofabout1.4percentinreal percapita lower-tier governments represents anannual billion to about$1.6billion. This increase by the slightly fasterrate. Itincreased from about$1.1 increased theirspendingover thisperiodata total ofMississauga,Brampton andCaledon), The lower-tiermunicipalities(thecombined t1/tbl1/en/tv.action?pid=1810000501 average, notseasonallyadjusted.” data; StatisticsCanada(2018)“Consumer PriceIndex,annual 20 MowatcalculationbasedonStatistics CanadaandPeel Region isbeingcut. quantity orqualityofservices rate, usingthegeneral inflation rate, in reality the if real percapitaspendinggrows onlyat azero the general inflation rate. Itcouldbeargued that, inflation ishigherthan rate formunicipalservices have relatively littleproductivity growth. Infact,the areMunicipal services labourintensive andtendto It ischallengingto restrain thegrowth ofcosts. per year from 2001to 2017. revenueproperty-tax increased nearly2percent and 2017.IntheRegionofPeel, real percapita overall ConsumerPriceIndexbetween2002 increased by about23percentmore thanthe taxhas budget. InOntarioasawhole,property is occupying agrowing share ofthehousehold government, intheformoftaxes anduserfees, income. This impliesthatthecostofmunicipal more thanthegrowth inreal personaldisposable The growth ofspendinginPeel wasconsiderably https://www150.statcan.gc.ca/ 20 . Source: Created by MowatbasedonRegionofPeel data. alternative scenariosofspending tax %ofincome, Residential property reduced to agrowth rate of0.5percentyear. income, real percapitaspendingwouldneedto be taxataconstantshare ofhousehold property term, asdepictedinFigure 5.Inorder to maintain as apercentage ofhousehold incomeinthelong create asubstantialupward tax trend inproperty growth inspendingatsucharapid rate would to beunsustainable.Continuedreal percapita growth inspending,thepastrate ofgrowth islikely Whatever thereasons may have beenfortherapid

% of household disposable income FIGURE 5 3.00 3.50 4.00 4.50 5.00 5.50 6.00 2018 2020 2022 per centyear Real percapitaspendinggrows0.5 historic rates Continued growthofspendingat 2024 2026 2028 2030 2032 2034 2036 2038 2040 those fees, itmay bedesirable to doso. extent thatthere isroom forincreasing reliance on now slightlybelowtheprovincial average. To the and licensefees asapercentage ofrevenues is between 2001and2017.Peel’s reliance onuser government increased itsreliance onfee revenue tax.Bycontrast,from property theupper-tier were gettingabout70percentoftheirrevenue etc., rather tax.By2017,they thanfrom property cent oftheirrevenue from userfees, licensefees the lower-tiermunicipalitiesobtainedabout40per changed somewhat,asseeninFigure 6.In2001, The compositionofrevenue inPeel hasalso of Revenue Composition andSources at about$1billion. revenue received by each level wasalmostequal, million fortheuppertier. By 2018,theproperty-tax revenue,of property-tax compared to almost$500 combined were receiving lessthan$300million substantially. In2001,thelower-tiermunicipalities going to thelower-tiermunicipalities increased revenueof themunicipalproperty-tax inPeel governments onfees relative to 2001,theshare As aresult ofthereduced reliance ofthelower-tier Source: Created by MowatbasedonRegionofPeel data. user fees, license fees, etc. Per cent share ofcurrent revenue from 10 15 20 25 30 35 40 45 FIGURE 6 0 5 2001 Ontario average Lower Upper T T ier ier 2017

11 | THE MOWAT CENTRE 12 | RETHINKING MUNICIPAL FINANCE FOR THE NEW ECONOMY subordinate to which theirprovincial counterparts, institutions. Thus, localgovernments are legally responsibility over lawsrelating to municipal granting provincial legislatures exclusive powers forthefederal andprovincial governments, Constitution Act,1867 in theCanadianConstitution.Section92of powers forlocalgovernments were notenshrined without addressing thefactthatdecision-making around municipalgovernance cannotbehad impact theircurrent fiscalhealth.Discussions andchallengesthat a uniquesetofopportunities local andregional municipalitiesinCanada face structure andintergovernmental relationships, elsewhere intheworld.Asaresult ofourfederal a rather different contextthanmunicipalities Municipal governments inCanadaoperate in trends aswellidenticallegislative barriers. duetoin thecountry high-level macroeconomic a similarsetofchallengesto othermunicipalities Canada andOntario,astheRegionofPeel faces of municipalgovernance andrevenue sources in The followingsectionprovides abroad overview and TaxationGovernance Context ofMunicipal bp276-e.htm#Legislative of Canada. constitution, andtheCanadianfederal system.” Government 21 Erin Tolley and WilliamR.Young (2001)“Municipalities,the systems,wastemanagement, as transportation in relation to specificspheres ofjurisdiction, such lower andupper-tiermunicipalitiesto passby-laws province. The Actoutlinesbroad authority for responsibilities oflocalgovernments inthe In Ontario,the legislation. provided to localgovernments through provincial – includingtaxationauthoritymustbeexplicitly municipal affairs. have a“largely unfettered” scopeofcontrol over http://publications.gc.ca/Collection-R/LoPBdP/BP/ Municipal Act,2001 21 . This meansthatanyauthority outlinesthedivisionof setsoutthe size anduniquedemands,hasitsownmunicipal the Cityof Toronto, whichinrecognition ofits under theMunicipalActwithexception of All municipalgovernments inOntariooperate generation issignificantlyconstrained. that autonomy indecision-makingandrevenue From afiscalhealthperspective, allofthismeans annual budgets(i.e.they cannotrundeficits). and provincial governments, mustbalancetheir the requirement thatmunicipalities,unlike federal governments inOntario. the onlymajortaxationtool available to municipal taxation, primarilyinrelation taxes to – property in detailtheauthorityandlimitsto municipal and businesslicensing. The Actalsooutlines public utilities,economicdevelopment services uploads/2014/09/Whos-Picking-Up-the-Tab-FULL-REPORT.pdf Governance. onto localgovernments.” ColumbiaInstitute,Centre forCivic “Who’s pickingupthetab?Federal andprovincial downloading Duffy,24 Robert GaetanRoyer andCharley Beresford (2014) PSAB_Newsletter_No_49.pdf AMCTO andMFOA. Balancing Act.” PSAB/AssetManagement NewsletterNo.49, 23 BruceRatford “LegislatedBudgetRequirements – The laws/statute/01m25#BK348 22 MunicipalAct,2001,S.O. 2001,c.25. them have notchangedto reflect this. new responsibilities, therevenue tools available to Canada have beenincreasingly burdened with following section).Whilelocalgovernments in governments (discussedingreater detailinthe responsibilities from thefederal andprovincial have witnessedsignificantdownloadingof responsibilities, andmunicipalgovernments Over theyears, there hasalsobeenashiftin to othermunicipalitiesintheprovince. revenue tools thathave not,to date,beengranted government, withadditionalpowersandunique outlines theresponsibilities of Toronto’s municipal statute. The http://www.civicgovernance.ca/wordpress/wp-content/ City of Toronto Act,2006 http://www.mfoa.on.ca/MFOA/webdocs/ . . 22 Finally, theActsetsout https://www.ontario.ca/ similarly 24 . 23

and healthcare translated funding. intoThis further areas education ofsocialassistance,post-secondary meant significantcuts to provincial transfers inthe with theCanadaHealthandSocial Transfer. This Established Programs Financing,andreplaced them 1995 budgetendedtheCanadaAssistancePlanand a result ofdownloading.At thefederal level, the municipalities dueto increased responsibilities as During the1990s,revenue pressures increased on and Revenues Shift inResponsibilities growing pressures and emerging challenges they face. have limitedauthorityandresources to respond to the municipalities remain “creatures oftheprovince” and address extreme weatherevents. Today, however, that require significantcapitalinvestments to climate changemitigationandadaptationmeasures (e.g.Uber),aswell delivery and platformservice such ashaving to regulate fast-moving technology ago. Considerthemunicipalresponses to issues issues –someofwhichwere inconceivable 150years municipalities mustnowdealwithcomplexemerging use theConstitution’s initialdivisionofpowers, governance isgenerally outdated.Whilewestill It canbeargued thattheway weapproach local 26 Ibid. Under%20PressureFINAL.pdf sites/default/files/uploads/publications/Ontario%20Office/2014/10/ Alternatives, Ontario.pp.12-15. Constraining Ontario Municipalities.” CanadianCentre forPolicy 25 CarloFanelli (2014)“UnderPressure: HowPublicPolicy is base. their property-tax forced to rely onurbangrowth asaway ofincreasing of raising revenues, manymunicipalitiesbecame revenue generation. Further, dueto inadequatemeans increased taxes municipalreliance for onproperty of downloading. issues, thesewere notsufficient tooffsettheimpacts introduced aseriesofprograms targeting urban cuts formunicipalities.Whilethefederal government 25 This downloadingresulted in . 26 https://www.policyalternatives.ca/

13 | THE MOWAT CENTRE 14 | RETHINKING MUNICIPAL FINANCE FOR THE NEW ECONOMY The effects Realignment (LSR), 1998 ofLocalServices municipalities to take responsibility forfunding to asdownloading –took effect thatrequired Realignment(LSR)–often referredLocal Services 1998,the system.InJanuary the property-tax amalgamations, andcomprehensively reforming governments through restructuring and local levels, halvingthenumberofmunicipal responsibilities betweentheprovincial and introduced three majorreforms –realigning and early2000s,theOntariogovernment At theprovincial level, duringthelate1990s Municipal FinanceandGovernance. pp.10. Source: André CôtéandMichaelFenn (2014)‘Provincial-Municipal RelationsinOntario:Approaching anInflection Point.’ Instituteon FIGURE 7 https://munkschool.utoronto.ca/imfg/uploads/275/1560_imfg_no_17_online_full_colour.pdf between 2010and 2018,andfullyuploadedto theprovince lastyear. years. For example,OntarioWorks benefitscostswere phasedout shiftedover28 Notethatfundingresponsibilities have the further colour.pdf utoronto.ca/imfg/uploads/275/1560_imfg_no_17_online_full_ Municipal FinanceandGovernance. pp.9-10. Relations inOntario:Approaching anInflection Point.” Instituteon 27 André CôtéandMichaelFenn (2014)“Provincial-Municipal municipalities collectonly9cents,while44 For every householdtaxdollarpaidinOntario, described inFigure 7. in responsibilities priorto andaftertheLSRare several essential socialservices. . 28 27 https://munkschool. The change The . understand whetherthere isafiscalimbalance. three orders ofgovernment from 1988to 2004to in thelevels ofexpenditures andrevenues forall Governance conductedanassessmentoftrends The InstituteonMunicipalFinanceand Figure 8). are responsible forabroad (see suiteofservices responsibilities. Ontario municipalities in particular Canada faceanumberofsignificantexpenditure share oftheeconomicpie,municipalitiesacross federal government. cents goto theprovince and47centsgoto the Ontario/Whats-Next-Ontario-Fiscal-Overview-Accessible-2015.aspx overview.” pp.25.https://www.amo.on.ca/AMO-PDFs/Whats-Next- Ontario? Imaginingaprosperous future forourcommunities:A fiscal 29 AssociationofMunicipalities Ontario overview.” pp.42.https://www.amo.on.ca/AMO-PDFs/Whats-Next-Ontario/Whats-Next-Ontario-Fiscal-Overview-Accessible-2015.aspx Source: Association ofMunicipalitiesOntario Municipal expenditure responsibilities across Canada,2005 FIGURE 8 FIGURE 8 29 Despitereceiving thelowest (2015)“What’s Next (2015)“What’s NextOntario?Imaginingaprosperous future forourcommunities:Afiscal . provincial government –decreased significantly. intergovernmental transfers from the –particularly revenue sources forCanadianmunicipalities,while and userfees increased as inrelative importance In theperiodfrom taxes 1988to 2004,property expenditure wasonhousing. 1998. increaseThe largest inthe proportionate increased significantlyinOntarioaftertheLSR In particular, expenditure onsocialservices expenditures rose steadilyduringthisperiod. available to municipalitiesremained thesame, The research foundthatwhiletherevenue tools uploads/102/trends_in_public_finance_in_canada___june_1.pdf Finance inCanada.” pp.2-14. M.KitchenandEnidSlack(2006)“Trends30 Harry inPublic https://munkschool.utoronto.ca/imfg/ 30 . .

15 | THE MOWAT CENTRE 16 | RETHINKING MUNICIPAL FINANCE FOR THE NEW ECONOMY constant (1988) dollars Federal, provincial andmunicipalgovernment revenues per-capita, 1989-2009, revenues onapercapitabasis. The share of territorial governments inCanadaraised themost 2009 whichfoundsimilarresults. all three orders ofgovernment from 1989to conducted astudycomparingrevenues for The Federation ofCanadianMunicipalities revenues. were expenditures increasing atafasterrate than than revenues. Only for the municipal governments increasing, they were increasing ataslowerrate provincial government, whileexpenditures were dollars percapitahave beendeclining.For the been increasing, federal expenditures inconstant per cent. cent, expenditures grew atanaverage rate of0.9 While revenues grew atan annualrate of0.7per Cities%20and%20Communities.pdf org/img/uploads/documents/FCM%202012%20State%20of%20 Canada’s CitiesandCommunities2012.” Chapter1. 33 See:Federation ofCanadian Municipalities(2012)“TheStateof 32 Ibid. 31 Ibid. suma.org/img/uploads/documents/FCM%202012%20State%20of%20Cities%20and%20Communities.pdf Source: Federation ofCanadianMunicipalities(2012)“TheStateCanada’s CitiesandCommunities2012.” Chapter1.pp.11. FIGURE 9 31 32 Further, whilefederal revenues have . 33 Provincial/ https://suma. (See Figure 10). These factspointtowards the governments accountforthesmallestproportion whilemunicipal for thelargest proportion, provincial/territorial governments accounting pretty muchthesameover theyears with revenues forallgovernments. This hasstayed ofconsolidated of government asaproportion (FCM) alsolooked atrevenues foreachorder The Federation ofCanadianMunicipalities revenues grew atarate of1.5percent(seeFigure 9). was 1.9percentforprovincial revenues. Municipal terms) in federal revenues was 0.8 per cent while it annual increase (inpercapitaconstantdollar the twenty-year comparisonperiod,theaverage considerably higherthanmunicipalities. During federal andprovincial/territorial revenues wasalso . https://

for municipalities. growth hasnotkept pacewithexpenditure growth stayed constantover theyears. Further, revenue share ofoverall government revenues, whichhas substantially, they continueto receive the smallest their expenditure responsibilities have increased increasing fiscalburden onmunicipalities– while suma.org/img/uploads/documents/FCM%202012%20State%20of%20Cities%20and%20Communities.pdf Source: Federation ofCanadian Municipalities(2012)“TheStateofCanada’s CitiesandCommunities2012.” Chapter1.pp.12. Total government revenue aspercentage ofconsolidated revenue, 1988-2008 from intergovernmental transfers from thefederal offundscomes sums. Amuchlarger portion although theseconsistof considerably smaller derive revenue from licensingandpermits, fees. Inadditionto thesesources, municipalities taxes, developmentproperty charges, anduser sources: residentialprimary andnon-residential and capitalexpenditures are financedfrom three revenue generation. ofoperating Alarge portion Ontario have alimitedsetoftools to usefor Local andregional municipalgovernments in Revenue Sources Municipal Primary FIGURE 10 35 Ibid. ca/imfg/uploads/275/1560_imfg_no_17_online_full_colour.pdf Municipal FinanceandGovernance. Relations inOntario:Approaching anInflection Point.” Instituteon 34 André Côté andMichaelFenn (2014)“Provincial-Municipal context, whichare describedbelow. have theirbenefitsanddrawbacks inthemunicipal fees are Each thefocusofanalysisinthisreport. taxes, developmentProperty charges anduser accountability. for amunicipality’s fiscalmanagement and revenue source, canhave negative implications Conditional transfers, whileanimportant andtransportation. public health,socialservices spent onspecificprograms suchas orservices This meansthatfundsare earmarked to be are unconditional,althoughmostare conditional. from theprovincial government –someofwhich in Ontario. average over 20percentofmunicipalrevenues and provincial governments, whichmake upon 34 The bulkofthesetransfers come 35 . https://munkschool.utoronto. https:// .

17 | THE MOWAT CENTRE 18 | RETHINKING MUNICIPAL FINANCE FOR THE NEW ECONOMY property withvarious rates.property For thepurposesof There are multipleclassesandsubclassesof indirectly to theirlandlord through rent. local municipality. addition to theprovincial educationtax,to their ownerspay thiscombinedamount,in Property neither caninfluencetheother’s rate-setting. regional governments settheirownrate and within atwo-tiered structure, boththelocaland within provincial constraints –forthoseoperating are setautonomously by municipalgovernments ratesProperty-tax are appliedto thisvalue, and (MPAC), andthisvalue isupdatedevery fouryears. AssessmentCorporationthe MunicipalProperty asdetermined byassessed value ofaproperty taxes areand educationproperty basedonthe Bothmunicipal a provincial educationportion. and has twocomponents–amunicipalportion per centinOntario. of municipalrevenues across Canadaand46 taxes) accountfor45percent in lieuofproperty on average, taxes (includingpayments property for municipalitiesinOntarioandacross Canada: taxes remain revenueProperty theprimary source TaxesProperty classes. See: Finance undertheEducation Actandapplyto multipleproperty system. These rates are determinedby Ontario’s Minister of education a meansto andsecondary helpfundtheelementary 37 acrossThe educationtaxisappliedto Ontarioas properties 36 Calculationsfrom EnidSlack basedon2016data. thatfallwithin is appliedto allproperties the taxes are flat–meaningthatthesame rate the rates class, dependingontheproperty vary While (including office)andindustrial properties. bebroken downintocan further commercial ratesproperty-tax are appliedto businesses,which are appliedto homeowners,non-residential tax classes.Whileresidential rates property-tax between residential andnon-residential property- to make adistinction itisimportant this report, https://www.fin.gov.on.ca/en/tax/pt/index.html 37 36 Tenants taxes pay property taxinOntario The property . the share ofrevenue ison from industrialproperty slack from declinesinnon-residential revenues: revenue.total property-tax This ispickingupthe and currently sitsataround 63.6percentofthe residential taxbasehasbeengrowing over time Region ofPeel, forexample,thereliance on from theresidential base.Inthe – particularly baseforfundingpublicservices the property-tax Most municipalitiesinOntariorely heavily on lower revenue. in spendingto balancetheirbudgetsinspiteofthe municipal governments wouldneedto make cuts non-residential to residential). Alternatively, is shiftedelsewhere inthetaxbase(e.g.from ofthetaxbase,burden from oneportion class. Generally speaking,whenrevenues decline 40 Ibid. ca/imfg/uploads/325/1710_imfg_no.21_online_sept17.pdf Municipal FinanceandGovernance. Property Tax: Lessons from around theWorld.” Instituteon 39 EnidSlackandRichard M.Bird (2015)“Howto Reformthe 38 MowatcalculationbasedonRegion ofPeel data. source ofrevenue formunicipalities. results inarelatively stablebaseandconsistent tax, itisdifficult taxes. to evade property the basecannotshiftlocationasaresult ofthe cannot behiddenand immovable: sinceproperty compared to othertaxes. relatively smallimpactoneconomicbehaviour isinelastic,whichmeansthere isa property to othertaxes onincomeandsalesforexample, forlocalgovernments. Relative tax –particularly taxisagood efficiency standpoint,the property proponents andcritics.From aneconomic As arevenue taxhasits tool, theproperty per cent(seeFigures 11,12and13). relatively stableover thistimeperiod,ataround 20 commercial andofficebuildingshas remained to thedeclineofmanufacturing. The share from in 2000to due 5percentin2018),large part a downward trend (fallingfrom around 9percent 39 Property isalso Property https://munkschool.utoronto. 38 40 This . Peel isincreasingly reliant onresidential tax property downward trend The share ofrevenue from isona industrial property Source: Created by MowatbasedonRegion ofPeel data. fairly steady ataround 20% Commercial andofficebuildings have remained FIGURE 12 FIGURE 11 % share of total% sharetax revenue of% totalshare tax of revenuetotal tax revenueFIGURE 13 % share of total% sharetax revenue of% totalshare tax of revenuetotal tax revenue% share of total% sharetax revenue of% totalshare tax of revenuetotal tax revenue 10.0 10.0 15.0 20.0 25.0 62.0 63.0 64.0 65.0 66.0 67.0 68.0 69.0 70.0 71.0 10.0 15.0 10.0 20.0 15.0 25.0 20.0 25.0 10.0 10.0 62.0 63.0 64.0 62.0 65.0 63.0 66.0 64.0 67.0 65.0 68.0 66.0 69.0 67.0 70.0 68.0 71.0 69.0 70.0 71.0 0.0 1.0 2.0 3.0 4.0 5.0 6.0 7.0 8.0 9.0 0.0 5.0 0.0 5.0 0.0 5.0 0.0 1.0 2.0 3.0 0.0 4.0 1.0 5.0 2.0 6.0 3.0 7.0 4.0 8.0 5.0 9.0 6.0 7.0 8.0 9.0 2000 2000 2000 2000 2000 2000 2000 2000 2000 2002 2002 2002 2002 2002 2002 2002 2002 2002 2004 2004 2004 2004 2004 2004 2004 2004 2004 2006 2006 2006 2006 2006 2006 2006 2006 2006 2008 2008 2008 2008 2008 2008 2008 2008 2008 2010 2010 2010 2010 2010 2010 2010 2010 2010 2012 2012 2012 2012 2012 2012 2012 2012 2012 2014 2014 2014 2014 2014 2014 2014 2014 2014 2016 2016 2016 2016 2016 2016 2016 2016 2016 2018 2018 2018 2018 2018 2018 2018 2018 2018 enidslack_imfg_no._2_online.pdf munkschool.utoronto.ca/imfg/uploads/173/ despite limitedincome. taxes asaresultproperty pay significantlyhigher poor households),andmust (i.e., asset-richbutincome- values soaroverproperty time in homeswhichhave had a fixed incomebut residing challenge forseniorslivingon This hasbecomeaparticular burdened. disproportionately income householdsare being regressive aslower- tax isoftencriticized for However, theproperty Municipal FinanceandGovernance. – in andPractice.”Theory Instituteon 42 EnidSlack(2011)“TheProperty Tax alternative-property-taxes publications/commentary/policy-points- Scotia. Centre forPolicy Alternatives, Nova taxes.”An alternative to property Canadian 41 MichaelBradfield (2013)“Policy Points: revenue inreal terms. years) –resulting inalossof notably Toronto in the lastfew with therate ofinflation(most taxes sufficiently to keeppace Ontario donotraise property municipal governments in increase rates. and itisdifficult to reformor itishighlyvisible, Furthermore, spectrum, especiallyforseniors. at thelowendofincome programs to address regressivity offer taxdeferrals orsome other provincial-level governments politically unpopular, andmost this reason andothers,itis https://www.policyalternatives.ca/ 42 Infact,some . . 41 For https://

19 | THE MOWAT CENTRE 20 | RETHINKING MUNICIPAL FINANCE FOR THE NEW ECONOMY Development charges are typicallyapplied to both study every five years. development charges withanewbackground their decisions.Municipalitiesmustrevisit their as capitalexpenditure forecasts usedto inform provides details onthegrowth projections aswell completing amandatory background studythat municipal by-laws andsettheirownrates after governments canintroduce thelevies through Localandregionalhousing andpoliceservices. and roads; and“soft suchassocial services” “hard suchaswater, services” wastewater eligible development they canbelevied –namely impose development charges, andonwhich process whereby municipalgovernments can Ontario’s developments. related capitalcostsrequired to new service issued, andare designedto helprecover growth- developers atthetimethatabuildingpermitis jurisdictions. These charges are collectedfrom in newdevelopments orredevelopment intheir municipal governments canlevy forinfrastructure Development charges are one-timefees that Development Charges could attract investment anddrive economic as wellnon-residential developments that are common forplacesofworshipexample, instances forstrategic reasons. Exemptions or deferrals fordevelopment charges insome Municipalities may decideto grant exemptions 2017. was more orlessconsistent between2002and from non-residential development. This make-up of thetotal withtheremaining 20percentcoming residential development –makingup80percent $247.5 milliondevelopment-charges revenue from differently. Peel currently derives themajorityofits although theseare calculatedsomewhat residential andnon-residential developments, Development Charges Act outlinesthe exemptions mustbethoroughly considered. for it–andtherefore therationale behindthese This invariably meansthatsomeoneelseispaying infrastructure necessitatedby thedevelopment. that they ofthe are notpaying theirportion are exempt from development charges, itmeans governments. whensomeproperties Furthermore, significant sumsoflost revenue formunicipal or are unavoidable, otherwise they canresult in While exemptions may beofstrategic importance case basis. result ofsuccessfulappealsmadeonacase-by- housing). Exemptions may alsobeprovided asa that drive socialobjectives (e.g.affordable development (e.g.officespace)and developments Figures 14 and15). from planned revenues is more substantial(see oftotal revenues, smaller proportion itsshortfall While non-residential development makes upa both residential andnon-residential projections. municipalities, thishasbeenthecaseinPeel for are leftwithunexpectedcosts.Like manyother not metwithanticipatedgrowth, municipalities making investments ininfrastructure thatare When localandregional governments begin projections usedthrough the infrastructure provincial investments –particularly pace withforecasts usedto make decisionsfor to thefactthatgrowth hasnotnecessarilykept recovery ofcapitalinvestments. This isdueinpart though thecharges levied didnotresult infullcost during populationandhousingbooms,even benefitted from development-charges revenues inSouthernOntario–have indeed particularly in practice. ManymunicipalitiesinOntario– to pay forgrowth intheory, thisisrarely thecase charges conceptisthat whilethey are designed The mostsignificantcriticismofthedevelopment- Places to Grow Act . Source: Created by MowatbasedonRegionofPeel data actual, Peel Region,2002-2017 Non-residential DCrevenues, plannedvs. actual, Peel Region,2002-2017 Residential DCrevenues, plannedvs. which tendnotto capture more recent changes. are setbased onhistorical levels, dataofservice charges revenue forecasts, includingthatrates are otherinherent problems withdevelopment- regions to meettheirgrowth projections. There its implicationsontheabilityforPeel andother 2018 hasleftmanyscrambling to understand in growth forecasts –anditscancellationin assumption ofitscompletionwasincluded and investment throughout Peel Region. The was projected to generate significantgrowth – ahighway from Vaughan to Milton that is thepreviously proposed GTA West Corridor A strikingexampleofhowthismighthappen 100,000,000 150,000,000 200,000,000 250,000,000 100,000,000 150,000,000 200,000,000 250,000,000 100,000,000 150,000,000 200,000,000 250,000,000 300,000,000 350,000,000 400,000,000 100,000,000 150,000,000 200,000,000 250,000,000 300,000,000 350,000,000 400,000,000 50,000,000 50,000,000 FIGURE 15 FIGURE 14 50,000,000 50,000,000 0 0 0 0

2002 2002 2002 2002 2003 2003 2003 2003 2004 2004 2004 2004 Planned Planned Planned Planned Actual Actual Actual Actual 2005 2005 2005 2005 2006 2006 2006 2006 2007 2007 2007 2007 2008 2008 2008 2008 2009 2009 2009 2009 2010 2010 2010 2010 2011 2011 2011 2011 2012 2012 2012 2012 2013 2013 2013 2013 2014 2014 2014 2014 2015 2015 2015 2015 2016 2016 2016 2016 2017 2017 2017 2017 renovated) generally result inlessrevenue. upon; structures needingto bedemolishedor developments (i.e.landpreviously used orbuilt reaches capacity(e.g.Mississauga).Brownfield inevitably slowsdownasacityurbanizes and lack constraints imposedby priorwork),which value ongreenfield developments (i.e.thosethat development. The current modelplaces high greenfield and development –particularly centre onitsemphasisconstantgrowth development charges asarevenue source Other concernsaround thesustainabilityof rate applied. infrastructure musthave a10percentdiscount for development charges, andsometypesof notallinfrastructureFurthermore, iseligible still facesome restrictions. require approval from theprovince, althoughthey from aconstitutional standpointasthey donot to implement forlocalandregional municipalities manner. This distinctionmakes userfees easier are pooledandcollectively spentinabroader whereas publicservice, taxes use ofaparticular effectively charges appliedto individualsforthe Fees are different from taxes inthatthey are more thanone-third oftheirrevenues from fees. wide, municipalitiesonaverage derive slightly municipal governments isuserfees. Province- The otherkey revenue tool currently available to User Fees walkable, livable communities. to sprawl unnecessary attheexpenseofmore of incentives could,forexample,beacontributor ultimately inthepublicinterest. This misalignment approve developments –even ifthey are not be aninclinationformunicipalitiesto buildand revenue generator insomeinstances,there might incentives to develop. Sinceit’s asignificant development charges canoftenprovide perverse fromFurthermore, aplanningperspective,

21 | THE MOWAT CENTRE 22 | RETHINKING MUNICIPAL FINANCE FOR THE NEW ECONOMY the importation offillmaterial,thatwasfound the importation This wasthecaseforamunicipalpermitfee on andthefeecost ofservice wouldinvalidate it. complete failure to showanexusbetweenthe to thecostofservice. a “reasonable attempt”wasmadeto relate it is questionable,afee willbevalid aslong revenue. enforcement unitrather thangoinginto general signs, where therevenue wasappliedto thesign municipal fee charged onoutdooradvertising ofAppealupheldasvalid a The OntarioCourt This principlemay begenerously interpreted. considered constitutionallyvalid.” providedof theservice inorder foralevy to be exist betweenthequantumcharged andthecost something to qualifyasafee, “a nexusmust of Canadahasestablishedtheprinciplethatfor dealt withby jurisprudence. The Supreme Court impermissible tax. This hasbeenextensively the municipalityhaspowerto levy) oran determining whethersomethingisafee (which behalf ofit.” oractivitiesprovidedservices ordoneby oron that may becharged by amunicipality, i.e.“for The ONSC 3931. 47 Angusv. Hope,2016 Corporation oftheMunicipalityPort wastewater butontheoriginalamount ofcleanwatersupplied. be forwastewater, butitwasnotbasedonthemeasurement of ONSC 795,atpara. 49.Inthiscase,thecharge wasintendedto 46 NyleneCanadaInc.v. Corporation ofthe Town ofArnprior, 2017 24140 (ONCA). 45 UrbanOutdoor Trans Adv. Scarborough (City),2001CanLII Case Law.” Canadian Tax Journal (2014)62:3,635-70. Design by CanadianMunicipalities: Considerations Arisingfrom the survey, see:Kelly I.E.Farish andLindsay M. Tedds (2013)“UserFee 44 Eurig Estate(Re),[1998]2SCR565atpara. 21.For ageneral 43 S.391(1).See: municipality. to beataxandthusoutsidethepower ofthe Municipal Act 45 Even ifthebasisofcalculation 43 47 There issometimesagrey area in https://www.ontario.ca/laws/statute/01m25 lays outthenature offees 46 Ontheotherhand,a 44 . patterns ofresidents andthushave potentialto can drive changeinbehaviour andconsumption other taxes orcharges. userfees Furthermore, greater publicacceptanceofuserfees than therevisible andhigh-qualitypublicservice, is a numberofreasons. Whentiedto aspecific, User fees are widelylaudedby for observers significant fairnessandaccessibilityconcerns. inthepublicrealmper-use service withoutraising to whatcanfeasibly betransformed into apay- to However, fundthoseservices. there are limits rather revenuesservices thanusingproperty-tax deriving revenue from usersto fundspecificpublic pressure baseby andreliance ontheproperty-tax revenue basedirectly, userfees canalleviate While notnecessarilybolsteringthegeneral newtaxsources_kitchen_slack_2016.pdf utoronto.ca/bitstream/1807/82858/1/imfg_perspectives_no15_ on MunicipalFinanceandGovernance. for Canada’s Largest Cities:WhatAre theOptions?” Institute KitchenandEnidSlack(2016)“New 48 Harry Tax Sources consumed. unit ofoutputshouldequalthecostlast price per economically efficientusageofservice, of providing For goodsandservices. themost fees shouldbesetto equalthemarginal cost fees to generate revenues inexcess of itscost, price rightiskey. Ratherthancharging user consumption behaviour, however, gettingthe In order foruserfees to positively influence emissions. public transit usageandloweringgreenhouse gas thereby reducing traffic congestion, promoting schemes can be used to disincentivize vehicle use, infrastructure.underfunded Similarly, road pricing consumption levels andreduce therisksof usage canresult inmore optimalandsustainable generation. For example,charging fees forwater be usedforagreater purposebeyond revenue 48 https://tspace.library. . Local and regional municipal governments in Ontario have a limited set of tools to use for revenue generation. 23 | THE MOWAT CENTRE THE MOWAT 23 | TRENDS AND DRIVERS 3 OF THE NEW ECONOMY Ongoing economic trends and emerging issues resulting from technological innovation are reshaping the way we work, play and do business, and will continue to do so over the coming years. The Region of Peel and the surrounding GTHA are, in many ways, a microcosm of these larger, macro-level shifts – and thus act as an interesting case study for the future of fiscal health of municipal governments. The following section discusses key trends and drivers of the new economy, and contextualizes how the Peel Region and GTHA fit into the broader picture. Demographic Changes The Region’s population is considerably younger than the provincial average with the median age Like most developed nations, Canada is expecting at 38.1 and generally more children and fewer continued population growth over the coming seniors than elsewhere in Ontario. However, decades, although at a slower pace than has Peel is still expected to see significant aging been experienced in the past. This trend is visible of its population: the senior population (65+) is in the Peel Region as well. Currently, Peel’s total expected to increase by 134 per cent by 2041.49 population is 1.48 million and it is forecasted to Population aging has important implications on grow to around 1,970,100 by 2041 – with growth service demands (e.g. increasing pressures on significantly higher between 2016 and 2031 than the public healthcare system) as well as an overall the following ten years (see Figure 16). shrinking of the labour force as baby boomers come to retirement age.

FIGURE 16 Population projections

2016-2031 2031-2041 2016-2041 2016 2021 2031 2036 2041 Growth Growth Growth Peel 1,428,400 1,540,400 1,770,050 1,870,000 1,970,100 341,650 200,050 541,700 Brampton 613,680 683,700 811,970 853,940 890,000 198,290 78,030 276,320 Caledon 68,820 78,970 116,010 136,850 160,080 47,190 44,070 91,260 Mississauga 745,900 777,730 842,070 879,210 920,020 96,170 77,950 174,120 Source: Region of Peel.

49 Region of Peel (2017) “Peel’s Economic Overview Presentation.”

24 | RETHINKING MUNICIPAL FINANCE FOR THE NEW ECONOMY FINANCE FOR 24 | RETHINKING MUNICIPAL https://www.peelregion.ca/budget/2018/Peel-Economic-Overview.pdf. 2.6 percentbetween1986and2015,growth is 2040. Similarly, whilereal GDPgrew atabout 1981-2015 to 0.8percentbetween2021and forecasted to drop from 1.4percentbetween In Ontario,annuallabourforce growth is Economy. Trends andProjections.” InOntario’s Long-Term onthe Report ofFinance(2017) “ChapterI:Demographic52 OntarioMinistry CensusBulletins/2016-immigration-ethnic-diversity.pdf and EthnicDiversity.” 51 RegionofPeel (2017)“2016CensusBulletin:Immigration https://www.fin.gov.on.ca/en/economy/ltr/2017/ch2.html and Projections.” InOntario’s Long-Term ontheEconomy. Report ofFinance(2017)“ChapterII:Economic 50 OntarioMinistry Trends between 1976and2015,whereas real median provincial GDPpercapitaincreased by 57percent standard ofliving. InOntario,forexample, has nottranslated into higherwagesora have grown substantiallyinrecent years, this the case.AlthoughGDPandlabourproductivity historically occurred intandem,thisisnolonger While economicgrowth andwagegrowth have Stagnation Inequality andWage factor insustainingpopulationgrowth. important from immigration– particularly –willbean minusdeaths).Rather,(i.e. births netmigration growth isexpectedto come from natural increase only 13percentofOntario’s overall population ratesas fertility declineandthepopulationages, driver ofpopulationgrowth across Ontario.Infact, continue asimmigration isforecasted to beakey are recent immigrants. the regional population,ofwhom13.3 percent community, representing around 51.5percentof Peel Regionalsohasavery large immigrant over time. entrants, althoughthiswouldneedto besustained offsetting theseimpactswithnewlabourmarket a relatively young populationcouldbebeneficialin 2016 and2040. expected to slowto around 2.1percentbetween https://www.fin.gov.on.ca/en/economy/ltr/2017/ch1.html 50 https://www.peelregion.ca/planning-maps/ Peel’s current positionofhaving 51 This couldbeexpectedto . . . 52 Increasing incomedisparity inPeel of corporate profits continues to rise. continues to decline,theshare ofGDPcomprised ofGDP.portion Indeed,asthewageshare ofGDP presents itselfinthedeclinelabourincomeasa between economicgrowth andwagesalso Canadian IndexofWellbeing. increases inmeasures ofwellbeingsuchasthe half thatrate, andsimilarlythere have beensmall adjusted after-taxincomeonlyincreased by about publications/132_working_without_a_net.pdf Mowat Centre. a Net:RethinkingCanada’s socialpolicyinthenewageofwork.” 54 SunilJohalandJordann Thirgood (2016)“Working Without www.fin.gov.on.ca/en/economy/ltr/2017/ch3.html Trends.” InOntario’s Long-Term ontheEconomy. Report ofFinance(2017) “ChapterIII:Employment 53 OntarioMinistry Economic-Overview.pdf Presentation.” Source: RegionofPeel (2017)“Peel’s Economic Overview FIGURE 17 https://www.peelregion.ca/budget/2018/Peel- https://mowatcentre.ca/wp-content/uploads/ . 53 The divergence The . 54 . https://

25 | THE MOWAT CENTRE 26 | RETHINKING MUNICIPAL FINANCE FOR THE NEW ECONOMY standard workhasaccountedfor60percentof as sub-contracting andself-employment. Non- jobs,aswell includes temporary orpart-time in “non-standard” employment, whichbroadly the sametime,there hasbeensignificantgrowth these roles are becomingincreasingly rare. At position withemployer-provided benefits, today once commonto workinafull-time,permanent decline inmostOECDcountries.Whileitwas The standard employment relationship isonthe Work Non-Standard andPrecarious Peel Region. visible across CanadaandOntario,includinginthe challenges. Incomeinequalityhasbeennotably and isknownto beadriver ofsocialandeconomic inaneconomy–hasbeengrowing participants to whichincomeisdistributedunequallyamongst around theworld.Incomeinequality–extent the poorhasbeenwell-documentedincountries cent). children betweentheagesof0and17(18per for racialized communities(16percent)and population live inpoverty. This numberishigher In Peel, 175,980residents or12.8percentofthe benefits-all-9789264235120-en.htm http://www.oecd.org/social/in-it-together-why-less-inequality- 56 OECD(2015)“InIt Together: WhyLess InequalityBenefitsAll.” Peel-Poverty-Reduction-Strategy-2018-2028.pdf Community Action.” pp.9. 55 RegionofPeel “2018-2028Peel ReductionStrategy: Poverty benefits, andlowwages.Precarious jobpositions characterized by instability, lackofprotections and measure. Generally speaking,precarious workis “precarious work”ismore difficult todefineand in standard andnon-standard work,theterm While itisrather easyto measure changes decade aswell(seeFigure 18). driven Peel’s employment growth over thepast since themid-1990s. the employment growth inadvanced economies 55

The growing disparitybetweentherichand http://www.povertyinpeel.ca/_include/ 56 Non-standard workhas . . Source: RegionofPeel. 2007-2017 Peel’s labourmarket by jobpermanency, Percentage changeinemployment in 58 Ibid. precarious-jobs workplaces-review-final-report/chapter-4-vulnerable-workers- – FinalReport. workers inprecarious jobs.” In The ChangingWorkplaces Review ofLabour(2017) “Chapter4:Vulnerable57 OntarioMinistry precarious circumstances. of non-standard jobshasputmore workers in jobs may notnecessarilybeprecarious, thegrowth and nobenefits). precarious (e.g. full-timecontractor withlowpay consultant) andstandard employment canstillbe quite highlypaidandsecure (e.g.aself-employed instance, non-standard employment canstillbe to notethatthere isadistinction.Forimportant between non-standard andprecarious work,itis inconsistent income.Whilethere isacorrelation of volatility, suchasunpredictable schedulingand provided benefits, andcanentailotherelements tend notto beunionized oroffer employer- P Inflation Rate (Toronto CMA) Median Hourly Earnings Average HourlyEarnings FIGURE 18 AR 48.3% T -TIME Growth AboveAverage SELF-EMPLOYED 46.7% https://www.ontario.ca/document/changing- . Changes 57 TEMPORARY Further, whilenon-standard 33.5% 58 A VERAGE 21.5% PERMANENT Growth BelowAverage 2007-2017 19.8%

21.0% 17.6% 21.3% FULL-TIME 17.1% » » » » » » » » who were: Review, quantifiedthisgroup by lookingatthose jobs.” The government’s ChangingWorkplaces of“vulnerablecategory workers inprecarious in 2014)ofworkers intheprovince fallinto the (about30to 32percent substantial proportion Government ofOntarioexternalstudy, a Based onthedefinitionoutlined by a recent – despiteeconomicimprovement followingthe engaged insomeformof precarious employment found thatover workers 37percentofGTHA are understanding thedynamicsinRegion.It aidin in thebroader thatcanfurther GTHA been interesting research focusedonprecarity workers inprecarious positions,there has residents fallwithin thisdefinitionofvulnerable While isitnotclearexactlyhowmanyPeel » » » » » » » » » » temporary basisdirectly foremployers; work fortemporary helpagenciesorona hours; do notwant,orcannotavail themselves of,more voluntarily,work part-time inthe sense thatthey according to StatisticsCanada); more hours(about30percentofallpart-timers involuntarily becausethey want work part-time who: benefits suchaswithoutapensionplan;and working forlowwageswithoutanyorminimal no benefits,(suchaspensionplan);or working full-timeforlowwages,withminimalor pays lessthanthemedianhourlyrate. are multiplejobsholderswhere job theprimary are soloself-employed withnoemployees; are seasonalworkers orcasualworkers; work ontermorcontract; result inlesspurchasing powerforindividualsand throughout theeconomy. Lowerincomesgenerally These trends have multiplerippleeffects family life. related anxietyinterferes withtheirpersonaland thatwork- around 40percentofwhomreport on thementalhealthandwellbeingofworkers, difficulties, suchinstabilityalsohas realimpacts training-related expenses. three timesmore likely to pay out-of-pocket for income varied from weekto week. They are also thattheir 85percentreported Furthermore, not have accessto anemployer-provided pension. access to employer benefitsand80percentdo definition ofprecarity, 90percentdonothave recession. 60 Ibid. for-website.pdf https://pepso.ca/documents/pepso-glb-final-lores_2018-06-18_r4- Employment Precarity inSouthern Ontario(PEPSO)research group. and whodidn’t inanimproving labourmarket.” and Poverty 59 Wayne Lewchuketal.(2018)“GettingLeftBehind:Who gained noting. factors are worth population andashrinkinglabourforce, these employment situation.Inthecontextofanaging having delayedreport childbearingdueto their about oneinfive workers aged25-35intheGTHA and impactpersonallife decisions.For instance, term financialplanningexceptionally difficult incomevolatilityFurthermore, canmake long- families, whichcanhampereconomicgrowth. following therecession. economic improvement employment –despite some formofprecarious workers are engagedin Over 37percentofGTHA 59 . Amongstthosewhofallwithinthis 60 Inadditionto financial

27 | THE MOWAT CENTRE 28 | RETHINKING MUNICIPAL FINANCE FOR THE NEW ECONOMY in the service sector,in theservice whichaccountsforabout79 manufacturing have largely beenoffsetby gains Job lossesingoods-producing sectors suchas cent in2017. in Peel alsofell from 22percentin2001to 15per oftotal jobs Manufacturing jobsasaproportion cent in2001andjustover 10percentin2017. been onacontinuousdecline,fallingto 18per jobs intheprovince in1980. has This proportion accounting forasmuch24percentofthe once thebedrock oftheprovincial economy– hard-hitting was inOntario,astheindustry substantially. market employed inmanufacturinghasdeclined productivity, ofCanada’s theproportion labour globalization, exchange rate fluctuationsandlow to othercountries.Asaresult ofautomation, has beenmore gradual inCanadacompared has beenwell-documented,however thistrend manufacturing to economy aservice-based industrialized countries. The shiftfrom in Ontario,across Canadaandmanyother is reflective ofwhatishappeningelsewhere Peel Region’s economyisintransition. This Economy Growth oftheKnowledge 64 Ibid. 63 MowatcalculationbasedonRegion ofPeel data Table: 14-10-0023-01(formerly CANSIM282-0008) 62 MowatcalculationbasedonStatistics Canadadata,CANSIM https://mowatcentre.ca/ontario-made-full/ Rethinking Manufacturinginthe21st Century.” MowatCentre. Katherine ChanwithLizaKobrinsky (2014)“OntarioMade: eic/site/eas-aes.nsf/eng/h_ra02276.html the CanadianEconomy.” Canada. Industry 61 RonaldHirshhorn(2011)“ImpactsofStructural Changes in and warehousing. trade sector and36,500jobsintransportation 2001, theRegionhasgained53,200jobsin around 28percentofregional employment. Since and warehousing, whichcurrently accountfor notably, thisincludesjobsintrade, transportation per centoftotal jobsinPeel Region.Perhaps most 63 61 These losseswere particularly 64 This isreflective ofawider ; MatthiasOschinski, https://www.ic.gc.ca/ . 62

related employment suchaseducationservices cent. There hasalsobeenaboominpopulation- whichhaveand technicalservices grown by 28per Peel since2001,aswellprofessional, scientific and real estatewhichhave grown by 40percentin growth across sectors suchasfinance,insurance and intellectualcapital. This isevident injob emphasis onthevalue derived from information “knowledge economy,” whichplacesgreater sectorservice isthebroader trend oftheemerging notingwithintheexpansionof Also worth base. oftheregional tax impacting theindustrialportion replaced by warehouses anddistributioncentres, whereby manufacturingplantshave largely been shift from goodsproduction to goodsmovement, 65 Ibid. jobs couldbeautomated over thenext10-20 approximately 42percentofCanada’s existing For example,according to oneestimate, oftheworkforce. a significantproportion automation oftaskshasthepotentialto replace intelligence andmachinelearningmeansthat workers. Inparticular, theadvent ofartificial implications forthelabourmarket andindividual there isalsoconsiderable concernaround their economic gainsandproductivity improvements, technologies have thepotentialto unlock work anddobusiness.Andwhilemanynew has already begunto reshape theway welive, technological change. Technological innovation Inextricably linked to theknowledgeeconomyis Technological Change institutional spaces. suchasofficesand non-industrial properties based jobsare associatedwithnon-residential cent respectively. which have grown by 48percentand52 per as wellhealthcare andsocialassistance, 65 Mostoftheseknowledge- 01 (formerlyCANSIM282-0008);Peel Regiondata. across Canada.” Brookfield Institute. Source: Creig LambandMatthewLo(2017)“Automation Across theNation:Understandingpotentialimpactsoftechnologicaltrends Probability ofworkforce ofautomation andproportion by industry Figure 19examinestheprobability ofautomation years. Canadian labour market estimates. 66 Frey andOsbornemethodology–Brookfield Institute applied to is more reliant onthesesectors foremployment impacted by automation. theRegion Furthermore, have arather highestimated probability ofbeing andwarehousingand transportation –allofwhich industries intheRegionare trade, manufacturing, highlight. For example,thethree mostprominent There are, however, areas to particular important Canadian regions. impacts ofautomation willbefelt similarlyinall Peel, OntarioandCanada.Generally speaking,the workforce employed inthoseindustriesacross by industry, andthecomparative ofthe proportion FIGURE 19 Forestry, Fishing, Mining, Oil and Gas Agriculture Utilities Public Administration Information, Culture and Recreation Other Services Accommodation andFood Services Management, Administrative andOther Support Educational Services Construction Professional, Scientific and Technical Services Finance, Insurance, Real Estate andLeasing Healthcare and Social Assistance Transportation andWarehousing Manufacturing Trade 66 Applyingawidelyusedmethodology, Industry https://brookfieldinstitute.ca/report/automation-across-the-nation Probability of Automation technology. given theadvancement ofautonomous vehicle are likely to come underthreat, particularly those workinginwarehousing ortransportation goods-movement jobsgiven itsstrategic location, experienced promising growth in“logistics”or in thenearfuture. Similarly, whiletheRegionhas more may jobsintheindustry becomeautomated significant joblossesinthepasttwodecades,and hasalreadyThe manufacturingindustry seen Canada’s workforce. 11 percentofOntario’s andonly9percentof per centoftheworkforce compared to lessthan noteworthy,particularly asitcomprisesalmost15 The Region’s reliance onmanufacturingis compared to theprovincial ornationalworkforce. 69% 42% 30% 51% 35% 42% 52% 52% 44% 41% 40% 45% 37% 61% 61% 48% Peel 14.78% 18.19% Proportion ofWorkforceProportion 4.98% 5.00% 5.16% 5.53% 8.49% 8.95% 0.00% 0.32% 0.42% 2.61% 2.78% 3.69% 9.38% 9.69% ; StatisticsCanada Table: 14-10-0023- Ontario 11.63% 10.49% 14.64% 6.33% 4.47% 6.80% 7.15% 8.51% 7.54% 4.62% 0.50% 0.94% 0.64% 4.96% 4.35% 3.77% Canada 12.32% 14.85% 1.82% 1.49% 0.69% 4.98% 4.24% 4.13% 6.53% 4.13% 6.77% 7.77% 7.58% 6.09% 4.95% 9.11%

29 | THE MOWAT CENTRE 30 | RETHINKING MUNICIPAL FINANCE FOR THE NEW ECONOMY – particularly asaresult ofanagingpopulation. – particularly sectorsin healthandsocialservices may grow thereFurthermore, issomeanticipationthatjobs demand humanlabourinthesefields). around care ofchildren andtheelderlymight automated inthefuture (e.g.cultural expectations may never acquire thesociallicenseto become not yet beenmastered by technology, andperhaps require anelementofhumaninteraction thathas comprised ofnon-routine cognitive functions,and of automation). Jobsintheseindustriestendto be (30percentprobabilityand educationalservices assistance (37percentprobability ofautomation) low-risk industries–notablyhealthcare andsocial ofitsworkforce engagedin smaller proportion Finally, to notethatPeel hasamuch itisimportant based methodology. 67 Arntzetal.(OECD)estimateon thelowerendusingatask- supports. realities, through re-skilling initiatives orother effectively transition andcopewithchanging are availablesure thatsupports to workers to shared benefitsandprosperity, aswellmaking critical to ensuringthat newtechnologiescreate In anycase,soundpolicyinterventions willbe whatthisnumberwillactuallybe. with certainty 20 years. existing jobswillbeautomated over thenext10- estimates aslow9percentofCanada’s total rather thanoccupations(asusedabove), suggest used alternative methodologiesbasedontasks in theyears ahead.Otherstudies,whichhave of disruptionscausedby workplaceautomation disagreement over theanticipatedmagnitude to notethatthereIt isimportant ismuch per centinOntarioandCanada). employed (compared ineducationalservices to 7 Canada), andonly5percentoftheworkforce is (compared to 12percentinbothOntarioand is employed inhealthcare andsocialservices However, only9percentofPeel’s workforce 67 Ofcourse,itisimpossibleto predict » » experiencing job loss: that how captures are regions atypology devised has OECD The deferred. being simply is challenges associated and workers displaced of problem the to automation, risk at are jobs new these if but – jobs to generate aim typically developmentEconomic initiatives and Labrador). Newfoundland and Ontario between difference 20 the for (see Figure disparities smallest the amongst has Canada proportion, smallest the with region the and to automation risk at of jobs proportion largest the with region the between difference point a12 have like roughly Spain percentage countries while that show OECD by the calculated estimates Subnational risk. high at are that of jobs concentration by regional caused is distribution uneven This Cities. and Regions SMEs, Entrepreneurship, for OECD’s the Centre from to research new –according not does Canada to automation, susceptible of jobs number the in differences regional large anticipate might jurisdictions some While level can also enable economic diversification in skills-related activities. skills-related in diversification economic enable also level can local the at ecosystem” a “skills Building up. bottom the from innovation enable to designed flexibly be should policies market labour national variation, regional potential Given trends. to these responses of local forefront the at be should and can cities and regions that concludes 2018This report OECD process. change structural the during jobs of risky loss typical the experiencing are regions of the cent per 30 jobs. riskier creating to be seem 10 cent about per while category, this within land (60 of cent) regions per majority a Canada, In in. to be position –agood occupations risky less in jobs have created regions Most » » » » » » Creating jobs predominantly in from automation unemployment of risks long-term reduce and term short the in situation job –improve occupations risky less Creating jobs predominantly in current job losses and increasing risk of further losses down the road the down losses of further risk increasing and losses job current by suffering challenge greatest the –facing occupations risky less in predominantly jobs Losing reduced is future in losses job of further risk but lost being are jobs change; of structural process in of regions profile –typical occupations risky more in predominantly jobs Losing future the in profile job riskier towards of moving expense the at but situation job short-term –improve occupations risky more Regional Variation: Where doesCanadaStand? risk ofautomation across regions Some countries have widedisparitiesinterms of 2018_9789264305342-en#page47 org/employment/job-creation-and-local-economic-development- 2018: Preparing for theFuture ofWork.” pp.45. Source: OECD(2018)“JobCreation andLocalEconomic Development FIGURE 20 .

https://read.oecd-ilibrary.

31 | THE MOWAT CENTRE 32 | RETHINKING MUNICIPAL FINANCE FOR THE NEW ECONOMY and 28.9percentofthejobsinCaledonfallunder finds that Greater GoldenHorseshoe (GGH)area. The report analyzed thegeography ofdisruptionforthe fromA recent theNeptisFoundation report planning_the_next_ggh/neptis_planningthenextggh_report_dec4_2018.pdf Source: Pamela Blaisand The NeptisFoundation (2018)“PlanningtheNextGGH.” pp. 118. Employment inindustries with the highest vulnerability to automation, 2016 dec4_2018.pdf files/planning_the_next_ggh/neptis_planningthenextggh_report_ the NextGGH.” pp.117-129. 69 Pamela Blaisand The NeptisFoundation (2018)“Planning Howe Instituteby MatthiasOschinskiandRosalieWyonch. 68 Neptiscalculationbasedonresearch fortheC.D. undertaken risk ofautomation. average, with17percentofthecity’s jobsathigh (18.7 percent).Mississaugaiscloserto the higher thantheoverall average fortheGGHarea of automation. These numbersare considerably the ‘most vulnerable’ withahighrisk category FIGURE 21 68 , 23.3percentofthejobsinBrampton . 69 http://www.neptis.org/sites/default/ 70 Ibid. Peel’s strategic location. 2006-2016 period–indicating thebenefitsof SKID thatsawemployment growth duringthe Knowledge-Intensive District(SKID)wasthe only and Meadowvale Suburban that theAirport intensive firms.However, to note itisimportant and amenitiesmake itattractive to knowledge- neighbourhoods withahighly-skilledworkforce, Downtown Toronto’s proximity to transit, urban benefit from theco-locationof related firms. growth ofknowledge-intensive activitieswhich These trends are mainlydriven by therapid employment from the1980sto early2000s. – areversal ofthetrend ofsuburbanization by aslowdowninjobgrowth in otherregions and jobsindowntown Toronto, accompanied hyper-concentration ofeconomicdevelopment The studyalsohighlightstheunprecedented . http://www.neptis.org/sites/default/files/ 70 forms. space, whichcantake many outside atraditional office now betterableto workfrom labour force. Employees are a more mobileandglobal Technology hasenabled Region. effects thatcomewithalocalfirmoperating inthe do notcreate localjobsorotherpositive spillover lost revenues. Moreover, digital,internationalfirms as seniorlevels ofgovernment struggleto recoup indirectly feel pinchedthrough reduced transfers provincial coffers, municipalgovernments could taxes. Whilethisdirectly impactsfederal and the companymay alsoavoid paying corporate profits thatthecompanyearnsasa result, and the transaction may avoid salestaxandthe the USandPeel residents itprovides, useaservice in example, ifatechcompanyisheadquartered much economicvalue to thosejurisdictions.For from multiplejurisdictionswithoutcontributing this meansfirmscanderive significant profits for governments’ revenue generation. For one, options –itcanhave dangerous implications consumers –having greater accessandmore globe. Whilethisisapositive development for toservices consumersfrom allcornersofthe itcansellgoodsandprovideheadquartered, Regardlessservices. ofwhere acorporation is a more globalmarketplace forgoodsand Technological changehashelpedfacilitate Digitization andGlobalization Flexibility andtheGigEconomy and avoid taxation. these companiesperpetuatestheirabilityto evade dominate themarket. a few “superstar” companiesto riseto thetop and analytics capacity have contributed to the ability of effects Features ofthedigitaleconomysuchasnetwork techfirms. consolidation ofahandfulpowerful exacerbated over theyears dueto thecommercial to maximize profits. Thisproblem hasbeen to operate businesswithinthatjurisdiction firms can rather easilylocateelsewhere orcease is thatifajurisdictionimposesadditionaltaxes, Another implicationofthisincreased mobility mowatcentre.ca/robots-revenues-responses/ Ontario andtheFuture ofWork.” MowatCentre. 72 SunilJohaletal.(2018)“Robots, Revenues &Responses or service. thatimprove thevaluenumbers ofpeopleorparticipants ofa good 71 Networkeffects are thepositive impactsinducedby increased that over half oftheAmericanlabourforce could instance, recent research intheUShasestimated per cent. This trend isestimatedto accelerate: for the workforce between2006and2016at46.5 employment wasthefastestgrowing subsetof many advanced nations–inPeel Region,self- overall workforce, buthave grown considerably in always existedasrather smallcomponentsofthe their work.Freelancing andself-employment have only needalaptop andinternetconnectionto do in shared co-workingspaces,asemployees often freelance work. There hasalsobeenanincrease technology to betterfacilitateself-employment or of thetime(i.e.“teleworking”).Otherscanuse the flexibility to workfrom homesomeorall be engagedinatraditional occupationbuthave which cantake many forms.Someworkers may to workfrom outsideatraditional officespace, labour force. Employees are nowbetterable Technology hasenabledamore mobileandglobal 71 , lowmarginal costsandincreased data 72 The scaleandinfluenceof . https://

33 | THE MOWAT CENTRE 34 | RETHINKING MUNICIPAL FINANCE FOR THE NEW ECONOMY and Freelancer thatutilize thisbusinessmodelto based platformssuchasMechanical Turk, Upwork companies like UberandLyft, aswellweb- include globalplatformssuchasride-hailing be outsourced to theglobalmarketplace. These being unbundledinto individualtasksthatcan the “gig economy.” Traditional jobsare increasingly labour platformsandwhatisoftenreferred to as by technologyhave alsogiven riseto theuseof The flexibilityandgreater connectivityenabled cheaper alternative to traditional officespaces. in today’s economythatprovide aviableand emerged inresponse to growing entrepreneurship the Centre forSocialInnovation orWeWork have shared officesandco-workingspacessuchas be comprisedoffreelancers by 2027. that-is-50-freelance/#262035023f82 com/sites/elainepofeldt/2017/10/17/are-we-ready-for-a-workforce- 50% Freelance?” Forbes, October 17,2017. 73 ElainePofeldt (2017) “Are We ReadyFor AWorkforce That is tasks are outsourced to. of labourisrelatively higherthanwhere these in developed countrieslike Canadawhere thecost industries, they couldthreaten to suppress wages business modelsgrow andexpandinto new engaged inthistypeofwork.However, asthese many peopleinPeel Regionorelsewhere are there islittledataavailable to understandhow these platformsare arather newphenomenon, lowwages.Givena piece-workbasisforvery that digitally outsource micro-tasks to becompletedon . https://www.forbes. 73 Indeed, As the knowledge economy grows and technology continues to advance, the physical space required for workers may continue to shrink. 35 | THE MOWAT CENTRE THE MOWAT 35 | 36 | RETHINKING MUNICIPAL FINANCE FOR THE NEW ECONOMY 4 since municipalitiescannotrundeficitsand that rates are effectively calculatedbackwards: pressure ontheresidential taxbase. non-residential baseandtherefore increase materialize, thiscanresult intheerosion ofthe revenues. Intheevent thatlocaljobsdonot taxanddevelopment chargesproperty growth –whichimpactsbothnon-residential municipal revenue baseisinsufficientlocaljob One ofthemostsignificantthreats to the Insufficient LocalJob Growth including Peel, asaresult ofeconomic andlabourmarket transformations. following sectionexplores macro-level key threats facingmunicipalgovernments across Canada, implications forrevenue generation andthefiscalhealthofmunicipalgovernments inOntario. The Ongoing andemerging trends continueto reshape theway weenvisionwork,andthishasimportant keenan.html gta/2015/03/06/why-property-tax-revenues-dont-rise-with-inflation- Toronto Star, March 6,2015. taxrevenuesKeenan (2015)“Whyproperty don’t risewithinflation” revenue sources suchassalesandincometaxes. See:Edward 75 This isdifferent from otherlevels ofgovernment withother Paper.” Prepared fortheRegionofPeel. 74 Cushman&Wakefield (2017)“Employment Strategy Discussion losses inothers.Intheevent thatnon-residential classesto makesome property upforrevenue work withthebasethey have, increasing rates for meet spendingobligations,municipalitiesmust meet thatgoal. ratesthe baseandcalculatenecessary to determine howmuchrevenue is required from for operating expenditures, governments first taxes areproperty thedominantrevenue source . HEALTH FOR FISCAL IMPLICATIONS 75 This meansthatinorder to https://www.thestar.com/news/ 74 Consider continues to shrink. will increase if non-residential development to date,there isapossibilitythattheseshortfalls this hasalready beenachallengeforgovernments infrastructure basedonthesecalculations. While unexpected costs due to significant investments in result, municipal governments have beenleftwith provincial level have not cometo fruition. Asa policy, planningandgrowth managementatthe revenues. Asdiscussed,projections usedfor inexpecteddevelopment-chargesa shortfall spaces intheRegionasprojected, thisleadsto If employers donotestablishcommercial oroffice negatively impactdevelopment-charges revenues. Weakened jobgrowth intheRegionmay also budget. government may needto make cutsto balancethe shifts theburden onto residents. Alternatively, a rates whichfurther forresidential properties, contributions decline,thismightmeanincreasing Indeed, Peel hasexperiencedaconsistentlyweak competitive disadvantage forPeel inthissector. such as Toronto canoffer, whichmay create a urban environment withtheamenitiesthatacity thatmanyknowledgeworkersobserved enjoy an to attract tenantsto itsofficemarket. are likely to increase competitive pressure forPeel Centre, Downtown Markhamand Midtown Oakville, emerging officenodesin VaughanMetropolitan downtown Toronto core. other Furthermore, non-residential taxpayers asthey move to the Peel willlosesomeof itsexistingrevenue from new knowledgeeconomy, there isariskthat as Toronto establishesitselfasahubforthis rates).than commercial property-tax Further, tax rates inPeel are about15percenthigher result inlowerrevenues (industrialproperty- tend to operate inanofficeenvironment, which such asfinanceandprofessional that services manufacturing, towards sectors various service away from goods-producing sectors suchas knowledge economyhasshiftedemployment these challenges.For instance,thegrowth ofthe exacerbate new economythreaten to further As thenature ofworkchanges,elementsthe 77 Ibid. Paper.” Prepared fortheRegionofPeel. 76 Cushman&Wakefield (2017)“Employment Strategy Discussion job growth notcurrently captured inprojections. industries, they couldresult inoverall insufficient widespread disruptionandjoblossesintraditional tasks andAIadoptionintheworkplaceresults in interest inthe area. rents, whichover time canhamperdevelopment cent. This inturnplaces downward pressures on of 11.7percentandGTA overall rate of7.9per Brampton, relative to theGTA suburbanaverage vacancy rates: 14percentinMississaugaand office market sincethe recession, resultinginhigh 77 Furthermore, ifautomation Furthermore, of 76 Ithasbeen PRODUCTION PRODUCTION SHIFT FROMGOODS that threaten to erode theexistingtaxbase. will bechallenged.Beloware afew suchtrends required forworktransforms, theseassumptions of workchangesandthusthephysicalspace required foremployment. However, asthenature set ofassumptionsaround thephysicalspace taxes anddevelopment charges, isbasedona fornon-residentialrevenues, property particularly The way inwhichmunicipalgovernments collect Workplaces Transforming Work and 79 Ibid. pdf goodsmovement/pdf/goods-movement-strategic-plan-2017-2021. Plan 2017-2021.” 78 RegionofPeel (2017)“Peel RegionGoodsMovement Strategic Region. seven 400-serieshighways crossing through the tracks andfacilities fortwonationalrailways and Canada’s mainline largest international airport, freight hubfornationaldistribution,hometo every day. commodities travel to, from andthrough Peel this shift:approximately of $1.8billionworth benefittedfrom location, Peel hascertainly stored locallyanddistributed.Given itscritical Southeast Asia–butare shippedbackto be lower labourcosts,suchasChinaandareas of produced elsewhere –i.e.injurisdictionswith warehousing hascontinuedto grow. Goodsare manufacturing sector hasdeclined,while result oftechnologyandglobalization,Ontario’s movement isalready underway. Largely asa The shiftfrom goodsproduction to goods TO GOODS MOVEMENT . 79 78 The Regionisconsidered akey https://www.peelregion.ca/pw/transportation/

37 | THE MOWAT CENTRE 38 | RETHINKING MUNICIPAL FINANCE FOR THE NEW ECONOMY for revenue. Whileawarehouse mightbethe in theRegion,there are specificimplications While this shift has providedopportunity economic Source: RegionofPeel advantages Peel Regionstrategic transportation on theotherhand,mightaccount forthesame of employees atagiven facility. Awarehouse, labourintensivevery –sometimeswithhundreds Manufacturing, atleastin thepast,tendedto be the numberofemployees workingwithinit. a manufacturingfacilityandwarehouse is More importantly, thekey distinctionbetween commercial, whichisoften charged alowerrate. without goodsproduction wouldbeassessedas to beindustrial.However, awarehouse onitsown is attachedto awarehouse, itisstillconsidered activities. For example,ifamanufacturingfacility classmay changedependingonits its property same size asamanufacturingfacilityorlarger, FIGURE 22 generate lessvalue persquare footthanindustrial spaces thattendto bemuchsmallerand tend to belocatedincommercial andoffice goods-movement, service-related occupations sectors.various service Withtheexception of shifts away from goodsproduction andinto the growing knowledgeeconomy, asemployment anaturalworkspaces. outcomeof This is inpart There isalsoanoverall trend ofshrinking SHRINKING WORKSPACES facilities are highlysusceptibleto automation. manufacturingandwarehousingFurthermore, less jobsto theRegionanditsresidents. people workinginthebuilding,thereby providing amount ofspacebuthave significantly fewer 81 Ibid. Paper.” Prepared fortheRegionofPeel. 80 Cushman&Wakefield (2017)“Employment Strategy Discussion may continueto shrink. advance, thephysicalspacerequired forworkers economy grows andtechnologycontinuesto the publicandprivate sectors. Astheknowledge being adoptedacross manyindustriesinboth place eachday. These approaches are increasingly or officesandinsteadseesworkers sitinanew approach whichabandonsassignedcubicles “hot-desking” or“hotelling”into theiroffices–an coworkers. “telecommuting” andshared deskspaceamongst and storage, to betterfacilitatingtheoptionof space required forfunctionssuchaspaperfiling impacts ontheuseofspace–from reducing the technologyishavingFurthermore, widespread for officespacespecifically. around 400square feet peremployee –lowerstill whereas theaverage forofficeand retailspacesis (e.g. manufacturing)isaround 2000square feet, footage peremployee foranindustrialspace spaces. For example,theaverage square 81 Indeed,manyfirmsare incorporating 80 just 3.4percent. about 17,900hectares to only18,500hectares or employment-land consumptionincreased from the 2004to 2016period.From 2004to 2016, by 2004,thisgrowth declinedsharplybetween to 11,000hectares in1994and17,900hectares 6,400 hectares in1974to 8,100hectares in1984 employment landconsumptionincreased from over theyears. Basedonestimates,while the growth rate ofemployment-land consumption The RegionofPeel hasexperiencedadeclinein Source: RegionofPeel. Growth rate ofemployment landconsumption inPeel 82 RegionofPeel data. revenue camefrom non-residential property, even of 2018,about30percent ofPeel’s property-tax increases the burden onresidential taxpayers. As tax rates, andadecliningnon-residential base considerably higherthanresidential property- revenues. rates Non-residential property-tax are as thedriver ofgrowth innon-residential tax traditionally relied ongrowth inemployment land been concerningfortheRegionofPeel asithas buildings onit,thisreduced rate ofgrowth has land area, butalsoby thesize andvalue ofthe is notentirely determinedby thesize ofthe While thevalue ofassessmentandtaxrevenue FIGURE 23 » 26.6% 82 » 35.8% Source: Created by Mowat basedonRegionofPeel data. is about 35%higherthan onresidential The tax rate onnon-residential property though non-residential onlyaccountedforabout property. effective taxrates, takinginto accountlowerrates onvacant differences intaxrates are greater shows thanshown. The chart 83 MowatcalculationbasedonRegion ofPeel data. Nominal revenue thatcomesfrom non-residential sources. ofitstax also seenareduction intheproportion employment landconsumption,theRegionhas In additionto thedecliningrate ofgrowth of 19 percentofthemarket value ofallproperty. Ratio of Peel effective tax rate, FIGURE 24

non-residential over residential » 62.7% 1.34 1.44 1.28 1.30 1.32 1.36 1.38 1.40 1.42 2000 2002 2004 2006 3.4% » 2008 2010 2012 2014 2016 83 2018

39 | THE MOWAT CENTRE 40 | RETHINKING MUNICIPAL FINANCE FOR THE NEW ECONOMY work, althoughwhileNFPOWgrowth cancapture working inpositionswithoutafixed placeof shifted considerably. The sameistrueforthose ofoverallas itsproportion employment hasnot although mostlyalongsidepopulationgrowth grown overemployment hascertainly time, “no fixed Home-based placeofwork”(NFPOW). of home-basedemployment orwhatis considered whether thistranslates into agrowing incidence between 2006and2016,althoughitisnotclear growing subsetofPeel Region’s workforce to accelerate. Self-employment wasthefastest advanced nations,andthistrend isestimated workforce buthave grown considerably inmany existed asrather smallcomponentsoftheoverall Freelancing andself-employment have always rental basis. or usingco-workingspacesonamembership or clientbasis–eitherworkingfrom homeand/ well asfreelancers whoconductworkonaproject orentirely from home,as basis butworkpartially employer onamoreto permanent aparticular work. This canincludebothworkers whoare tied flexible inwhere they physicallyconducttheir Technology hasenabledworkers to bemore MOBILE WORKERS 84 Ibid. extent thatworkers becomesomobile that workplace intheknowledge economy. To the reshape theway wecurrently envisionthe continues onalarge enoughscale,thiswill the incidenceofhome-basedworkorNFPOW closely examinedby municipalgovernments. If understood, thisisanarea thatshouldbe broader useofofficespace are not yetwell- While theimpactsofmobileworkers onthe day basis. which thelocationofworkchangesonaday-to- include occupationsinsalesorconstruction freelancing andself-employment, itcanalso 84 and theconvenience oftheseoptionsisbeginning reducing thesize ofretail spacesthatdo exist, little to nocost. The growth ofe-commerce is can bedelivered directly to buyers’ homesfor make purchases online,andoffer products that years asretailers increasingly provide optionsto Online shoppinghasbeengrowing over recent pressure withthegrowth ofonlinetransactions. The retail sector iscomingundersignificant ONLINE RETAIL taxes. ofnon-residential property portion term, thiscoulderode thecommercial andoffice Peel Regionisalready experiencing.Over thelong will exacerbatethestubbornvacancy rates that traditional officespaceishardly necessary, this owed remains thesameas initialassessment, tax (e.g. aswasthecasefor Sears), theproperty store a largestores department closes, particularly taxes owedeachyear.property When oneofthe of multipleretail tenantsthatpay their share ofthe example: considerthatashoppingmallconsists occurring. Shoppingmallsoffer aninteresting There are indicationsofthistransition already developments. as wellreduce thedemandfornewcommercial tax revenue received from commercial properties, purposes. ofproperty- This may shrinktheportion usedforcommercialand reduction inproperties likely beanetlossinretail-related employment However,access gainsimportance. there will as newdistributionmodelsemerge andhighway componentofPeel’s– animportant economy– positive impactsonthegoods-movement sector This growth ine-commerce will continueto have businesses. and threaten profitability for smallandlocal like Amazon encroach onmultipleindustries, this landscapeisever-changing aslarge firms retail outletsaltogether.mortar” Furthermore, to lowerthedemandfortraditional “bricksand although these opportunities dwindle as a cityfully although these opportunities forthistypeofdevelopment – opportunity in theirearlierstagesofgrowth, there ismore smaller developments. Whenjurisdictionsare generates significantlymore revenues than means large-scale greenfield development charges are appliedpersquare metre, which revenue. Ingeneral, non-residential development in whichdevelopment isperceived andgenerates reaching “urban” status,thisdoeschangetheway While there are manybenefits to theseareas and Brampton iswellonitsway. – perhaps to itslimitsofgreenfield opportunities Mississauga hasbeenbuiltoutsignificantly– exception ofCaledon,whichremains quiterural. Peel Regionisanurbanizingenvironment, withthe Redevelopment Urbanization and revenue. lower taxes owed,municipalitiesloseouton result inalowerassessedvalue andtherefore revenue to pay thecurrent rate. Iftheseappeals lessoverall isworth andgeneratingproperty less assessment,makingthecasethat the property of tenants.Asaresult, thelandlord may appeal but theburden isshared across asmallernumber true costofinfrastructure. current development charges failto capture the more employees inthesamespace.Consequently, employee hasdeclined,employers are ableto fit work spaces,i.e.sincethe square footageper more infrastructure dueto theintensificationof new commercial redevelopments oftenrequire redevelopment. This isdespitethefactthat initiatives, there islessrevenue to receive through derive development charges from brownfield this threshold. to Whilethere isstillopportunity Mississauga, forexample,mightbenearing greenfield spaces. urbanizes andreaches itsnatural limitofavailable While thistypeofredevelopment isgoodfor Mississauga withtherenewal oftheoldcitycore. loss. This isbeginningto happeninareas of conversion from industrialstillresults ina slightly more thanresidential spaces,the While commercial redevelopment generates revenue asresidential. average, generate more thantwiceasmuch on potentialrevenues, asindustrialbuildings,on These conversionsapartments. tendto loseout into boutiqueshopsandloft buildings converted Districthavesuch astheDistillery hadmany residential spaces.For example,areas in Toronto intospaces are commercial converted and whenoldindustrial taxes –particularly property Redevelopment canalsoresult inlossof automation and artificial intelligencetaking overautomation and artificial the gigeconomy, andpredictions ofincreased possible. The riseofglobaldigital platformsand incomes, andwidespread joblosses are very increasingly finditharder to get by onexisting and thechangingnature ofwork,asresidents may is likely to continuedueto anagingpopulation been spendingmore onsocialservices. This trend have remained stagnant,andmunicipalities have needs have increased drastically whilereal wages Over thepastseveral years, expensesforbasic ASSISTANCESOCIAL may facepressure isoutlinedbelow. areas undertheRegionofPeel’s jurisdictionthat Abriefdiscussionofkeyfor municipalservices. climate change,willcontinueto increase demands income gapamongstresidents andthreats dueto Challenges suchasanagingpopulation,growing Growing Demands Service considered intheinitialdevelopment. that increase municipalexpenditures thatwere not revenues andresults inmore residents inthatarea vibrancy andliveability, itreduces overall available

41 | THE MOWAT CENTRE 42 | RETHINKING MUNICIPAL FINANCE FOR THE NEW ECONOMY A recent report fromA recent thePeel-Halton report Local revenue sources. unless themunicipalitysuccessfullydiversifies its ownerswillhave toproperty beartheburden aren’t enoughnewoffice developments, residential residential baseinPeel isshrinkingandthere pressure base.Asthenon- ontheproperty-tax These trends alsomeanthatthere willbemore quality oflife ofcitizens. deteriorate the thatwillfurther existing services revenues, there isriskthatthere willbecutsto cost pressures. Intheabsence ofincreased living, municipalgovernments couldfacespiralling citizens andmaintainanadequatestandard of to leverage themarket fornewjobs. To protect upgrading programs willberequired forworkers subsidized childcare. Further, investments inskills increased demandforaffordable housingand receiving socialassistance(OntarioWorks) and would presumably translate into more residents on them.For example,higherincidenceofpoverty face increased pressures asmore peoplemay rely This meansthatsocialprograms will andservices lower inquality. but alsothatmanyofthenewjobscreated willbe jobs, meannotonlythatthere willbejoblosses, ployment+-+LECP+FINAL%5B19018%5D.pdf cf/1538082969141/The+Costs+of+Unemployment+and+Underem static/59d54ac1ccc5c5a938e27565/t/5bad48939140b7ab9f5707 Workforce Development Group. and Underemployment inPeel andHalton.” Peel Halton 85 BenEarle(2018)“TheCostsand ImpactsofUnemployment receiving social assistance. Employment Insurance, and$29,531foraperson with noincome,$26,909foranindividualreceiving unemployed personto be$21,504foranindividual their research calculatedtheannual costsper underemployment to governments. InPeel, estimate thetotal costofunemployment and Employment Planning Councilattemptedto https://static1.squarespace.com/ 85 . 0.00% 0.20% 0.40% 0.60% 0.80% 1.00% 1.20% 1.40% 1.60% Source: Created by MowatbasedonRegionofPeel data. ratio Average monthly caseloadsto population years, asshowninFigure 25.In2017,anaverage to populationratio hasalsoincreased over the monthly caseloadsandtheaverage caseloads of Peel hasseenanincrease intheaverage tofor delivering services residents. The Region of theadministration costandare responsible government, municipalitiesdoshare aportion programs, primarilyfundedby theprovincial Program (ODSP).Whiletheseare provincial individuals –alongsideOntarioDisabilitySupport provides financialassistance to low-income Ontario Works program istheprimary (OW) that regional municipalgovernments. InOntario, tends to betheresponsibility oflocaland assistance programs to address joblessness Providing various payments, benefitsand 86 Datafrom theRegionofPeel. month through theOWprogram. each of 18,678householdsinPeel were supported FIGURE 25 2001 0.69% 2002 0.73% 2003 0.75% 2004 0.78% 2005 0.80% 2006 0.84% 2007 0.81% 2008 0.83% 2009 1.05% 2010 1.17% 201 86

1 1.17% 2012 1.25% 2013 1.24% 2014 1.24% 2015 1.31% 2016 1.34% 2017 1.31% Source: Created by Mowat basedonRegionofPeel data. household incomeonshelter costs Residents spendingmore than 30%of larger forrenters. Figure 26),althoughtheincrease hasbeenmuch has grown forbothtenantsandhomeowners(see 30 percentofhouseholdincomeonsheltercosts ofresidents spendingmorethe proportion than emergency homelesssheltersin2017. were nearly15,000visits to regionally owned has driven upmonthlyrents. Asaresult, there unaffordable. The vacancy rate ofjust1percent income householdslive inhousingthat is income householdsand30percentofmiddle- In theRegionofPeel, about70percentoflow- housing are closelyinterrelated. ashousingaffordabilityGTHA, andaffordable and rental pricescontinueto riserapidly inthe trueintheevent thatmarketparticularly housing may increase.for suchservices This willbe increased incidenceofpoverty, thedemand of workresults injoblosses,lower wagesand safety andaccessibility. Ifthechangingnature andrenovationssubsidies, sheltersupport for providing suchas housingandshelterservices Peel’s regional government isresponsible for HOUSING ca/strategicplan/community-for-life/housing-support.asp 87 RegionofPeel (2018)“Housing Support.” 10.0% 15.0% 20.0% 25.0% 30.0% 35.0% 40.0% 45.0% 50.0% FIGURE 26 0.0% 5.0% 39.5% 1996 25.5% 38.1% 2001 21.6% T enant Households 42.6% 2006 28.9% 41.5% 20 https://www.peelregion. 1 28.1% 1 Owner Households 45.3% 87 2016 InPeel, 27.6% . infrastructure, to maintainqualityoflife, remain aswellwalkingandcyclingtransportation, that itisvitalto invest inlong-termsustainable trips duringthepeakmorningperiod. This means road in2041–ora45percentincrease inSOV continues, there willbe200,000 more carsonthe using single-occupantvehicles (SOV). Ifthistrend Peel householdsmake 63percentoftheirtrips per centmore tripscompared to 2011.Currently, 2041, Peel residents andemployees willmake 40 demand intheRegion–itisestimatedthat will have anobvious impactontransportation cent employment growth. This populationgrowth to see19percentpopulationgrowth and21per From 2017to 2041,theRegionofPeel isprojected TRANSIT 89 Ibid. transportation-strategies-appendix-II.pdf Peel. pp.5. Employment Growth: DiscussionPaper.” Prepared fortheRegionof 88 IBIGroup (2017)“Transportation Strategies to Support sustainable andconnectedcommunities. investment to ensure theavailability oflivable, will havetransportation to beafocusarea of from neighbouringmunicipalities. Therefore, new officesand toattract qualifiedworkers for businesseswhendecidinglocations grows, connectivityislikely to beakey factor this numbermay decrease aslocalemployment trips inPeel iseitherto orfrom Toronto. facilitate bettermobility. Currently, oneinfive willhaveGTHA to becomemore connected to Additionally, systemsacross transportation the as teleworking–to reduce travel demand. fully embrace newapproaches to working–such periods. At thesametime,itwillbeessentialto will have to walkorbike to workduringpeak passengers andabout11percentoftheresidents have to more thandoublethenumberof carry economic competitiveness. By2041,transit will environmentally sustainable aswellimprove https://www.peelregion.ca/planning/officialplan/pdfs/ . 89 While 88

43 | THE MOWAT CENTRE 44 | RETHINKING MUNICIPAL FINANCE FOR THE NEW ECONOMY also projected to increase. ofseniorsinthisagegroupand theproportion is average ageofresidents inlong-termcare is80, to 11.9percentin2041.IntheRegion ofPeel, the considerably increase –from 4.3percentin2011 ofseniorsoverThe proportion theageof75will calls ishigheramongstseniorsover theageof75. demand.However,service of911 theproportion of chronic conditionsare key determinants of and factors suchasincomelevel andpresence over theageof65)are notahomogenous group, to recognizeIt isimportant thatseniors(i.e.those cent ofthehealthcare utilizationinthisagegroup. more chronic conditions,accountingfor40per of Canadiansover theage of65live withthree or boomers enterretirement. Twenty-four percent overall shrinkingofthelabourforce asbaby on thepublichealthcare system)aswellan demands(e.g.increasingon service pressures implications Population aginghasimportant 10 residents in2011to 1in4residents by 2041. see anincrease initsseniorpopulationfrom 1in of anagingpopulation. The Region of Peel will increase considerably willbeinmeetingtheneeds Another area where demandislikely service to AGING POPULATION the_Municipal_Role_in_Caring_fo.aspx www.amo.on.ca/AMO-PDFs/Reports/2011/2011_Coming_of_Age_ The municipalrole incaringforOntario’s seniors.” pp.17. 92 AssociationofMunicipalities Ontario(2011)“ComingofAge: 29-apsc-agenda.pdf Agenda. Population Term ofCouncilPrioritySteeringCommittee.” InCouncil 91 RegionofPeel (2014)“Recommendationsfrom theAging ca/planning/officialplan/pdfs/age-friendly-discussion-paper.pdf 2041: RegionalOfficialPlan Review.” pp. 3. 90 RegionofPeel (2016)“PlanningforanAgingPopulation –Peel programs suchastheLow-Income SeniorsDental for inflation. about 40percentmore in8years afteraccounting number increased to $1,433,109,628 in2008or $846,388,193 onassistanceforseniors,andthis In 2000,Ontario’s municipalgovernments spent http://www.peelregion.ca/council/agendas/2014/2014-05- 92 The RegionofPeel currently funds . 91 . https://www.peelregion. https:// . 90

Source: RegionofPeel (2014)“Recommendationsfrom theAging percentage oftotal population inPeel Seniors by agesub-groups asa 29-apsc-agenda.pdf Agenda. Population Term ofCouncilPrioritySteeringCommittee.” InCouncil 29-apsc-agenda.pdf Agenda. Population Term ofCouncilPrioritySteeringCommittee.” InCouncil 93 RegionofPeel (2014)“Recommendationsfrom theAging willcontinue tofor suchservices increase. precarious work, itcanbeanticipatedthatdemand the populationofseniors,aswellrisein $1.3 millionisinsufficient. each weeksuggestingthattheannualbudgetof new seniorscontinueto beaddedto thewaitlist thosewhoareand serve mostinneed,about18 tightened theeligibilitycriteriato reduce waitlists to beonthewaitlist.WhileRegional Council thousands ofseniors,butmanyseniorscontinue insurance. Since2008,theprogram hasserved Program forlow-incomeseniorswithoutdental 10% 15% 20% 25% 0% 5% FIGURE 27 1996 4.6% 2.0% 0.5% http://www.peelregion.ca/council/agendas/2014/2014-05- http://www.peelregion.ca/council/agendas/2014/2014-05- 65-74 2001 4.9% 2.4% 0.6% . . 75-84 2006 5.3% 2.9% 0.8% 85+ 20 1.1% 6.2% 3.2% 93 1 Withthegrowth in 1 2021 1.6% 8.5% 4.2% 2031 10.5% 6.3% 2.4%

2041 9.1% 8.1% 3.8% to increase. willcontinue for socialservices can beanticipatedthatdemand as theriseinprecarious work,it population ofseniors,aswell With thegrowth inthe Peel-Poverty-Reduction-Strategy-2018-2028.pdf Community Action.” pp.9. Source: RegionofPeel “2018-2028Peel ReductionStrategy: Poverty FIGURE 28 of theirincomeon individualsinPeelhave Only 45% WELLBEING 18,678 HOUSING W A EMPLOYMENT INCOME housing subsidized live in tenant households 13.9% individual is entitlement Monthly verage monthl orks

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especially inwinter, driersummersandhigher be anincrease inaverage annualprecipitation, Eastern Canadaare vulnerable. There willalso America.Inparticular, and in North Northern increase significantly over thenexttwodecades theaverage2014 report, annualtemperatures will Intergovernmental Panel onClimateChange’s respond to thesechanges.According to the governments willneedto prepare forand going to impactmunicipalfinancesaslocal and anticipatedeffects ofclimatechange,are events, suchassevere storms andheatwaves, The increased frequency ofintenseweather Weather Events Climate ChangeandIntense become-more-frequent-and-five-times-more-deadly news/canada/new-research-predicts-heat-waves-in-canada-could- deadly.” National Post, August 9,2018. Canada couldbecomemore frequent —andfive timesmore 95 Alexa Taylor (2018)“Newresearch predicts heatwaves in thistlethwaite_Feb_23_2017.pdf utoronto.ca/bitstream/1807/81204/1/imfgpaper30_henstra_ on MunicipalFinanceandGovernance. pp.3. Change, Floods,andMunicipalRiskSharinginCanada.” Institute 94 DanielHenstra andJason Thistlethwaite (2017)“Climate severe floodinginthesame year, whichsevered billion. Toronto experiencedrecord rainfall causing disaster, resulting ineconomiclossesofover $6 in 2013becameCanada’s mostexpensive natural areas. The torrential rain experiencedby Calgary to sewerbackupandextreme rainfall inurban than $20billioninlossesthatcanbeattributed Canada, from 2003to 2012,there were more costs are onlyprojected to increase further. In damage,andthese cause significantproperty hazard facedby municipalgovernments asfloods Currently, floodingisthemostexpensive climate 2080, compared to the1984to 2015period. five timesmore heat-related deathsfrom 2031 to expected to getmuchworse–Canadacouldsee to extreme heat.According to astudy, thistrend is In 2018,more than 80peoplediedinQuebecdue number ofdays withextreme hottemperatures. . https://nationalpost.com/ https://tspace.library. . 95 94

45 | THE MOWAT CENTRE 46 | RETHINKING MUNICIPAL FINANCE FOR THE NEW ECONOMY in 2015–from $2percapitato $6percapita,reducing Government of Canada modified its expense thresholds annually. To overcome thisfinancialpressure, the DFAA payments willreach more than$650million $100-million. It is projected that over the next five years, significantly surpassedtheprogram’s annualbudgetof 2011 to $280millionannuallyfrom 2012-2015. This an average of$118millionannuallyfrom 1996- Arrangements (DFAA) increased significantlyfrom federal government’s DisasterFinancialAssistance to notethatpayments underthe It isalsoimportant billion by 2050. catastrophes willgoupto $5billion,andover $20 projected thatby 2020theannualcostofsuchnatural than $65millionto themunicipalgovernment. power to about300,000residents and costmore Budget-SeizingTheMoment_EN.pdf Government.” pp.8. Budget 2017Recommendationsfrom Canada’s LocalOrder of 99 Federation ofCanadianMunicipalities(2017)“Seizing theMoment: Feb_23_2017.pdf ca/bitstream/1807/81204/1/imfgpaper30_henstra_thistlethwaite_ Finance andGovernance. pp.5-6. Floods, andMunicipalRiskSharing inCanada.” InstituteonMunicipal 98 DanielHenstra andJason Thistlethwaite (2017)“ClimateChange, future future.” 97 CUPE(2018)“Publicinfrastructure buildsasustainable,equitable Feb_23_2017.pdf ca/bitstream/1807/81204/1/imfgpaper30_henstra_thistlethwaite_ Finance andGovernance. pp.4-5. Floods, andMunicipalRiskSharinginCanada.” InstituteonMunicipal 96 DanielHenstra andJason Thistlethwaite (2017)“ClimateChange, in climatechangemitigationandadaptation. steps to reduce theircarbonfootprintaswellinvest climate resilient communitiesby takingmeaningful would have to make significantinvestments to build means thatmunicipalities,includingtheRegionofPeel, events inCanadawouldbe$5billionby 2020. estimated thattheannualcostofextreme weather The Federation ofCanadianMunicipalities (FCM)has to disasterrelief inthecomingyears. will beforced to devote even more financial resources its future contributions. This meansthatmunicipalities . https://cupe.ca/public-infrastructure-builds-sustainable-equitable- . . https://fcm.ca/Documents/issues/2017_FCM_ 97 https://tspace.library.utoronto. https://tspace.library.utoronto. . 98 99 96 This Itis Governments across the world are feeling challenged to effectively predict and plan for the future in the face of rapid changes to the economy, including the changing nature of work and its impact on people and places. 47 | THE MOWAT CENTRE THE MOWAT 47 | PLAUSIBLE 5 SCENARIOS Governments across the world are feeling challenged to effectively predict and plan for the future in the face of rapid changes to the economy, including the changing nature of work and its impact on people and places. Given this reality, it is vital for policymakers to take a future-oriented approach to the decision-making process and prepare for multiple possibilities in the face of uncertainty.

Strategic planning should not only include an analysis of historical trends and data, but also creative strategies that go beyond it. This section employs scenario planning to systematically anticipate various possibilities for the future and determine how policymakers can influence various outcomes. The three scenarios – business-as-usual, worst case and best case – presented below were developed based on the economic model100 created for the Region of Peel that utilizes historical data for the Region. Additionally, qualitative insights from this study, based on a comprehensive literature review and stakeholder engagement, were also employed to envision these scenarios.

100 The Mowat Centre developed an economic model for the Region of Peel utilizing historical data from the region. Based on historical trends, the model allows the user to predict how various items, such as the affordability of property taxes for households, may vary based on key assumptions for different variables. While this model will serve as a useful tool to assist policymakers with their strategic planning

48 | RETHINKING MUNICIPAL FINANCE FOR THE NEW ECONOMY FINANCE FOR 48 | RETHINKING MUNICIPAL activities, it must be noted that the actual outcomes cannot be predicted with certainty. Intergovernmental Collaboration for policiesandprograms. and address the various needs, aspirations andconcernsforthe future of different groups. Further, engagement is vital to increase buy-in marginalized ofdiverse groups,perspectives voices, andinterests. isalsoessentialto particularly Inclusionandparticipation understand To avoid narrow visionsofthefuture, itisessentialforpolicymakers to engagewithdiverse stakeholders that represent arange of Engagement andInclusion ofpolicies. at theheart termandmedium-termensuresaddition to thatdecision-makers keep theshort environmental sustainabilityandintergenerational equity the impactofpoliciesonfuture generations andtakingresponsible actionsinthepresent. Decisions shouldnotjustbegeared ormedium-termgoals.Rather, towards short-term policymakinginvolves visionary thinkingabout Long-term Sustainability acknowledge theiragencyininfluencingthefuture inapositive direction. and create proactive policiesinthepresent thatare geared towards achieving desired outcomes. This alsoallowspolicymakers to the pathway to achieving it. future. Oneoftheapproaches to thisisbackcasting, i.e.creating avisionforthepreferred future andworkingbackwards to determine Current actionorinactionare bothgoingto influencethefuture. Proactivity futures. suggested planningforfourdifferent butinterrelated typesoffutures. These includethepossible,plausible,probable andpreferable Therefore, policymakers shouldprepare forandthinkaboutmultiplefutures whendesigningpoliciesandprograms. Futurists have factthatshouldbekeptAnother inmindwhenplanningforthelongtermisthatthere are important multiplepossibilitiesforthe future. Multiplicity agile enoughto adaptto emerging realities. challenges. existing evidence andprojections theirplanning, they mustalsoacknowledgethatthey to willbefacedwithunanticipated support A key reality facingdecision-makers isthatthefuture cannotbepredicted withcompletecertainty. Whilepolicymakers shoulduse Agility principles include: some key strategic foresight principlesatthecore to helpthemincrease therelevance andvalue oftheirplanningactivities. When policymakers are analyzingtrends, developing challenges,they future shouldkeep scenariosandpreparing forneworuncertain capacity-development/English/Singapore%20Centre/UNDP_ForesightManual_2018.pdf 108 UNDP(2018)“Foresight Manual:Empowered Futures forthe2030Agenda.” pp.14-15 foresight.intro.conway.pdf 107 Maree Conway (2014)“Foresight: anintroduction.” Thinking Futures. pp.5. https://doi.org/10.1177/1946756718777252 106 David N.Bengston (2018)“Principlesfor Thinking abouttheFuture andForesight Education.” World Futures Review. 10(3):193-202. files/epsc_-_strategic_foresight_primer.pdf 105 AngelaWilkinson(2017)“Strategic Foresight Primer.” European Political Strategy Centre. pp.13. foresight.intro.conway.pdf 104 Maree Conway (2014) “Foresight: anintroduction.” Thinking Futures. pp.5. https://doi.org/10.1177/1946756718777252 103 David N.Bengston (2018)“Principlesfor Thinking about the Future andForesight Education.” World Futures Review. 10(3):193-202. capacity-development/English/Singapore%20Centre/UNDP_ForesightManual_2018.pdf 102 UNDP(2018)“Foresight Manual:Empowered Futures forthe2030Agenda.” pp.8. tourism/ megatrends to bettershape thefuture oftourism.” OECD. 101 Adoptedfrom research conductedby MowatfortheOECD. See: SunilJohal,Jordann Thirgood andKiran Alwani(2018)“Analysing sustainability, shared prosperity Working collaboratively isessentialto ensuring thatplansacross theboard are compatible,andinlinewiththeoverall targets for wellbeing ofthepeople.Operating insiloswillcreate theriskofdeveloping plansthatare notwell-alignedandtherefore inefficient. To create effective andfeasible policies,itisvitalthatgovernments atalllevels collaborate to achieve mutualgoalsthatensure the Principles forStrategic Foresight 103 . 102 Hence,policiesandprograms shouldbecreated inamannerthatutilizes existingevidence andprojections, whilebeing . . 108 105 This techniqueallowspolicymakers to focusonthefuture asaprocess rather thanadestination, andequity. . . . https://mowatcentre.ca/analysing-megatrends-to-better-shape-the-future-of- 104 Hence,itisvitalto take proactive stepsto worktowards thedesired 106

http://choo.ischool.utoronto.ca/fis/courses/inf1005/ http://choo.ischool.utoronto.ca/fis/courses/inf1005/

http://www.undp.org/content/dam/undp/library/ . . . http://www.undp.org/content/dam/undp/library/ 107 Thinking aboutthelong-termfuture in

https://ec.europa.eu/epsc/sites/epsc/ 101 These

49 | THE MOWAT CENTRE 50 | RETHINKING MUNICIPAL FINANCE FOR THE NEW ECONOMY Scenario 1:StatusQuoorBusiness-As-Usual by 2040. household incomes,would riseto about5percent makes upanaverage of4percenttotal taxpaidby households,whichcurrentlyproperty account thelowertieraswell,total residential increase to about2percentby 2040. Taking into income ofresidents asof2018,andthiswould an average of1.65percentthetotal household The uppertier’s taxrepresents residential property taxpayers over thecomingyears (seeFigure 29). increase intheburden onresidential property maintaining thestatusquowouldleadto amodest Based ontheassumptionsmade,weseethat change in real per capita fee Upper tier annual percentage revenue to employment Elasticity ofnon-residential tax by consumer expenditure deflator) government expenditure (deflated change in real per capita Lower tierannual percentage expenditure deflator) expenditure (deflated by consumer in real per capita government Upper tier annual per cent change total population Employment as a percentage of Real wage growth rate relative to Ontario Population growth difference revenue change in real per capita fee Lower tierannual percentage revenue Policy variables at this level. tier has been 1.2 per cent per year. This scenario assumes that growth will stay The historical growth rate of revenues from user and license fees forthe lower will be maintained. tier has been 1.6 per cent per year. This scenario assumes that thisgrowth rate The historical growth rate of revenues from user and license fees forthe upper scenario assumes thatit will remain the same. reflecting theshift inemployment away from higher-value industrial uses. This the percentage increase in employment. Historically, thishas been about 0.86, This reflects the percentchange intax revenue from businessesas a ratio of 2017 period was1.4 per cent per year. lower tierwillriseat the current levels. The actual average during the2009 to This scenario assumes thatthe real per capita government expenditure forthe to 2017. increase at current levels – 1.2 per cent per year, the actual average from 2009 This scenario assumes thatthe real per capita spending for the upper tierwill will be no change. The historical trend forPeel has been flat, and this scenarioassumes thatthere – by 0.45 per cent annually. This scenario assumes thatreal wage will continue to grow atthecurrent level rate). will grow at a slower pace (about 0.2 per cent higher thanthe province growth as-usual scenario assumes that this trend willcontinue, i.e. Peel’s population per cent higher than the Ontario average over the pastfew years. The business- provincial average – by 1.5 to 2 per cent. However, thishasslowedto about0.2 Historically, Peel’s population growth was considerably higher than the their standard ofliving. manythingsthattheyvery mustbuyto maintain chunk ofalltheincomethatpeopleneedfor tax,takingasizeable item, municipalproperty remembered thatweare talkingaboutjustone taxrisesby one-quarter.by property Itmustbe that theshare ofthehouseholdbudgettaken way to overburdened households.Itwouldmean high asanabsolutenumber, but itmightfeel that A figure suchas5percentmay notsoundterribly Assumptions in cutsto somepublicservices. This might be would require somerebalancing, andcouldresult decrease therate ofgrowth inspending. That the pressure onratepayers, Peel wouldhave to increasingly burdened taxes. by property To reduce growth ofhouseholds,Peel residents willfeel to grow substantiallyfasterthanthereal income politically unfeasible. Ifexpenditures continue revenue sources is likely to beunsustainableand the statusquointermsofspendinggrowth and This scenarioanalysissuggeststhatmaintaining tax burdenProperty onhouseholds strong economicdriver intheRegion’s economy. asa and logisticswillcontinue to gainimportance warehousing goods movement andparticularly manufacturing sector willcontinueto contract, expect to see mixed sectoral changes. Whilethe In abusiness-as-usualscenario,Peel can of suitablepolicyinterventions. the Regionwouldremain stubborninthe absence income inequality. Moreover, rate thepoverty in can expectto seeariseinprecarious workand current labourmarket trends continue, theRegion increase incomesforworkers. Bycontrast, ifthe through new investments and well-paying jobs that prevented iftheRegioncanfindeconomicgains Percentage of household income FIGURE 29 0.0 1.0 2.0 3.0 4.0 5.0 6.0

2018 income, includingprovincialeducationtax T Lower tierresidentialpropertytaxas%ofhouseholdincome Upper tierresidentialpropertytaxas%ofhouseholdincome otal residentialpropertytaxas%ofhouseholddisposable 2019 2023 2024 2025 2026 2027 2028 2029 2030 2031 2032 2033 2034 2035 2036 2037 2038 2039 2040 the Regiontaxes commercial space.Automation MPAC ortheway assessescommercial properties with theiremployers, itwouldnotchangetheway workers willhave flexibleworkarrangements a significantlylowerlevel than today. Whilemore this will continueto declineandthen plateau at for municipalities.Inabusiness-as-usualscenario, revenuesimpacted non-residential property-tax number ofsquare feet peremployee. This has shrinking, leadingto areduction intheaverage We have seenthatofficesizes have been moderately benefit Peel’s logisticsindustry. However, thegrowth inonlineretail would and shrinktheircustomer baseto somedegree. box stores, boutiqueshopsandsmallbusinesses, Online retail willcontinueto negatively impactbig- advancements. as they enjoy betterhealthdueto medical continue to workbeyond theageof65,particularly working ageofthepopulationasseniorsmay Another possibilitycouldbeanincrease inthe as automation, ordueto increased immigration. dueto technological advancements such shortfall Region. Ontheotherhand,there may notbea ofworkersseniors may inthe leadto ashortage workforce. Ononehand,the highernumberof for howtheagingpopulationwillimpactPeel’s will remain constant, there are various possibilities employment asapercentage oftotal population would rise.Whilethisscenarioassumesthat the demandforsocialandpublichealthservices to increase. Therefore, itcanbeanticipatedthat population, asintherest ofCanada,willcontinue of seniors(aged65andabove) inPeel’s Based onprojections, weknowthattheproportion tax base. unemployment orreduction inthenon-residential level, butthiswouldnotleadto large-scale and digitaloutsourcing willincrease atamoderate

51 | THE MOWAT CENTRE 52 | RETHINKING MUNICIPAL FINANCE FOR THE NEW ECONOMY Scenario 2:Worst Case infrastructure repairs andpublichealthcosts. levels ofgovernment, municipalitieswillfaceunanticipatedhighcostsfordisasterrelief, includingfor infrastructure. Ifstrategies andinitiatives to combatthisremain small-scaleandpiecemealfrom various predicted thatthefrequency ofextreme weatherevents willincrease andcausesignificantdamage to The impactsofclimatechangewillcontinueto exacerbateinthefaceofstatusquo–itis of total population Employment as a percentage Real wage growth rate relative to Ontario Population growth difference revenue change in real per capita fee Lower tierannual percentage revenue change in real per capita fee Upper tier annual percentage tax revenue to employment Elasticity ofnon-residential expenditure deflator) (deflated by consumer government expenditure change in real per capita Lower tierannual percentage expenditure deflator) (deflated by consumer government expenditure change in real per capita Upper tier annual per cent Policy variables increasing taxes. reliance onproperty user fees are instituted andthatrevenue growth rate stagnates to zero – ultimately has been1.2 percentyear. In the worst-casescenario, we assume that no new The historical growth rate of revenues from user and license fees forthe lower tier zero, thereby increasing taxes. reliance on property user fees are instituted andthat the real percapitarevenue growth rate stagnates to has been1.6 percentyear. In the worst-casescenario, we assume that no new The historical growth rate of revenues from user and license fees forthe upper tier elasticity (0.43), indicatingadeclinein commercial-tax revenues. factors such as telecommuting. We assume this numberto be halfof the current due to The worst-casescenario assumes thatthe elasticity will decline further uses. (about 0.86), reflecting the shiftinemployment away from higher value industrial percentage increase in employment. Historically, it hasbeenslightlylessthanone This reflects the percentchange intax revenue from businessesas a ratio ofthe per cent per year. 1.68 per cent annually. The actual average duringthe 2009 to 2017 period was 1.4 rise at a higher pace for the lower tier as well – 20 per cent above current levels at This pessimisticscenarioassumes that real per capita government expenditure will average for 2009 to 2017 was 1.2 per cent per year. due to factors such as increased demand for health andsocialservices. The actual tier will increase at a higher pace (20 per cent above current levels at1.44 per cent) This worst-casescenario assumes thatthe real per capita spending forthe upper will decrease by 0.2 per cent eachyear. of the employed population. Therefore, the percentage of the populationemployed demographic changes, such as an aging population, willsignificantly reduce the size changes such as increased automation willleadto large-scale job losses. Further, has remained flatfor Peel. In this worst-case scenario, we assume that economic Currently, about 58 per cent of Peel’s populationisemployed. Historically, this figure we assume that itwilldecline by 0.45 per cent each year. precarious jobs, real wage will decline significantly. For the purposeof thisscenario, This scenario assumes thatdue to the changing nature of work, such astherise in The actual average for2002 to 2017 wasan annual increase by 0.45 per cent. negative impact on Peel’s fiscalhealth. In the worst case scenario, we assume that slower population growth will have a depending onother factors, itcan either improve or worsen Peel’s fiscal situation. and revenue growth, butit can also lead to a higher demand for services. Therefore, on fiscal health.Higher populationgrowth canpotentially lead to higherincome to note here that populationgrowthIt is important does not have adirect impact this scenario,weassume that itwillbecome equal to the provincial average. quite similar to Ontario – being just 0.2 percentabove the provincial average. Under average (by 1.5 to 2 per cent), during the latest5 year censusperiod,it has become historically Peel’s population growth has beenconsiderably higher than the provincial This scenario assumes thatthe population growth in Peel will slowdown.While Assumptions Property tax burdenProperty onhouseholds health. Over thepastseveral years, wagegrowth Region willstruggleseverely to maintainitsfiscal digital disruption,occuratarapid pace,the economic changes,suchaslabourmarket and The worst-casescenarioindicatesthatif to 8.05percentin2040. household incomes,thiswouldmore thandouble makes upanaverage of4percenttheirtotal taxpaidby householdscurrentlyproperty cent by 2040.Overall, whilethetotal residential income forresidents, thisincreases to 3.5per average of1.65percentthetotal household taxformsan the upper-tierresidential property will becomemore unaffordable. Whilein2018, tax incomes, adeclinemeansthattheproperty Since higher wage growth implies rising household rise. revenues decrease, whileexpenditures continueto even more from householdsascommercial-tax the municipalgovernment isforced to askfor of householdsto pay taxes. At thesametime, real wagegrowth rates reduces thecapacity combination ofloweremployment anddeclining increases significantly(seeFigure 30). The we seethattheresidential burden property-tax Based ontheassumptionsmadeinthisscenario, Percentage of household income FIGURE 30 0.0 1.0 2.0 3.0 4.0 5.0 6.0 7.0 8.0 9.0

2018

income, includingprovincialeducationtax T Lower tierresidentialpropertytaxas%ofhousehold income Upper tierresidentialpropertytaxas%ofhousehold income 2019 otal residentialpropertytaxas%ofhousehold disposable 2023 2024 2025 2026 2027 2028 2029 2030 2031 2032 2033 2034 2035 2036 2037 2038 2039 2040 Peel islargely reliant on.Workplaces willcontinue movement (e.g.logistics)–twoindustriesthat production (e.g.manufacturing)andgoods potentially take over humanlabourinbothgoods transformation inthisscenario.Automation will cope withthechangingeconomyanddigital Peel, andothermunicipalities,willstruggleto unaffordable. increase dramatically –makingthemeven more of total householddisposableincomescould life deteriorate. taxes paidasaportion Property further, Peel residents willseetheirqualityof growth decreases andwagegrowth declineseven burden ontaxpayers. Iftheoverall employment growth, already resulting inasomewhatincreased for residents hasnotkept pacewithexpenditure underfunded acrossunderfunded Canada. market policiesandprograms remain severely new economy. Onereason forthisisthatlabour training initiatives willnotbeprepared forthe relevant. In apessimisticscenario,localjob market inwhichtheirskillsprofile isnolonger to automation are likely to befaced withalabour Many residents whoexperiencejoblossesdue impact theirmentalandphysicalwellbeing. reliance aswellnegatively onsocial services, This precarity islikely to increase residents’ underemployed orengaged inprecarious work. unemployment, manyintheworkforce willbe In additionto dramatic increases in base. residential property-tax countries altogether. Allthiswillreduce thenon- and jobfunctionsmay beoutsourced to low-cost tasks platforms becomeswidespread, certain becomes sofissured thattheuseofdigitallabour of officespacedemandintheRegion.Ifwork freelancing) wouldintensify thedownward trend The growth ofthegigeconomy(flexibleworkand space. commercialrequired office forjobs,particularly to shrinkasefficiencies reducethephysicalspace

53 | THE MOWAT CENTRE 54 | RETHINKING MUNICIPAL FINANCE FOR THE NEW ECONOMY events. createddemand forservices by frequent extreme weather unable to copewithstrains to infrastructure andincreased municipalities across Canada,includingPeel, wouldbe adequate mitigationandadaptationmeasures. Asaresult, Governments atalllevels failto acturgently to putinplace will to take meaningful actionto address climatechange. In theworst-casescenario,there islittleto nopolitical social services soar.social services residents. At thesametime,expenses forpublichealthand the lackofbusinessinvestment andaninabilityto attract critical infrastructure. contributesto This austerityfurther does notmake sufficient long-terminvestments in transit or tofails to drive capitalize prosperity onopportunities and responding to rapid changesintheeconomy. The Region term approach. Rather, they remain focusedonreacting and In thisnegative scenario,policymakers failto take along- new levels. in shared prosperity. Therefore, societalinequalityreaches ways to ensure thatefficiencygains from technology result improved userfees. Further, policymakers struggleto find its revenue sources, orincrease revenues through newor Inthisdystopianservices. scenario,Peel failsto diversify burden onresidentsproperty-tax orcutsto essentialpublic their fiscalhealth. Thiswouldeither result inanincreased restricted revenue sources, continueto struggleto maintain another. Municipalities,dueto theirlimitedauthorityand to worktogether to one achieve mutualgoalsandsupport is likely to bethatgovernments across different levels fail One ofthemaindrivers behindthisworst-casescenario cost countriesaltogether. Allthiswill functions may beoutsourced to low- tasksandjob widespread, certain use ofdigitallabourplatformsbecomes If workbecomessofissured thatthe base. reduce thenon-residential property-tax Scenario 3:BestCase (deflated by consumer (deflated by consumer government expenditure change in real per capita Lower tierannualpercentage expenditure deflator) (deflated by consumer government expenditure change in real per capita Upper tier annual percentage of total population Employment as a percentage Real wage growth rate relative to Ontario Population growth difference revenue change in real per capita fee Lower tierannualpercentage revenue change in real per capita fee Upper tier annual percentage percentage rate onincome Peel personal income tax, tax revenue to employment Elasticity ofnon-residential expenditure deflator) Policy variables assess the impact of a potential 1 per cent municipal income tax on household assess the impact ofapotential1 percentmunicipalincome tax on household revenuereduce tax astheprimary reliance source. on property Inthis scenario, we The best case scenario assumes that Peel will diversify itsrevenue sources, and amount (0.9) than the current level (0.86). employment increases, tax revenues from businesses will increase –by a higher uses. This best case scenario assumes that theelasticity will increase –i.e. as (about 0.86), reflecting the shiftinemployment away from higher value industrial percentage increase in employment. Historically, it hasbeenslightlylessthanone This reflects the percentchange intax revenue from businessesas a ratio ofthe 2017 period was1.4 per cent per year. the lowertier will riseat the current levels. The actual growth rate duringthe 2009 to This best case scenarioassumes that the real per capita government spending for stay at the current level (1.2 per cent per year) for the upper tier. assuming that the annual growth rate ofreal per capitagovernment expenditure will public services. This best case scenario therefore takes aneutral approach, efficiency, or it may meanmore investments withlong-term benefits and improved to Similarly, essential public services. growth in expenditure can denotereduced Decline inexpenditures can signifyeitherincreased efficiency or austerityandcuts Historically, this figure has remained flatfor Peel. the percentage of population employed to increase by 0.2 per cent eachyear. in Peel will increase,scenario, we assume that causing employment opportunities Currently, about 58 per cent of Peel’s populationisemployed. Inthe best case for 2002 to 2017 wasan annual increase of 0.45 per cent. increasing residents’ standard of livingandaffordability oftaxes. The actual average This scenario assumes thatreal wage growth rate will double to 0.9 per cent, thereby impact on Peel’s fiscalhealth. the best case scenario, we assume that higher populationgrowth willhave a positive depending onother factors, itcan either improve or worsen Peel’s fiscal situation. In and revenue growth, butit can also lead to a higher demand for services. Therefore, on fiscal health.Higher populationgrowth canpotentiallylead to higherincome to note here that populationgrowthIt is important does not have adirect impact assumes that it will rise again to 1.5 per cent above the provincial average. cent higher than the Ontario average over the past few years. The best case scenario provincial average, by 1.5 to 2 percent. However, this has slowed to about 0.2 per Historically, Peel’s population growth has been considerably higher thanthe property taxes. property increases by 20 per cent to 1.44 per cent per year, thereby decreasing reliance on tier has been 1.2 per cent per year. In the best casescenario,weassume that this The historical growth rate of revenues from user and license fees forthe lower taxes. property increases by 20 per cent to 1.92 per cent per year, thereby decreasing reliance on tier has been 1.6 per cent per year. In the best casescenario,weassume that this The historical growth rate of revenues from user and license fees forthe upper personal income. Assumptions

55 | THE MOWAT CENTRE 56 | RETHINKING MUNICIPAL FINANCE FOR THE NEW ECONOMY Property tax burdenProperty onhouseholds and jobchurn,theRegionwouldbeableto cope be atransition periodcoupledwithsomeprecarity labour market disruption.Whilethere islikely to is ableto thrive amidstthedigital revolution and adjustment period.Inthebestcasescenario,Peel all municipalitieswillhave to gothrough an The changingnature ofworkmeansthat significantly to lessthan3percentin2040. per centoftotal householdincomes,itdecreases taxcurrently makesproperty upanaverage of4 made inthisscenario,whilethetotal residential increase forresidents. Basedontheassumptions rate, implyingthattheaffordability oftaxes will assumes anincrease inthereal wagegrowth Peel collects. This scenarioalsooptimistically taxthat oftheresidential property large portion a potentiallyrichsource ofrevenue, replacing a a 1percentmunicipalincome-taxrate actsas diversify itsrevenue sources –inthisscenario, that themunicipalitywillbeableto successfully assumption madeinthebestcasescenariois household incomedeclines(seeFigure 31).Akey oftotal taxasaproportion that theproperty Based ontheassumptionsmadeabove, wesee Percentage of household income FIGURE 31 0.0 0.5 1.0 1.5 2.0 2.5 3.0 3.5 4.0 4.5

2018

income, includingprovincialeducation tax T Lower tierresidential property taxas% of household income Upper tier residential property tax as % of household income 2019 otal residential propertytaxas % of household disposable 2023 2024 2025 2026 2027 2028 2029 2030 2031 2032 2033 2034 2035 2036 2037 2038 2039 2040 jurisdiction formunicipalgovernments to diversify on municipalitiesover theyears, orincreased some responsibilities thathadbeendownloaded market andothersocialinitiatives, uploadingof from otherlevels ofgovernment forlabour canbethrough increased transfersSuch support from otherlevels ofgovernment.and support be dependentonsuccessfulcollaboration with these positive outcomesinisolation.Itwilllargely to notethatPeel cannotachieveIt isimportant its fiscalhealthandthewellbeingof residents. into thedigitaleconomyforrevenue to maintain case scenario,theRegionwouldbeableto tap and localjobtraining initiatives. Further, inthebest and leverage theneweconomythrough re-skilling with itby assistingitspopulationto transition to productivity andjobsatisfaction. Goodincomes good fiscal and mental health, leading to increased lack ofprecarity intheworkforce, residents enjoy standards. Dueto the creation ofgood jobs and the creation andimplementationofdecentwork responsible corporate behaviour. This leadsto work successfullywiththeprivate sector to drive In thebestcasescenario,policymakers also live andwork. the Region’s reputation asanattractive placeto municipalities to attract newtalentby enhancing Such collaboration wouldalsoallowGTHA jobs intheneweconomyare notprecarious. municipalitiesisalsokeyGTHA to ensuringthat facilities.Collaboration amongst entertainment class amenitiessuchasreliable transit and connected communitieswithaccessto world- shopping by businesses, aswellto create shared prosperity. This isvitalto curbjurisdiction to planforeconomicdevelopment to promote willworktogethermunicipalities intheGTHA scenario alsomeansthatPeel andother To avoid arace to thebottom, anoptimistic their revenue sources. Comparative tax burden onhouseholdswith and without Peel incometax initiatives.building retrofits andotherclimate-smart emissions, expansion of renewable energy projects, cycling infrastructure to reduce transportation and densification, investments inadequatetransit scenario includezero-waste promotion, Initiatives thatwouldbetaken inanoptimistic in livable citiesandimproved urbanplanning. Peel, demonstrate resilience dueto investments strategies. Municipalitiesinparticular, including and implementadaptationmitigation results inlong-terminvestments to develop political willto take meaningfulclimateaction proactive stepsto address climatechange. This case scenario,governments atalllevels take of intenseweatherevents. Underthebest still beoncopingwiththeincreasing number of increased spendingformunicipalitieswould Even inthebestcasescenario,apotentialarea suchasOntarioWorks,social services, decreases. to reduced burden ontaxpayers, asreliance on increases. Reductioninprecarious workalsoleads taxesalso meanthattheaffordability ofproperty Note: the numbers in the chart are basedonthe assumptions describedforeachscenario. Note: thenumbersinchart FIGURE 32 tax) tax paid, $ for Residential property Worst Case Scenario: tax) tax paid, $ for Residential property Business-As-Usual Scenario: tax paid, $ for Residential property Best CaseScenario: municipal incometax) Increase in personal income tax,$ Best CaseScenario: for average household(1 per cent average household(without income average household(without income average household(withincome tax) not negatively impactrevenues. At thesametime, as telecommutingbecomemore common,they do scenario, whileflexibleworkarrangements such increasing digitalactivity. Inthebestcase that results from shrinkingworkplacesand in lightofareduced non-residential taxbase Peel’s taxes, reliance particularly onproperty diversification wouldbecritical to decrease benefit from thedigitaleconomy. taxes, newtaxclassesorcreative ways to sales tax,newuserfees, progressive property provincial approval. These includeamunicipal implemented, manyofwhichwouldrequire possibilities forrevenue tools thatmay be income taxasanexample,there are various While thisscenariousesa1percentmunicipal mowatcentre.ca/robots-revenues-responses/ Ontario andtheFuture ofWork.” MowatCentre. 109 See:SunilJohaletal.(2018) “Robots, Revenues &Responses: tape. advancements andby red cuttingunnecessary efficiency gains are madedue totechnological 4,170 4,050 2,771 1,217 2020 4,776 4,361 2,962 1,284 2025 5,420 4,690 3,159 1,355 2030 109 . Revenue https:// 6,107 5,038 3,363 1,431 2035 6,845 5,406 3,577 1,511 2040

57 | THE MOWAT CENTRE Despite the changing circumstances and increasing responsibilities, the revenue sources available to municipalities have largely remained unchanged. 58 | RETHINKING MUNICIPAL FINANCE FOR THE NEW ECONOMY THE NEW FINANCE FOR RETHINKING | 58 MUNICIPAL 6 and wagesmay be deteriorating. residential taxbaseatatimewhenwork quality – shiftingtheburden onhomeownersthrough the will likely continueto shrink over thecomingyears base hasdeclinedand non-residential property-tax has already posedchallenges:forinstance,the and labourmarket. The changingnature ofwork exposed to thechangingnature oftheeconomy tax–atool thatisconsiderablyon theproperty Municipalities inOntariocontinueto rely heavily Changes to theProperty Tax Working attheMargins development andintegrated planning. delivery, aswellrethinking economic innovative approaches to municipalservice introduction ofnewrevenue tools, developing to currently available tools, advocating forthe around themargins by makingimprovements fiscal healthinthefuture. Theseincludeworking to meettheirrevenue needstoday andmaintain policy responses thatmunicipalitiescanlookinto The followingsectiondiscussesanumberof challenges, suchasthechangingnature ofwork. ability ofmunicipalitiesto implementinnovative projects andeffectively dealwithnovel 21stcentury revenue sources available to municipalitieshave largely remained unchanged. This largely limitsthe shifting demographics. Despitethesechangingcircumstances andincreasing responsibilities, the nature ofwork,risingincomeinequality, growing demands,deteriorating service infrastructure and Municipalities across Canadaare dealingwithincreasing fiscalpressures asa result ofthechanging OPTIONS POLICY http://www.policynote.ca/housing-crisis-fuel/ fuel housingcrisis.” CanadianCentre forPolicy Alternatives, BC. taxes110 AlexHemingway help (2018)“Policy Note:Lowproperty to othertypesofinvestments. costmakescarrying itmore attractive compared residential real estateasaninvestment, asthelow taxes encouragelow property peopleto hold asitisargued that taxisalsoimportant property needs ofmunicipalgovernments. Modernizing taxto meetthechanging modernizing theproperty feasible, manyhave suggestedotherways of In theevent thatoverall rate increases are not the rate ofinflation–are difficult toimplement. and assuch,rate above increases –particularly taxes areproperty incredibly unpopularpolitically inflation, ifnotincreased. Asdiscussedhowever, minimum, they should be maintained at the level of taxes areAs property fairlyinelastic,ata 110 .

59 | THE MOWAT CENTRE 60 | RETHINKING MUNICIPAL FINANCE FOR THE NEW ECONOMY » Some ideasto taxes reform include: property housing wealth. taxes, toas property reap gainsfrom increased to reform incomeandhousingpolicies,aswell is required. is even higherinOntario,where 16years ofwork compared to the1976to 1980period. This gap for anaverage home. This iseightmore years 13 years to save fora20percentdownpayment with medianfull-timeearningsnowhasto workfor declined. A25to 34year oldworker inCanada inflation, real incomesfor young Canadianshave have more thandoubledafteradjustingfor over thepastfourdecades.Whilehomeprices prices andincomeshasincreased significantly to notethatthe gapbetweenhome It isimportant property-tax/ munkschool.utoronto.ca/imfg/research/data-visualizations/ “Investigating ResidentialProperty Tax andInflation.” 112 InstituteonMunicipalFinance andGovernance (2017) sites/9/2018/05/16/Tax_Shift_2018-05-15_website.pdf pp. 6. tools usedby Canadiangovernment.” Generation Squeeze Lab. housing wealthto rebalance themixofrevenue generation Majority: thecaseformore annual(deferrable) taxationof 111 Paul Kershaw (2018) “A Tax ShiftthatBenefitsthe Vast » property taxes areproperty flat–meaningthatwhile which incomeistaxed inCanada.Currently, goesup–muchlike thewaythe property in which thetaxrate increases asthevalue of A progressive taxwouldbeonein property Tax:ProgressiveProperty taxes politically challenging in general. quite unpopular. This makes reforming property tax isthatitahighlyvisibletax,and is therefore However, a key challenge with reforming property values oversoaring property thepast several years. from the increased housing wealthcreated by to increase municipal revenues and obtain benefits Progressive tax is apromising proposal property withinthatclass. applies to allproperties (e.g. residential vs.commercial), thesamerate rates differ class dependingontheproperty-tax https://www.citynews1130.com/wp-content/blogs.dir/ . 111 These factspointtowards theneed

112 https://

. expenditures-in-bc-budget-2018/ ca/everything-you-wanted-to-know-about-the-housing-taxes-and- Canadian Centre for Policy Alternatives, BC. about thehousingtaxes andexpenditures inBC Budget 2018.” 114 Marc Lee(2018)“Policy Note:Everything you wantedto know sites/9/2018/05/16/Tax_Shift_2018-05-15_website.pdf pp. 8-9. tools usedby Canadiangovernment.” Generation Squeeze Lab. housing wealthto rebalance themixofrevenue generation Majority: thecaseformore annual(deferrable) taxationof 113 Paul Kershaw (2018) “A Tax ShiftthatBenefitsthe Vast generation thatearnslowerincomescompared aging population,withoutburdening theyounger the midstofdemographic changes,suchasan help pay forincreased publicexpenditures in address theintergenerational goldenrule,i.e. homeowners. Adeferrable taxwouldalso years withoutcreating burden for low-income value generatedadditional property over the jurisdictions. Suchasystemwouldcapture programs are already inplacesomeCanadian deferraluntil thesaleofhome.Certain should bedeferrable by low-incomeearners incomes, ithasbeensuggestedthatthey rich butincomepoor, suchasseniorsonfixed does notdisadvantage thosewhoare house To properties. still realizing massive capital gainsontheir payment ofthetaxuntilhomeissold,while homeowners, seniorsinBCcandefer the issue ofincreased taxburden onlow-income lead to increased revenues. To overcome the revenue base,andprogressive rates would taxesand asaresult provide property astable because real estatewealthcannotbehidden, has beenregarded asapositive development proposed aprogressive rate. property-tax This In Canada,the2018BritishColumbiaBudgethas costs. to historical levels, andfaceshigherhousing ensure thataprogressive tax property https://www.citynews1130.com/wp-content/blogs.dir/ 113

114 . https://www.policynote. . » » categories may includea“homeoffice” class reflective ofthechangingrealities. These new shouldbeintroduced thatareof properties this, ithasbeensuggestedthatnewcategories baseofmunicipalities. property-tax To overcome facing thealready-shrinking non-residential developments may exacerbatetheproblems activity innon-commercial places. These home offices,have causedariseincommercial nature ofwork,suchasincrease inteleworkand trendsObserved inrelation to thechanging New TaxClasses: competition. municipalities wouldbekey to avoid such Therefore, collaboration withotherGTHA are appliedonabroader geographic scale. across jurisdictionsunlessprogressive taxes not. High-incomepeoplemay chooseto move a progressive taxwhileothersdo property if somemunicipalitieschooseto implement negative competitionbetweenmunicipalities that progressive taxes cancreate property Opponents ofprogressive taxes argue property increase inthenumberof appealswithowners new taxclassesisalsolikely to result inan home nortraditional officespace).Adding may nothave afixed placeofwork(i.e.neither case ofteleworkers, workthatisdoneonline define specifictaxclasses.For example,inthe implementation –inparticular, itisdifficultto There willalsobeadministrative challengesto the AssessmentActatprovincial level. to beintroduced through amendmentsto new categoriesofproperty, thiswouldneed While there may bepotentialto introduce popular. space” classasthesebecomeincreasingly higher taxrates forteleworkers, ora“co-working been absorbedinto residential spaceswith residential revenue lossesthathave effectively that attemptsto capture someofthenon-

cost ofanticipatory growth-related infrastructure pace ofdevelopment inPeel. Asaresult, the forecasts have notbeenreflective oftheactual municipalities outside Toronto, however, growth growth, suchasPeel Region.Like mostOntario revenue injurisdictionsexperiencingconsiderable Development charges are ausefultool to derive Charges Optimizing Development larger physicalspace,isnowinaccurate. provision forasmallernumberofpeoplewithin forecasting basedonhistorical rates ofservice lower square footageper employee. Therefore, tend to accommodatemore employees with mentioned above, newofficebuildings today decisions ininfrastructure investments. As outdated canbeobsoleteandleadto misguided realities. Ratesbasedonhistorical datathatistoo on aregular basisto keep pacewithchanging projections, forecast modelsshouldberevised To bestaddress thechallenge of growth this context. development charges asarevenue generator in improvements thatcanbe madeto optimize difficult problem toget around, there are some face withdevelopment charges. Whilethisisa most significantchallengethatmunicipalities has notbeenrecovered, whichtendsto bethe many ofwhichare optional. different potentialtaxclassesandsubclasses, system inOntario,whichcurrently hasover 30 complicate thealready complex property-tax Finally, additionofnewtaxclasseswillfurther totrying getinto classeswithlowertaxrates.

61 | THE MOWAT CENTRE 62 | RETHINKING MUNICIPAL FINANCE FOR THE NEW ECONOMY consumption choices. consumption choices. citizens to make more efficient whileencouraging various services, municipalities to cover thecostsof asusefultoolscan serve for In additionto taxes, userfees costs ofproviding especiallyfornon- services, to analyze whetherthey are sufficient to cover the redevelopment revenues shouldbereassessed whether theseare fairandjustifiable.Moreover, where revenue losses mightoccur, and exemptions anddeferrals to betterunderstand athorough analysisofthese should undertake charges, localandregional governments potentially increase revenues from development decisions canaddupto considerable sums. To a result ofanappealsprocess, thesecase-by-case strategic reasons oroftentimesmustbemadeas eligible. Whileexemptions tendto bemadefor development charges, andnotallofthecostsare and deferrals. Notallinfrastructure iseligiblefor potential revenues asaresult ofexemptions Municipalities may alsobelosingsignificant possibilities include: approval through provincial legislation.Some although someoftheseoptions wouldrequire user fees to cover thecosts ofessentialservices, is potentialformunicipalities to incorporate new make more efficientconsumptionchoices. There whileencouragingvarious services, citizens to tools formunicipalitiesto cover thecostsof In additionto taxes, userfees asuseful canserve New orImproved User Fees avoid unduefinancialburden onmunicipalities. should alsobeminimized asmuchpossibleto more people in the same space.Payment deferrals residential buildingsrenovated to accommodate » 117 Ibid. 116 Ibid. newtaxsources_kitchen_slack_2016.pdf utoronto.ca/bitstream/1807/82858/1/imfg_perspectives_no15_ Municipal FinanceandGovernance. pp.3-7. for Canada’s Largest Cities:WhatAre theOptions?” Instituteon Kitchen andEnidSlack(2016)“New 115 Harry Tax Sources » » » » » maintenance ofroads thatthey use. drivers canbecharged afee forthecostof similar to howpublictransit userspay fares, penalize citizens fordriving.Having saidthat, that thesefees are fairanddonotunnecessarily municipality wouldhave to becareful inensuring in fullyurbanized areas. Intheseinstances,the transit isnotaswidespread oraccessibleas many residents travel primarilyby car, and In municipalitiessuchasPeel Regionhowever, high occupancytoll lanesorhighway tolls. pollution. Roadpricingcouldtake theformof travel demand,reducing congestionandcurbing it hasbeenproven to beeffective inmanaging While road pricingisoftenpoliticallyunpopular, Road Pricing: be easyto administer. combined withtheprovincial tax,itwouldalso are unlikely to affect travel behaviour. Ifitis levies cangenerate significantrevenue, they emissions andweight.Whilethesemodest on features suchasenginesize, ageofvehicle, These fees canbelevied annually, andbebased Motor Vehicle Registration Fee: the costofmaintainingparkingspaces. and development. easing congestionandencouraging transit use spaces. These couldhelpreduce traffic volume, fees fornon-residential andcommercial parking parking levies inhigh-demandareas, aswell Another way to generate revenue isto charge Parking Charges:

116

Suchfees wouldalsocover 117 . https://tspace.library.

115

municipalities in particular wouldargue thatit municipalities inparticular Proponents ofnewtaxationtools for popular. notbepolitically option, andwouldcertainly concerns, increasing taxes may notbeafeasible Canada’s proximity to theUSandcompetitiveness States ismuchlowerat26percent. revenue asapercentage ofGDPintheUnited provincial approval andlegislation.Finally, tax (or for Toronto, the that isnotalready outlinedinthe new orhighertaxes. Secondly, anyrevenue tool to advocate for challenging foranypoliticalparty that wedolive inahigh-taxjurisdiction,itis for several reasons. Firstly, given theperception As mentioned,however, thistendsto bedifficult collect anadditional$40billioninrevenue. taxed attheOECDaverage, governments would of 34.3percentthenationaleconomy. per cent)are slightlylowerthantheOECDaverage tax jurisdictionoverall, taxes (31.7 inthecountry note thatwhileCanadaisperceived to beahigh- Contrary to popularperception, itisessentialto Additional Taxes Revenue ToolsNew statistics-highlights-brochure.pdf in theOECD.” pp.3. 120 OECD(2018)“Revenue Statistics 2018: Tax revenue trends sites/9/2018/05/16/Tax_Shift_2018-05-15_website.pdf pp. 9. tools usedby Canadiangovernment.” Generation Squeeze Lab. housing wealthto rebalance themixofrevenue generation Majority: thecaseformore annual(deferrable) taxationof 119 Paul Kershaw (2018) “A Tax ShiftthatBenefitsthe Vast statistics-highlights-brochure.pdf in theOECD.” pp.3. 118 OECD(2018)“Revenue Statistics2018: Tax revenue trends increase flexibilityandallowgovernments to the changingnature ofwork,newtaxes may help expenditures andeconomicchangessuchas revenueprimary source. Inthefaceofrising are overly taxes reliant astheir onproperty is criticalto diversify revenue sources, asthey https://www.citynews1130.com/wp-content/blogs.dir/ https://www.oecd.org/tax/tax-policy/revenue- https://www.oecd.org/tax/tax-policy/revenue- City of Toronto Act . . Municipal Act 120 ), requires Dueto 118 . 119 If

States. across theworld,including25statesin theUnited Such localsalestaxes are usedinvarious cities and taxnon-residents whouselocalservices. municipalities cangenerate significant revenue A municipalsalestaxisoneoftheways MUNICIPALSALES TAX Ontario: options have beendiscussedinthecontextof which couldimprove efficiency. Thefollowing also meanlowertaxrates onanygiven taxbase, compromising quality. More typesoftaxes might efficiently withoutmakingcutsor provide services Plan-2017-05-25.aspx PDFs/Local-Share/Reports/AMO-Local-Share-Proposed-Action- Next Ontario– The LocalShare.” 121 AssociationofMunicipalities ofOntario(2017)“What’s municipalities to prevent taxavoidance and be essentialto coordinate withneighbouring unavailable. Aswithothertaxes, it will also need to becalculated,whichare currently consumption baseforeachmunicipalitywould tax onto theHST, estimatesforthetaxable If municipalitieswere to piggybackthemunicipal expenditure base. calculated based on estimates of the consumption government, butentitlementforeachprovince is from eachprovince are nottracked by thefederal Currently, theGST andHST revenues collected the administrative structure ofthesetaxes. HST andGST, includingOntario,becauseof municipal salestaxinprovinces withexisting (IMFG), itmay notbepossibleto piggybacka Institute onMunicipalFinanceandGovernance to theprovincial tax.However, according to the A municipalsalestaxmay alsobepiggybacked structure andbenefitfrom thelocaleconomy. flexibility to municipalities to determinethetax 121 Ifitislocal,suchataxcouldprovide . https://www.amo.on.ca/AMO-

63 | THE MOWAT CENTRE 64 | RETHINKING MUNICIPAL FINANCE FOR THE NEW ECONOMY related to thetaxpayer’s abilityto pay, itmay countries. Astheincometaxisprogressive and It iswidelyappliedby municipalitiesinother way to generate revenues andfundredistribution. asaprogressiveA municipalincometaxcanserve INCOME TAX PERSONAL buy-in andapproval from theprovince. tax isapromising option,itwouldrequire political infrastructure gaps. in HST to beusedforaddressing municipal a1percentincrease per centofOntarianssupport public opinionsurvey conductedby theAMO, 60 additional revenues annually. estimate thatitwouldgenerate $2.5billionin revenue generating optionformunicipalities,and HST. They have regarded thisasthemostfeasible added to ofthe theexistingprovincial portion implementing a1percentHST increase to be has advocated forsuchanapproach –namely The Association of Municipalities of Ontario (AMO) scenario. However, there wouldbenolocalautonomy inthis the additionalrevenues amongstmunicipalities. province to increase itstaxrate anddistribute way to administerthisapproach mightbeforthe generate mutualbenefits.Assuch,a feasible 124 Ibid. Plan-2017-05-25.aspx PDFs/Local-Share/Reports/AMO-Local-Share-Proposed-Action- Next Ontario– The LocalShare.” 123 AssociationofMunicipalities ofOntario(2017)“What’s slack_June_27_2016.pdf utoronto.ca/bitstream/1807/81209/1/imfg_paper_27_kitchen_ Municipal FinanceandGovernance. pp.16-17. for Canada’s Largest Cities: Why, What,andHow?”Instituteon KitchenandEnidSlack(2016)“More 122 Harry Tax Sources cash poor.” the home. The homeownermay be “houserichbut but thatvalue cannotberealized withoutselling locationshave appreciatedcertain considerably, ownerto pay.of theproperty in Someproperties taxdoesnottake intoproperty accounttheability be considered tax. fairer thantheproperty The 122 . . 124 Whilethemunicipalsales https://www.amo.on.ca/AMO- 123 According to a https://tspace.library. hopping to avoid taxes. To overcome thisand is residence-based, itmay promote jurisdiction either beresidence-based orpayroll-based. Ifit A personalincometaxatthelocallevel could coordination amongstmunicipalities. and may result inapatchworkwithlackof rate. However, itwouldbeexpensive to administer greater autonomy over thetaxbaseand administer itontheirown,wouldgive them not have control over thetaxbase.Ifmunicipalities inexpensive to administer, butmunicipalitieswould them to municipalities. The latterwouldbe province wouldcollecttherevenues andtransfer onto theexistingprovincial system,where the administering itthemselves orby piggybacking Municipalities canlevy anincometaxeitherby statistics-highlights-brochure.pdf the OECD.” pp.3-4. 127 OECD(2018)“Revenue Statistics 2018: Tax revenue trends in 126 Ibid. slack_June_27_2016.pdf utoronto.ca/bitstream/1807/81209/1/imfg_paper_27_kitchen_ Municipal FinanceandGovernance. pp.14-16. for Canada’s Largest Cities:Why, What,andHow?”Instituteon KitchenandEnidSlack(2016)“More 125 Harry Tax Sources fiscal pressures onmunicipalitiesbecomemore to beconsidered asan option inthefuture if cent. cent, farabove theOECDaverage of24.4per of total taxrevenue inCanadaisabout37per income taxrates. Personal incometaxasashare Moreover, Canadaalready hasrelatively high making thisoptionpoliticallyinfeasible. due to itslackofpopularityamongsttaxpayers, The province andlocalpoliticiansmay be reluctant difficult as provincial approval wouldbe required. generate significant revenues, instituting it wouldbe While alocalpersonalincometaxhasthepotentialto outside but work inthemunicipality would be taxed. who live inthemunicipality aswell as those who live basis. Inthecaseofa payroll-based tax, employees tax wouldwork best if it is levied onaRegion-wide ensure economicefficiency, apersonalincome 127 Nevertheless, theincometaxmay Nevertheless, have https://www.oecd.org/tax/tax-policy/revenue- . . https://tspace.library. 125 126

some municipalitiesinOntariooptedto have an would besomeadministrative complexityifonly income taxonbehalfoftheprovince. There Agency, wouldalsobeneeded. The CRAcollects government, through theCanadaRevenue tax. Inpractice, thecooperation ofthefederal to delegatethepowerto imposeanincome within thecompetenceofprovincial legislature As theincometaxisadirect tax,itwouldbe income tax. Municipal Act is basedonincome. explicitly prohibits theimpositionofalevy that greater. the province’s salestax–dependingonwhichis corporate taxes aswellfueltaxorashare of receive eitherashare ofthepersonalincomeand their populations,allmunicipalitiesinManitoba an income-tax-sharingprogram. to Proportionate a localincometax,theProvince ofManitoba has While nomunicipalityinCanadacurrently levies income wouldyield$530million. a onepercentage pointeffective taxrate estimated to beabout$53billion. Therefore, even of revenue. Personal incomeinPeel in2018is severe. The incometaxisapotentiallyrichsource statute/01m25#BK498 130 S.394(1).See: 60. Progressive revenue sources forCanada’s citiesandtowns.” CUPE.pp. 129 David Thompson etal.(2014)“Funding abetter future: taxed atconsiderably lowerrates thanemployment income. from taxwhileother forms(e.g.,capitalgainsanddividends)are posted taxrate schedule, assomeformsofincomeare exempt require somewhatmore thana1percentage pointincrease inthe 128 A1percentage point increase intheeffective taxrate would competitiveness. opted forit,there would alsobeconcernsabout in allmunicipalities.Ifonlysomemunicipalities straightforward ifthere wasauniformincometax income tax.Bycontrast, itwouldberelatively https://cupe.ca/sites/cupe/files/funding_a_better_future_0.pdf 129 Currently, the wouldberequired to permitan https://www.ontario.ca/laws/ . 130 Anamendmentto the Municipal Act inOntario 128 onthat . time whenreal estatewasconsiderably cheaper. people, asmanyseniorsacquired theirhomesata seniors wouldbenefitattheexpenseof younger likely thatrelativelyparticularly low-income houses, butthecorrelation isimperfect. Itis that higherincomepeopleownmore expensive tax.Itisgenerallyincidence oftheproperty true types ofindividualswouldbedifferent thanthe The incidenceoftheincometaxondifferent and lessdriving dueto publictransit expansion, with theincreased useofmore fuel-efficientcars maintenance. However, to note that itisimportant public transit expansion,roads andinfrastructure tax canalsoprovide criticalfunding neededfor emissions andincrease publictransit use.Afuel Benefits includetheincentive fordrivers to reduce an additionalmunicipalfueltax. transit ridership. Despitethis,there ispotentialfor municipalities basedonpopulationandpublic gas-tax revenues, whichisdistributedamongst Ontario, theprovince shares 2centsperlitre from receive ashare ofprovincial fuel-taxrevenues. In transit ridership.Somemunicipalitiesalso municipalities basedonpopulationandpublic taxes, thefederal government provides grants to While municipalitiesinCanadadonotlevy fuel DEDICATEDFUEL TAX tax rates. benefit from the offsetting reduction inproperty- the income-taxincrease, butmay getlittleorno differently impacted. They wouldbecaught by struggling to afford ahome.Renterswillalsobe higher taxes onyounger peopleworkinghard and Further, itcouldbeconsidered unfairto impose municipalities become more severe. future iffiscalpressures on considered asanoptionin the Income taxmay have to be

65 | THE MOWAT CENTRE 66 | RETHINKING MUNICIPAL FINANCE FOR THE NEW ECONOMY Mississauga recently implementedsuch atax. do nothave suchatax. in competingneighbouringmunicipalitiesifthey incentive forvisitors to stay athotelsormotels regionally, aslackofcoordination may create an it wouldbemostbeneficialifiscoordinated Columbia, have suchatax.Aswithothertaxes, Charlottetown andmunicipalitiesinBritish municipalities, includingWinnipeg,Montreal, providedthe services to them.Several Canadian to cities,andallowscitiesto becompensatedfor hotel and motel tax is that it falls largely on visitors accommodation tax. municipalities to implementamunicipal effect inOntarioonDecember1,2017,allowing The HOTEL AND MOTEL TAX province responsible for collecting and remitting it. and piggybacked onto theprovincial rate with the tax shouldbecoordinated at theregional level term. To maximize administrative efficiency, this this taxrevenue islikely to declineinthelong accommodation-tax Tax.” 134 See:CityofMississauga(2018) “MunicipalAccommodation kitchen_slack_June_27_2016.pdf library.utoronto.ca/bitstream/1807/81209/1/imfg_paper_27_ Municipal FinanceandGovernance. pp.20-21. for Canada’s Largest Cities:Why, What,andHow?”Instituteon Kitchen andEnidSlack(2016)“More 133 Harry Tax Sources laws/regulation/170435 Municipal Act,2001,S.O. 2001,c.25.See: 132 O. Reg.435/17: Transient Accommodation Tax under kitchen_slack_June_27_2016.pdf library.utoronto.ca/bitstream/1807/81209/1/imfg_paper_27_ Municipal FinanceandGovernance. pp.17-18. for Canada’s Largest Cities: Why, What,andHow?”Instituteon KitchenandEnidSlack(2016)“More 131 Harry Tax Sources http://www.mississauga.ca/portal/business/municipal- TransientAccommodation Tax . . 132 The advantage ofsucha 133 . . InPeel, theCityof https://www.ontario.ca/ came into https://tspace. https://tspace. 134 131 The Province ofOntariohaspromised to municipalities. will beresponsible forpassingashare onto the revenues from thecannabisexcise tax,and increase. Provinces willreceive 75percentof costs to dealwithcannabis-impaired drivingwill enforcement willdecrease formunicipalities, it canbeexpectedthatwhilepolicingcostsfor legalization ofrecreational cannabisinCanada, borne by municipalgovernments. Withthe2018 around $830.3million–70percentofwhichwere health andcriminaljustice,were estimatedto be intheareasfor governments, of particularly In 2015-2016,thedirect costsofcannabisuse TAXCANNABIS term-vision-for-Municipal-use-of-th.aspx 3. long-term visionforMunicipal-use oftheCannabisExcise tax.” pp. 136 AssociationofMunicipalities ofOntario(2018)“Towards a sharing-the-costs-of-cannabis-in-canada-key-takeaways/ Canada: Key Takeaways.” MowatCentre. (2018)“SharingtheCostsofCannabisin 135 ErichHartmann adjustments to thefundingformulaasnecessary. ongoing assessmentsto advocate forappropriate a fairshare ofrevenues, aswellconduct with cannabislegalizationandadvocate for potential risksandrevenue associated shortfalls it willbecriticalformunicipalitiesto analyze provincial healthcare costswillbe. Therefore, related challengesorwhatthelevel ofstrain on municipalities willincurto dealwithcannabis- it iscurrently unclearprecisely whatcosts the excise taxwithmunicipalities. amount inexcess of$100millionreceived from to municipalities,andshare 50percentofthe provide $40million oftheprovincial portion https://www.amo.on.ca/AMO-PDFs/Cannabis/Towards-a-long- 135 . https://mowatcentre.ca/ 136 However, . circumstances. Itwouldalsomake municipalities taxes andfees needsand according to particular creating more choicesatthelocallevel to deploy tools wouldhelpdiversify theirrevenue sources by to othermunicipalitiesto employ someofthese It hasbeenargued thatproviding similarauthority and TobaccoPricing Road Tax. andAmusement Tax,Entertainment Parking Levy, City of Toronto includeanalcoholicbeverage tax, Sign Tax. Additionalrevenue tools available to the (which wasrescinded in2011)and Third Party Land Transfer Tax(MLTT), VehiclePersonal Tax in thisAct,thecityhasimplementedaMunicipal cultural significance.” responsibilities, diversity andeconomic Toronto” policiescommensurate withitssize, legislative framework to achieve “made-for- and therefore “requires abroad, permissive Toronto asitisCanada’s 6thlargest government, other municipalities. This authoritywasgranted to increased taxationpowersthatare notavailable to on anumberofmattersaswellprovided it powers to theCityof Toronto to passby-laws The Toronto Act Tools Available inthe Plan-2017-05-25.aspx PDFs/Local-Share/Reports/AMO-Local-Share-Proposed-Action- Next Ontario– The LocalShare.” 139 AssociationofMunicipalities ofOntario(2017)“What’s term-financial-plan/city-revenue-fact-sheet/ toronto.ca/city-government/budget-finances/city-finance/long- 138 Cityof Toronto (2016)“CityRevenue Fact Sheet.” city-of-toronto-act/ administration/city-managers-office/intergovernmental-affairs/ city-government/accountability-operations-customer-service/city- 137 Cityof Toronto “Cityof Toronto Act.” which couldpromote jurisdictionshopping. has beenargued thatitmay create apatchwork more fiscallyautonomous. Ontheotherhand,it City of Toronto Act,2006 . . 137 Basedontheprovisions https://www.amo.on.ca/AMO- provided expanded https://www.toronto.ca/ 138 . City of https://www. 139 and increase property-tax ratesand increase property-tax by atleasttherate valuesmunicipalities to annually assessproperty the Province ofOntarioshouldinsteadrequire all in thelabourmarket. people from moving andcreates inflexibilities been suggestedthattheMLTT disincentivizes Toronto’s taxes. lowproperty artificially market cycle. buyers onlyandisvolatile property to theproperty been criticized asbeinginequitableittargets revenue generator, thelandtransfer taxhas past few years. Whileithasbeenasignificant source ofrevenue fortheCityof Toronto over the to instituteanMLTT, whichhasbeenamajor interest inobtainingtheauthority a particular Several municipalitiesinOntariohave indicated policycommentaries/CUR%20Policy%20Commentary3_Clayton.pdf University. pp.4. the Land Transfer Tax.” Faculty Ryerson ofCommunityServices, Making “Policy Commentary: Toronto’s Tax SystemBetter-Repeal 143 Centre forUrbanResearch andLandDevelopment (2015) slack_June_27_2016.pdf utoronto.ca/bitstream/1807/81209/1/imfg_paper_27_kitchen_ Municipal FinanceandGovernance. pp.6. for Canada’s Largest Cities: Why, What,andHow?”Instituteon KitchenandEnidSlack(2016)“More 142 Harry Tax Sources expectations-by-30-million/ canada/toronto/article-toronto-land-transfer-tax-revenue-beats- And Mail,May 24,2018. expectations by $30-milliondespitemarket decline.” The Globe 141 JeffGray (2018)“Toronto land-transfer taxrevenue beats ryerson.ca/cur/Blog/blogentry2/ Research andLandDevelopment, Ryerson University. in Ontario- Tweak theProperty Tax Instead.” Centre forUrban 140 Frank Clayton (2015)“Forget aMunicipalLand Transfer Tax have thesedelivered attheirdoorstep.Since often viaglobalplatformssuchasAmazon, and now order manyofthethingsthey needonline, physically visitingamallorstore, individualscan therefore remain untaxed. For example,insteadof in-person traditionally nowtake placeonline,and platforms, manybusinessactivitiesthatoccurred With theriseofgigeconomyandglobaldigital Activity Tapping into DigitalEconomic of inflation. 143 https://www.ryerson.ca/content/dam/cur/pdfs/ 140 Italsounfairlycompensatesfor https://www.theglobeandmail.com/ . . 142 Criticshave argued that . https://tspace.library. 141 https://www. Ithas .

67 | THE MOWAT CENTRE 68 | RETHINKING MUNICIPAL FINANCE FOR THE NEW ECONOMY significant municipal revenues. Inorder to dothis compared to theresidential rate, itwillresult in rate,property-tax whichissignificantlyhigher listed onAirbnbare charged acommercial Research from theIMFGfoundthatifproperties rentals in2018. hotels andshort-term implemented amunicipalaccommodationtaxon the platformin2017. if thistaxwascollectedfrom the2,700hostson received about$850,000inadditionaltaxrevenue Airbnb. tax ormunicipalaccommodationcollectedby every listingontheplatformincitypays ahotel kind inCanada,afterQuebec.SinceAugust 2018, platform. This agreement isonlythesecondofits rental agreement withAirbnb,thedigitalshort-term be seeninOttawawhichhasentered into atax an approach atthemunicipallevel inOntariocan creativetrying approaches. Anexample ofsuch activities, policymakers across theworldare To obtainrevenues from digitaleconomic this taxbase. significantly impactedandwillcontinue to impact physical stores andclosingofexistingoneshas taxes, thereducedproperty needfornew municipalities rely heavily onnon-residential june_5_2018.pdf no40_platformeconomyregulatorydisruption_zacharyspicer_ tspace.library.utoronto.ca/bitstream/1807/88262/1/imfgpaper_ Institute onMunicipalFinanceand Governance. pp.18-19. Disruption: EstimatingtheImpact onMunicipalRevenue in Toronto.” Spicer(2018)“Th­ 146 Zachary 879293534b27 on-its-listings-in-city-of-ottawa/wcm/ed41233d-5c2f-4444-9a92- https://ottawacitizen.com/news/airbnb-to-collect-remit-hotel-tax- on itslistingsinCityofOttawa.” OttawaCitizen, July31,2018. 145 The CanadianPress (2018)“Airbnb to collect,remit hoteltax short-term-accommodation-tax tax.” termaccommodation 144 CityofOttawa(2018)“Hotelandshort of theplatform,whichmay prove challenging. between commercial enterprisesandcasualusers devise appropriate meansto effectively distinguish effectively, however, municipalitieswouldhave to https://ottawa.ca/en/city-hall/budget-and-taxes/hotel-and- 144 Itisestimatedthatthecitywouldhave . . 145 The Cityof Toronto also e PlatformEconomy andRegulatory . https:// 146 To generate benefitsfrom foreign onlineservices, in busyareas onfor-hire vehicles. of NewYork hasimplementedacongestion charge $15.3 millionCAD)eachyear. this fee willraise about37.5millionreals (orabout roads, thatthey rely on. The cityestimatesthat maintenance ofthepublicinfrastructure, suchas and passengerscontributeto thecostand commercial platformsorappsthatmatchdrivers The purposeofthisfee isto ensure thatthese Network Companies(TNCs)suchasUber. vehicle perkilometre travelled on Transportation average of0.10reals (about$0.04CAD) Paulo. The cityhasinstitutedprepaid fees ofan digital economicactivitycanbeseeninSao Another exampleofgenerating revenue from tax-quebec-budget_a_23396919/ March 27,2018. A Reaction To Feds’ Laissez-Faire Attitude.” The Huffington Post, 150 Daniel Tencer (2018)“Quebec’s New Tax OnNetflix,Amazon june_5_2018.pdf no40_platformeconomyregulatorydisruption_zacharyspicer_ tspace.library.utoronto.ca/bitstream/1807/88262/1/imfgpaper_ Institute onMunicipalFinanceand Governance. pp.12. Disruption: EstimatingtheImpactonMunicipalRevenue in Toronto.” Spicer(2018)“Th­ 149 Zachary fund-infrastructure net/blog/ride-sharing-companies-charged-mileage-fees-to-help- fees to helpfundinfrastructure.” Shareable. 148 Sharon Ede (2018)“Ride-sharingcompaniescharged mileage rates/ www.bankofcanada.ca/rates/exchange/annual-average-exchange- 147 Basedonthe2017annualaverage exchange rate. See: municipalities. also considersharingtheincreased revenues with government canlookatsimilarmeasures, and Other provincial governments andthefederal revenues annuallyby notcollectingthesetaxes. the province iscurrently losing$270million in in provincial salestaxes. According to estimates, from Quebecerswillhave to pay 9.975percent collectingmoreservices than$30,000inrevenue 1,2019.All asofJanuary tax ontheseservices charging aprovincialbudget thatitwillstart sales Government ofQuebecannouncedinits2018 such asNetflix,Amazon, iTunes andSpotify, the . . https://www.huffingtonpost.ca/2018/03/27/netflix- . e PlatformEconomy andRegulatory . 148 Similarly, theCity https://www.shareable. 149 147 https:// per https:// 150

both thenationalbaserate appliedto allGermancorporate profits, and anadditional rate thatisseparately determined by are subjectto twoseparate taxes: auniformcorporation taxandatrade tax. The trade tax In employment incomeare taxed inthesamemanner, andcapitalisgenerally taxed ataflat rate of30percent. own rates (withtheaverage ataround 32percent).Itisonlyappliedto taxableearnedemployment income.Businessand (97.4 percentin2013). andSweden.In Finland, Norway Local incometaxes are alsoprominent inNordic elsewherecountriessuchasDenmark, internationally–particularly Europe Fund’s revenues compared tax. to just9.7 percentfortheproperty for theGeneral Fund whichfinancesthecity’s operations –in2016,SalesandUse Tax madeup49.8percentoftheGeneral foodandbeverage,services, aviation andrailway fuel,carrentals, retail marijuanaetc. This formsthemajorrevenue source including retail sales andpurchases oftangiblepersonalproperty, informationalandentertainment telephoneservices, Many UScitiesalsolevy alocalsalestax.For example, grow to 79percentby 2021. Springfield collected directly by themunicipalgovernment. reliant onincometaxasarevenue Somecitiesare particularly source: in taxes, piggybacksonto thestate-level incometax.InPennsylvania, Ohio,Kentucky andMichigan,however, incometaxes are collected varies. NewYork City, ofitsmunicipal forexample,whichgeneratesrevenues asignificant portion from income across UScities.Incometaxes are popularinsomestates,forexample,althoughtheway inwhichtheserevenues are Given theirfreedom to introduce newtaxationtools, there is considerable variation inthemake-up ofrevenue sources race admissiontaxes. and another4percentfrom othertaxes, suchasbeerandliquorexcise, hoteloccupancy, taximedalliontransfers andhorse and stock transfers), 24percentfrom incometaxes (includingpersonalincomeandmultiplecorporate/business taxes), 10 percentfrom salesandusetaxes (includinggeneral salestaxandothertaxes oncigarettes, commercial motor vehicles most diverse municipaltaxbases,receiving 27percentofitsrevenues tax(residential from andnon-residential), property Canada, andtherefore tendto have amuchmore diverse revenue base. Generally, localgovernments intheUSare muchlessconstrained intheirabilityto implementnewrevenue tools than United States in Germanmunicipalities: municipalities (it is generally between 7 and 17 per cent). php?id=4615&_ffmpar%5B_id_inhalt%5D=4733002 localfiscalautonomy_slack_2017.pdf on MunicipalFinanceandGovernance. 157 EnidSlack(2017)“HowMuch LocalFiscalAutonomy DoCitiesHave? AComparisonofEightCitiesaround theWorld.” Institute system/Company-taxation/trade-tax.html corporate-income 156 PwC(2018)“Germany:Corporate – Taxes onCorporate Income.” Individual-Taxes-on-personal-income dttl-tax-swedenhighlights-2018.pdf 155 Deloitte(2018)“International Tax: SwedenHighlights 2018.” Governance. KitchenandEnidSlack 154 Harry MunicipalSalesTaxCollectionPractices_August2016.pdf Division,CityandCountyofDenver.Services 153 Timothy M.O’Brien(2016)“Audit ofFinance,MunicipalSales Tax Department Report: CollectionPractices.” Officeofthe Auditor, Audit uploads/2016/10/Springfield-Financial-Trend-Analysis-Final.pdf 152 PublicFinancialManagement(2016)“CityofSpringfield: localfiscalautonomy_slack_2017.pdf on MunicipalFinanceandGovernance. 151 EnidSlack(2017)“HowMuchLocalFiscalAutonomy DoCitiesHave? A Comparison ofEightCitiesaround theWorld.” Institute Revenue Tools inInternational Jurisdictions What CanWe Learnfrom Others? Germany https://munkschool.utoronto.ca/imfg/uploads/348/imfgpaper_no27_taxrevenues_slack_kitchen_june_27_2016_updated.pdf , , thenationalgovernment taxes corporate residents ontheirworldwideincome.Corporate profits inGermany Ohio ; German Trade andInvest (2018)“Trade Tax.” , forinstance,localincometaxes comprised77percentofgeneral revenues in2015,andare expectedto 151 154 Incomeistaxed by boththenationaland localgovernments inSweden –thelattersettheir (2016)“More Tax Sources forCanada’s Largest Cities:Why, What, andHow?”InstituteonMunicipalFinance and Frankfurt 152 ; PwC(2018)“Sweden:Individual– Taxes onPersonal Income.” ; CityofFrankfurt (2018)“Trade Tax (Gewerbesteuer).” . . Sweden https://tspace.library.utoronto.ca/bitstream/1807/82864/1/imfg_perspectives_no19_ https://tspace.library.utoronto.ca/bitstream/1807/82864/1/imfg_perspectives_no19_ . , forexample,thetrade taxmakes uparound 49percentofthetotal revenues. https://www.denvergov.org/content/dam/denvergov/Portals/741/documents/Audits_2016/ , forexample,municipalitiesderive nearlyalloftheirrevenues from incometaxes . . Denver, Colorado . https://www.gtai.de/GTAI/Navigation/EN/Invest/Investment-guide/The-tax- https://www2.deloitte.com/content/dam/Deloitte/global/Documents/Tax/ 156 In some cases, the trade source tax is the oftax primary revenue http://taxsummaries.pwc.com/ID/Germany-Corporate-Taxes-on- Trend Analysis.” 153

New York City usessalestaxes extensively onvarious items https://springfieldohio.gov/wp-content/

https://www.frankfurt.de/sixcms/detail. , forexample,hasoneofAmerica’s http://taxsummaries.pwc.com/ID/Sweden- (Gewerbesteuer) combines 155 . 157

69 | THE MOWAT CENTRE 70 | RETHINKING MUNICIPAL FINANCE FOR THE NEW ECONOMY 2010 andenhancedintheir2013budget(non-residential are taxed properties ataflat rate of10percent). Furthermore, Singapore Asia structure intheupcomingyears. success, whichshouldbeconsidered asmunicipalitiesinCanadianjurisdictionslike BritishColumbiadeliberate sucha These twocitieshave levied progressive taxes forasignificantenoughtime property to enablestudyand evaluation ofits tax rates withsixdifferent taxbrackets. a highermarginal taxrate. In2002, Some municipalitiesinBrazil South America responsibilities aswell. on greater challengesand autonomy, they musttake states may have greater fiscal taxes). Whilesomecity- (e.g. wageandcapitalincome and nationalgovernments income and value-added taxes) collected by thestate(e.g. as wellashare oftaxes (e.g. trade taxes) andproperty inheritance taxes), localtaxes (e.g. real estatetransfer and has accessto statetaxes Berlin federal state). orunitary and location(e.g.withina depending ontheirstructure compared to othercities, ability to collectrevenues more autonomy andgreater state statuscanoftenhave Municipalities thathave city- Policies/Property-Tax/Progressive-Property-Tax-Structure-For-Residential-Properties 162 Government ofSingapore (2018)“Progressive Property Tax Structure For ResidentialProperties.” publicsector/decentralization/June2003Seminar/PTBRAZIL.pdf Property_2017.pdf?sequence=1 “Property Tax andPotential Performance inBrazil.” University ofPretoria. 161 Seetheabove-referenced study(theprogressive Junior(2017) BrunodeCarvalho taxsection),aswellas:Pedro Humberto property Lincoln InstituteofLandPolicy. 160 Ciro BidermanandYuri Camara Batista(2018)“Working Paper –IsProgressive Property Tax Progressive? Evidences from SãoPaulo. ” 159 Ibid. localfiscalautonomy_slack_2017.pdf on MunicipalFinanceandGovernance. 158 EnidSlack(2017)“HowMuchLocalFiscalAutonomy DoCitiesHave? A Comparison ofEightCitiesaround theWorld.” Institute cent. on aslidingscalefrom zero to rates 16percent,whereas non-owner-occupiedproperty range onascalefrom 10to 20per latter are subjectto ahigher rate even atthesameassessedvalue. Currently, rates owner-occupiedproperty are determined since 2015,Singapore hasmadeadistinctionbetweenowner-occupiedandnon-owner-occupiedresidential –the properties 162 , Germany, forexample, alsousesaprogressive structure whichwasintroduced specificallyfor property-tax in residential properties, 159 158

https://www.lincolninst.edu/sites/default/files/pubfiles/wp18cb1_biderman.pdf ; C. M. De Cesare and L. Ruddock (1999) “The Property ; C.M.DeCesare andL.Ruddock(1999)“TheProperty Tax SysteminBrazil.” use progressive rates withhigherassessedvalues property-tax –meaningthatproperties pay . 161 https://tspace.library.utoronto.ca/bitstream/1807/82864/1/imfg_perspectives_no19_ Sao Paulo munkschool.utoronto.ca/imfg/uploads/340/slack_presentation_mfabc_march_31_2016.pdf Options? Presentation to theMunicipalFinanceAuthority ofBritishColumbia.” Source: EnidSlack(2016)“LocalGovernments Whatare theFunding inthe21stCentury: Sources oflocaltaxation, selected OECDcountries, 2012 FIGURE 33 160 Similarly, shifted its property taxstructure from shifteditsproperty uniformrates to progressive property- Porto AlegrePorto . https://repository.up.ac.za/bitstream/handle/2263/62689/Carvalho_ hasusedaprogressive rate structure sincethe 1990s. . https://www.mof.gov.sg/Policies/Tax- http://www1.worldbank.org/ . https:// . destinations inthetown for$3-5. taxi foraccessiblerides)andbedriven to key Residents cancallanUberon-demand(oralocal with Uberto outaninnovate carry pilotproject. thesufficient service, town decided topartner were too expensive andwouldnothave provided traditional options,suchasfixed bus routes, transit offerings inacost-efficientmanner. Since ride-hailing companyUberto expanditspublic to lowpopulationdensity, withthe partnered of town toToronto thenorth withamoderate For example,Innisfil–agrowingpartnerships. There are several examples ofcreative and inefficient. asthey canoftenbemore expensivepartnerships, andgettingintoout services public-private the risksandcostsassociatedwithcontracting sectors. However, municipalitiesmustassess withtheprivate andnon-profit partnerships municipalities canlooktowards strategic To inacost-efficientmanner, deliver services and Non-Profit Sectors withthePrivate Partnerships Innovative Approaches to Delivery Service globalnews.ca/news/4084807/uber-innisfil-transit-savings/ Innisfil, Ont.,$8Mper year.” GlobalNews,March 15,2018. 164 The CanadianPress saving (2018)“Ubertransit partnership mygovernment/planningforourfuture/BringingTransittoInnisfil and Answersto Frequently Asked Questions.” 163 Town ofInnisfil(2018)“Bringing Transit to Innisfil:Background recent years, governments have increasingly relied withinthecommunity.and partnerships Over the often have pre-established knowledge of, trust asthesecommunityorganizationsservices, efficiently, inthedomainofhuman particularly also workwithnon-profits moreto deliver services from theprivate sector,Apart municipalities can traditional busservices. of over $8millionforthetown compared to estimates, thisproject isleadingto annualsavings 164 163 https://innisfil.ca/ According to https:// . . To more deliver services efficiently, municipalities Governments withOther Partnerships (HPS). Strategy(CIP) andtheHomelessnessPartnering residents –theCommunityInvestment Program organizations thatprovide to humanservices currently hastwogrant programs fornon-profit programming andrecreation. The RegionofPeel cultural shelterservices, and socialservices, such associalhousing,childcare, employment on thissector to inareas delivery helpwithservice uploads/318/1623_imfg_no.19_spicer_online.pdf and Governance. pp.6. Municipal Agreements inCanada.” Institute onMunicipalFinance Spicer(2015)“Cooperation166 Zachary andCapacity:Inter- peelregion.ca/communityinvestments/ 165 RegionofPeel (2018)“CommunityInvestments.” to otheroptionsconsidered, York receives water win situationforbothmunicipalities.Compared plant operating costs. This hascreated awin- and themunicipalitiesshare infrastructure and on thisagreement, Peel provides waterto York, between thePeel RegionandYork Region.Based is theYork-Peel Agreement institutedin2002 Another exampleofcost-effective shared services financial benefits. operating expenses,thishasresulted insignificant extremely costlyintermsofbothcapitaland Sinceestablishingtransitservices. systemsis around Edmonton have madeto extendtransit extension agreements thatseveral communities costs.Oneexampleofthisistransitstart-up to significantcostefficiencies by savinginitial municipality to provide theservice. This canlead to they deliver cancontract aservice, another municipality doesnothave sufficient resources to create economiesofscale.Incaseswhere a withoneanother should alsoconsiderpartnering 165 https://munkschool.utoronto.ca/imfg/ 166 . . https://www.

71 | THE MOWAT CENTRE 72 | RETHINKING MUNICIPAL FINANCE FOR THE NEW ECONOMY investment, thepublic sector hadto take thelead. this criticalinfrastructure dueto lackofreturn on providerstelecom service didnotinvest inbuilding Asprivateincluding healthandsocialservices. improve invarious delivery sectors service fordevelopment, aswelltoopportunities is essentialto promote socialandeconomic premise thatafastandreliable internetservice communities. critical infrastructure thatconnectsover 350 population. SWIFT aimsto dothisby building 3.5 millionOntariansor25percentofthe Caledon andNiagara Region–makingup for communitiesacross SouthwesternOntario, aims to provide accessto high-speedbroadband profit collective broadband initiative, SWIFT collaboration amongstmunicipalities.Anon- Networkisanotherexampleofinnovative(SWIFT) The SouthWestern Integrated Fibre Technology tonecessary meetincreasing needs. Peel’s watersupplyanddistributionsystemthatis contribute $340milliontowards theexpansionof 2031. Basedonestimates,York Regionwillalso for Peel isestimated$152.4million to theyear also benefitsfinancially. Thefinancialbenefit from Peel atasubstantiallylowercost,whilePeel 170 SWIFT website: Note-2.pdf swiftnetwork.ca/wp-content/uploads/2018/03/2018-SWIFT-Briefing- 169 SWIFT (2018)“BriefingNote–Project Update: 2018.” 168 SWIFT website: peelregion.ca/pw/water/water-trtmt/york-peel/agreement.htm 167 RegionofPeel (2018)“York-Peel Agreement.” design andbeginconstructioninspring2019. network. SWIFT aimsto release thefinalnetwork providers canbidto build,ownand operate the open procurement process where telecomservice municipal governments. governments, aswellover $17millionfrom of $180millionfrom thefederal andprovincial The project isfundedby combinedinvestments . 168 https://swiftnetwork.ca/ https://swiftnetwork.ca/ The project wasbuiltonthe 169 SWIFT isusingan . . 167 https://www. http:// 170 . safety are taken into account,they shouldnot considerations suchassustainability, healthand jurisdictions. Whileregulation isessentialto ensure canshift toit takes too other long,opportunities the costofestablishingabusinessistoo highor by entrepreneurs andbusinessesinthecountry. If New Zealand. as theUnitedStates,Kingdom,Australia and ranking compared to competingjurisdictionssuch its annualeaseofdoingbusinessrankings –alow Bank ranked Canada22 increasing businessattractiveness. The World cost savings whileimproving and delivery service Cutting red tapecanhelpmunicipalitiesrealize Red TapeCutting business-climate-ontario ontario.ca/page/2018-burden-reduction-report-building-better- business climateforOntario.” Government ofOntario. Trade Buildingabetter (2018)“2018Burden Reduction Report: ofEconomic Development,173 See:Ministry JobCreation and ReducingBusinessBurdensGreatIdeasfromFiveInnovativ.aspx https://www.amo.on.ca/AMO-PDFs/Reports/2017/ Municipalities.” Associationof MunicipalitiesofOntario. Burdens: Great Ideasfrom Five Innovative Ontario 172 See:MichaelFenn (2017)“ReducingBusiness media/Annual-Reports/English/DB2019-report_web-version.pdf pp. 5. 171 World BankGroup (2018)“DoingBusiness2019,16thEdition.” Businesses Act,2017 Tape Act,2017 regulations, including the towards simplifyingprocesses andmodernizing Government ofOntariohastaken notablesteps provincial jurisdiction. to streamline regulatory processes inareas of as well,theprovincial government needs reducing red tapedependslargely ontheprovince money fortaxpayers. Having saidthis,successin improving administrative efficienciescanalso save Deploying municipalresources prudently by base. property-tax entrepreneurs, andexpandthenon-residential can provide certainty, attract businessesand Streamlining theregulatory process and timelines be too cumbersome,complexandbureaucratic. http://www.worldbank.org/content/dam/doingBusiness/ 171 and This highlightstheburdens faced . Reducing Regulatory Costs for . 173 172 nd Over therecent years, the outof190economiesin Cutting Unnecessary Red Cutting Unnecessary https://www. . . Planning andEconomic municipalities. consultants, both of which add additional costs for by employees orby hiring workingovertime already busyschedules. This isoftenovercome effectivelyservices by puttingasqueeze ontheir provincial impactstheirabilityto deliver reporting onerous believepublic servants thatundertaking conducted by AMCTO, abouthalfoftheOntario municipal resources. are time consumingandputburdenreports on –stillaconsiderable90 reports number. These lower end,somemunicipalitiessubmitasfew as provincial ministriesandagenciesin2012.Onthe of Toronto to various submitted270reports there are somethat submit over 200–the City responsible forsubmittingall422reports, estimate. Whilenotallmunicipalitiesare from municipalitieseachyear -aconservative (AMCTO), the province receives about422reports Managers, Clerksand Treasurers ofOntario research from theAssociationofMunicipal requirements from theprovince. According to municipalities alsofaceextensive reporting from theburdens facedbyApart businesses, 175 Ibid. 3062d99aaf20/.aspx www.amcto.com/getattachment/8a6fcf9a-c10b-4d9e-8d1a- to theProvince Report).”Reporting (Summary pp.4-6. 174 AMCTO (2017)“BearingtheBurden: ofMunicipal AnOverview in adequatetransit andcycling infrastructure, welcoming andinclusive communities by investing term. Particularly, itisessentialto buildlivable, without makingstrategic investments intheshort long-term fiscalhealthcannotbeachieved approach. This meansrealizing thatpositive for municipalitiesto take aholisticandlong-term financialplanning, itisvital When undertaking Building Livable Communities Development 175 . 174 According to asurvey https:// increasingly value theurban,amenity-rich offer cheaperrents, businessesandworkers such asrestaurants andshops.Whilesuburbs available to businesses,andotherattractions accessibility, ayoung andqualifiedworkforce mainly becauseofamenitiessuchastransit development compared to suburbs. This is been thepreferred destinationfornewoffice Over thepastdecade,downtown Toronto has destination forworkers andbusinesses. attract residents andpositionPeel asapreferred These strategic investments are essentialto foster socialconnectionsamongstresidents. to celebratewell asopportunities diversity and options,as to various amenities,entertainment pedestrian-friendly environments withaccess 177 Ibid. Discussion Paper.” Prepared fortheRegionofPeel. 176 Cushman&Wakefield (2017)“Employment Strategy of anyincentive shouldbestudiedbeforehand. andtheprosmunicipalities intheGTHA, andcons be conductedonincentives provided by other this effectively, anenvironmental scanshould facilities. Inorder forthePeel Regionto do grants (TIEGs),andmunicipally-built parking charges reductions, taxincrement equivalent of financialincentives suchasdevelopment- development inthemunicipalitythrough arange to othermunicipalitiesandencourage new office development more costcompetitive compared by Cushman&Wakefield, theRegioncanmake Discussion Paper prepared forthePeel Region According to the2017Employment Strategy Business Opportunities Attracting Investment and and stagnatestheeconomy. forlong-termgains austerity limitsopportunities in buildinglivable communitiesandanattitudeof may seemcostlyinitially, butlackofinvestment environment. 176 Investments insuchamenities 177 It

73 | THE MOWAT CENTRE 74 | RETHINKING MUNICIPAL FINANCE FOR THE NEW ECONOMY critical to promoting economicdevelopment. amongst localgovernments andtheRegionis government. Therefore, effective collaboration planning, rather thantheupper-tierregional are mainlyresponsible foreconomicdevelopment to notethatlower-tiergovernmentsIt isimportant million wasinCanada. far generated $29millioninrevenue, ofwhich$17 RICC currently hasover 500clients,andhasso & Internetof Things asitsmainpriorities. Materials, Clean&Green Technologies, andICT RICC isfocusedonAdvanced Manufacturing & ups ofvarious sizes forfree. For 2018-2019,the provides arange to ofservices technologystart- RICC isanentrepreneur andinnovation hubthat the of Caledonalongwitheducationalpartners, City ofMississauga,Brampton and Town Commercialization Centre (RICC). Founded by the in thePeel RegionistheResearch Innovation jurisdictions. Anexampleofsuchaninitiative to drive innovation andentrepreneurship intheir Municipalities alsoneedto take proactive steps iscritical. with othermunicipalitiesintheGTHA incentives. unnecessary Therefore, cooperation is alsoessentialto avoid arace to thebottom with General Report.” 179 RICCentre (2015–2016) “Welcome to RICCentre’s Annual entrepreneur-and-innovation-hub/about-us/ 178 RICCentre (2018)“About RICCentre.” http://agr.riccentre.ca/ 179 . https://riccentre.ca/ . 178 The An exampleofcollaboration amongst competition. GTA andto avoid arace to thebottom inlocaltax revenue tools amongstmunicipalitiesacross the when itcomesto taxationpolicyto harmonize determining itslocation. Therefore, itiscritical predominant factor inabusiness’s decisionin there isminimalevidence to prove thatthisisthe believed thatlowertaxrates attract businesses, towards shared prosperity. Whileitiswidely neighbouring municipalities, in working particularly must collaborate withothergovernments, and Municipalities cannotoperate inisolation. They Municipalities Collaboration with Other details-on-the-20-finalists-in-5b-sweepstakes/#37b181eb79e6 www.forbes.com/sites/bisnow/2018/01/19/amazon-hq2-shortlist- Finalists In$5BSweepstakes.” 19,2018. Forbes, January 182 Bisnow(2018)“Amazon Details On The 20 HQ2Shortlist: Amazon-s-HQ2-Highlights-Mos torontoglobal.ca/about-us/News/2017/Toronto-Region-Bid-For- Highlights MostEducated America.” Workforce inNorth 181 Toronto Global (2017)“Toronto RegionBidforAmazon’s HQ2 Toronto-Region-Municipalities-Join-Forces-to-Submi Headquarters.” Forces to SubmitRegionalBidforAmazon’s NewCorporate 180 Toronto Global(2017)“Toronto RegionMunicipalitiesJoin company. location amongst20finalistsannounced by the Toronto Canadian region wastheonlyshortlisted America. most educatedworkforce inNorth highlighttheRegionashaving the in particular strengths to puttogether anattractive bid,and wasto leveragethis combinedeffort collective included inthe Toronto region. The rationale for bid, Waterloo RegionandGuelphwere also America. in North for Amazon’s secondcorporate headquarters Region cametogether to submitaregional bid Region, York Region,DurhamRegionandHalton region, includingtheCityof Toronto, Peel where citiesandmunicipalitiesfrom the Toronto municipalities wasseenwiththeAmazon bid, 182 https://torontoglobal.ca/about-us/News/2017/ 180 For thepurposesofthis . . https:// https:// 181 The . As mentionedabove, municipalitiesacross the Procurement Policies Agreements andSocial Community Benefits the numberofcarsonroad andreduce GHGs. investments intransit are alsoessentialto reduce Inthelongterm, employment orentertainment. barrier to visitingtheRegionforpeopleseeking is currentlyfacilities, astransportation amajor investments inbusinesses andrecreational of people.Goodtransit islikely to increase connections andfacilitatethemovement is alsoessentialto planimproved transit Collaboration withneighbouring municipalities prosperity. in workingtowards shared neighbouring municipalities, governments, andparticularly must collaborate withother operate inisolation. They Municipalities cannot development. that isalready beingspent oninfrastructure to benefit local communities, by leveraging funding additional social,economicorenvironmental value CBAs andsocialprocurement policies cancreate agreements (CBAs) to maximize value formoney. to usecommunitybenefits an opportunity to newinfrastructure development. This presents future. Attracting newbusinesseswillalsolead upgrades andwillhave to invest inthisthenear are inurgentcountry needofinfrastructure The RegionofPeel hasrecognized thepotential agreements. groups cometogether to create three-way where developers, government andcommunity and legislation;orthey cantake ahybridapproach developers andgovernments, orotherpolicies social procurement clauses,contracts between and localcommunities;publicinitiatives suchas through private agreements betweendevelopers the community. These benefitscanbeachieved of publicspacesoranyotherbenefitidentified by businesses orsocialenterprises,improvement to purchase from goodsandservices local in thelabourmarket, socialprocurement forthosedisadvantagedand training opportunities Community benefitscanincludelocaljobcreation Peel-Poverty-Reduction-Strategy-2018-2028.pdf Community Action.” pp.11. 184 RegionofPeel “2018-2028Peel ReductionStrategy: Poverty mowatcentre.ca/engage-and-empower/ Ontario’s communitybenefitsinitiatives.” Mowat Centre. “Engage &Empower:Definingand engagingcommunityin 183 Jordann Thirgood, (2018) Kiran Alwaniand ErichHartmann begin in2019. Transit, theconstructionofwhichisexpectedto signed withMetrolinx fortheHurontario LightRail Community Benefits Framework Agreement was Peel CommunityBenefits Network.Recently, a Region, andin2017,theCommitteecreated the a tool inthe to advance economicopportunities ReductionCommitteeidentifiedCBAsas Poverty of CBAsinmaximizinggains.In2014,thePeel 183 184 http://www.povertyinpeel.ca/_include/ . . https://

75 | THE MOWAT CENTRE 76 | RETHINKING MUNICIPAL FINANCE FOR THE NEW ECONOMY municipality. Currently, GTAA pays ground rent to to getagreater share ofthebenefitsforitshost terms withthefederal andprovincial governments itwillbekey forPeelairport, to negotiaterenewed its connectionwithincreased cargo traffic atthe increase ingoodsmovement intheRegionand employment andbusiness.Withthepredicted isakey assettoThe airport Peel, bringingin compared to 6.3percentin2018. today, andform8.5percentofOntario’s GDP 700,000 jobsin2037compared to 332,000jobs willfacilitate to 85millionin2037,thattheairport passengers willincrease from 47millionin2018 coming years. Itispredicted thatthenumberof willbeeven morethe airport substantialin Authority (GTAA), theeconomiccontributionof According to theGreater Toronto Airports the largest passengervolumes inthecountry. Vancouver combined,and andMontreal airports America. North in hasbeennamedthebestlarge airport Airport infrastructureand animportant element.Pearson – akey employmentinternational generatorairport The RegionofPeel ishometo Canada’s largest Economic Benefitsfrom theAirport Committee/Landdevelopmentandtaxation-Mar272018.pdf About_Pearson/Community_Relations/Committees/Consultative_ www.torontopearson.com/uploadedFiles/Pearson/Content/ economic benefits:landdevelopment and taxation.” 187 Greater Toronto Authority (2018)“Local Airports pdf goodsmovement/pdf/goods-movement-strategic-plan-2017-2021. Plan 2017-2021.” 186 RegionofPeel (2017)“Peel Region Goods Movement Strategic service-1.3832567 airport-named-best-large-airport-in-north-america-for-customer- 7, 2018. Americaforcustomer service.” inNorth large airport March 185 CTV News(2018)“Toronto namedbest Pearson airport the RegionofPeel. of Toronto aswelltheCityofMississaugaand taxes (PILT)of property to itshostmunicipalities the federal government aswellpayments inlieu . https://www.ctvnews.ca/canada/toronto-pearson- https://www.peelregion.ca/pw/transportation/ . 185 Ithandlesmore aircargo than 187 https:// . 186

Since thePILT rate hasnotchangedsince2001, taxes. municipal property developments. tenantsalsopay Third party a requirement non-aviation forthird party GTAA hasvoluntarily madedevelopment charges landsasitisafederalairport property. However, charges regime doesnotapplyto development of Mississauga’s buildingpermitanddevelopment- $0.94 hasstayed constantsince2001.Inaddition, passenger volume, theper-passengerrate of increased over theyears dueto increases in 45.1(7). WhilethePILT paidby theGTAA has based onOntarioRegulation282/98Section The PILT rate wasestablishedby theprovince agendas/2018/2018-02-08-rc-agenda.pdf In CouncilAgenda. 189 RegionofPeel (2018)“TheGTAA and theCityofMississauga.” 188 Ibid. increased significantly, taxpayers have property assessmentshavebecause municipalproperty to notethat estimates. Itisalsoimportant and theRegionofPeel based onconservative in arevenue lossof$2.6millionforthecity of Mississauga,thestagnantPILT hasresulted 2016. According to estimatesmadeby theCity should have increased by 30percentto $1.22in According to cityofficials,the rateforthe GTAA Authority.for theOttawaInternationalAirport Authority and$1.08 London InternationalAirport are higherthantheGTAA –$1.67fortheGreater authorities,alsoset by theprovince,other airport not recognize cargo traffic. The ratesforsome rates are basedonpassengertraffic onlyanddo capped ata5percentincrease. Further, these remained unchangeddespiteinflation,andis for years to increase it. The $0.94PILT rate has of Peel, have beenadvocating to theprovince the CityofMississauga,aswellRegion https://www.peelregion.ca/council/ 188 . 189 environmental impacts ofincreased cargo traffic, vital thatthemunicipalitytakes into accountthe nationalrevenue generator.important It is also toservices ensure smoothoperation ofthis that Peel andMississaugaprovide significant better economicbenefitsfortheRegion,given with thefederal government, andadvocate for toThis pointstowards negotiate theopportunity paying $34.6millioninPILTs to municipalities. in ground rent to thefederal government while government. In2016,GTAA paidover $148million authorities in Canada pay rent toairport the federal In additionto thePILT paidto municipalities, relationship forallstakeholders. and ensure apositive andmutuallybeneficial Mississauga andGTAA to address theseissues renewed negotiationsbetweentheprovince, Peel, 2017. sued theAuthority fornon-payment inFebruary stormwaterThe city managementat theairport. has invested over $120millioninstateoftheart with theformulausedto calculateitandthat over $3millionannually, citingthatitdisagrees of Mississauga,whichthecityestimatedto be has refused to pay thestormwater levy to theCity been facingagreater burden. legdocs/mmis/2018/ex/bgrd/backgroundfile-110721.pdf Ownership.”Interests Regarding Airport 192 Cityof Toronto forAction:Cityof Toronto (2018)“Report council/2017/2017_12_13_Council_Additional_Agenda.pdf https://www7.mississauga.ca/documents/committees/ 191 CityofMississauga(2017)“Additional Agenda.” councillor/ mississauga-getting-deeply-shafted-by-pearson-airport-says- 23, 2017. says councillor.”by Pearson airport, Mississauga.com,January 190 RachaelWilliams(2017)“Mississaugagetting‘deeply shafted’ increased benefits. the airport’s economicimpactandadvocating for air pollution and pressure on roads when analyzing 191 https://www.mississauga.com/news-story/7080851- These factspointtowards theneedfor . 190 https://www.toronto.ca/ Inaddition,GTAA . . 192

77 | THE MOWAT CENTRE 78 | RETHINKING MUNICIPAL FINANCE FOR THE NEW ECONOMY » » » » » Specifically: environment, evolving demographic andeconomicpressures andpublicopinionaround taxationissues. to confront ahostofchallenges. These challenges include:fiscalconstraints, operating anuncertain As municipalitiesworktowards diversifying revenue sources to improve theirfiscalhealth,they canexpect https://mowatcentre.ca/race-to-the-top/ 196 See:SunilJohalandArmine Yalnizyan (2018)“Raceto the Top: Developing anInclusive Growth AgendaforCanada.” MowatCentre. mowatcentre.ca/robots-revenues-responses/ 195 SunilJohaletal.(2018)“Robots, Revenues &Responses OntarioandtheFuture ofWork.” MowatCentre. pp.14-15. ofMunicipalAffairsand Housing(2017)“UnderstandingMunicipalDebt.”194 OntarioMinistry site/cd/gg/add_pdf/77/Governance/Electronic_Documents/Other_CDN_Jurisdictions/Powers_of_Canadian_Cities.pdf 193 Cityof Toronto (2001)“Powers of CanadianCities- The legalframework.” » » » » » » » » » Another challengeto increasing revenues inbeingableto forecast isthe lackofdataanduncertainty the authority to diversify revenue sources. provincial and/orfederal governments to increase contributionsto municipalities,aswellexpandtheir to maintaintheirfiscalhealthanddealwithemerging economicchallengesisonthewillingnessof efficiencies.Given thisscenario,akeyto findfurther success factor inensuringthatmunicipalitiesare able Consequently, municipalitieshave increasingly beendoingmore forless,andassuchthere islimitedscope eroded over time,whiletheresponsibilities ofmunicipalitiesto provide have additionalservices increased. available to municipalgovernments –theresources beingtransferred from otherlevels ofgovernments have payments forotherlong-term financialobligations. own-source revenues for mostmunicipalitieslesstheirannuallong-termdebtservicingcostsand long-term debtforcapitalexpenditures. There isanAnnualRepayment Limit,whichis25percentofannual In addition,municipalitiesare notallowedto runadeficitintheiroperating budgets. They canonlyincur approval. every actionnotexplicitlygranted underlegislation,includingtheabilityto levy newtaxes, requires provincial have. This makes adaptingto newchangesandemerging realities extremely difficultformunicipalities,as are governed by the Depending ontheprovince, somewhatacross municipalpowersvary Canada. power over municipalitiesandthey canprovide powersto municipalitiesattheirdiscretion. As itisoftensaid,‘municipalities are creatures oftheprovinces.’ Constitutionally, provinces have exclusive limitingfactorThe primary forCanadianmunicipalitiesto address fiscalchallengesistheirlimitedtoolkit. property taxincreases hasalreadyproperty created arisingburden onhouseholdincomes. be. For thePeel acute,asthehistoric municipalgovernments, trend thischallengewouldbeparticularly of budget efficienciescouldnotbeaccomplishedaswell aswhatthepurposeofadditionaltaxes would Any newtaxorincrease rationale wouldrequire asto aclearlyarticulated whyothermeansoridentifying growth over thepasttwodecades. many Canadiansfacerisingcostsinareas suchashousing,childcare andenergy butwithlimitedwage public opinion. fornewtaxesThere inCanadaatanylevel as islittle support ofgovernment, particularly Finally, akey challengeto successfullyimplementing newrevenue tools, includingtaxes anduser fees, is jobs facethisthreat. 42 percentofCanadianjobsare athighriskofautomation, whileaccording to anotheronly9percentofthe transformation, thisiseven more difficultasestimatesvary widely. For example,basedononestudyabout When talkingaboutthechangingnature ofworkandthreats suchasautomation andofficespace makes planningadequatelyextremely difficult,especiallywheninvesting inlong-terminfrastructure. future accurately. Asmentionedearlier, provincial andlocalforecasts have notalways matchedrealities. This Implementation Challenges Municipal Act 195 . which is a ‘laundry list’legislation,i.e.itlistsevery whichisa‘laundry powermunicipalities . 196 194 There isafiscalimbalanceintheshare ofrevenues https://www.toronto.ca/ext/digital_comm/inquiry/inquiry_ http://www.mah.gov.on.ca/Page15266.aspx 193 InOntario,municipalities . https:// . Given the host of demographic challenges, service pressures and tax base difficulties posed by technological and employment shifts, municipalities must consider a range of approaches and tactics to solidify their footing. 79 | THE MOWAT CENTRE THE MOWAT 79 | 7 RECOMMENDATIONS The fiscal challenges facing Peel and other municipalities in the years ahead won’t be addressed through any single measure. Given the host of demographic challenges, service pressures and tax base difficulties posed by technological and employment shifts, municipalities must consider a range of approaches and tactics to solidify their footing. In particular, this is critical as land consumption (which is intimately linked to existing municipal revenue tools) is increasingly becoming decoupled from broader economic growth. Increases in digital economic activities, knowledge-based jobs and a broader shift towards the service sector have decreased demand for land. For municipalities this means that their land- based revenue tools are increasingly falling further away from the realities of economic growth and activity.

As a general strategy, Peel and other municipalities Therefore, bilateral municipal-provincial need to advocate for a review of, and realignment conversations about realigning current revenue of, the existing revenues and responsibilities of sources are unlikely to yield much in the way of each level of government. This realignment must substantive progress. The federal government recognize that provinces are, by and large, in a must be at the table for these conversations, given much more fiscally precarious situation than the its relatively rosier fiscal situation and room to federal government over the long term, largely as potentially allow municipalities or provinces to a result of the projected increase in healthcare occupy existing federal tax space or provide direct costs. The federal government is projected to have transfers to fund core services. Any conversations capacity to increase spending (or reduce taxes) by around re-allocating the existing revenue pie must $29B a year while maintaining current net-debt-to- involve all three levels of government. GDP levels, whereas provinces will over the longer- Nevertheless, there is a clear opportunity for term be faced with an $18B shortfall in order to dialogue with the province around new revenue maintain current debt ratios.197 As creatures of the powers which could be granted to municipalities, province, municipalities will be further squeezed modelled on the City of Toronto Act precedent. by this inexorable diminution of provincial fiscal Opportunities to explore a municipal sales tax, flexibility. road pricing and other measures would provide significant flexibility to mitigate the weaknesses of land-based tax bases in an evolving operating environment. However, all of these approaches

197 Office of the Parliamentary Budget Officer (2018) “Fiscal will be viewed with skepticism by the public and Sustainability Report 2018.” https://www.pbo-dpb.gc.ca/en/blog/ are unlikely to generate much political support,

80 | RETHINKING MUNICIPAL FINANCE FOR THE NEW ECONOMY FINANCE FOR 80 | RETHINKING MUNICIPAL news/FSR_September_2018. » the ledger: should guidePeel’s thinkingontherevenue sideof Therefore, thefollowinghierarchy ofapproaches forachangeto thestatusquo. support first step to gainingmore publicandpolitical theyand whatservices directly fund,isacritical where taxdollarsfrom residentsarticulating go, provincial governments eachreceive). Clearly paid, roughly one-fifththeamount federal and Ontario (receiving only9centsofevery taxdollar by farthelowesttaxinglevel ofgovernment in residents are likely aware thatmunicipalitiesare that newrevenue tools mightberequired. Few taxes oruserfees letalone formunicipalservices, residents thatthey oughtto pay higherproperty challenging formunicipalitiesto make acaseto which taxdollarspay makes forwhichservices it government. The lackoftransparency around municipalities, are taxpayers forthree levels of around theseissues.ResidentsofPeel, andother Finally, itiscriticalto engageinapublicdialogue economies. levels thanmostotherresidents inadvanced despite thefactthatCanadiansare taxed atlower » » » the Working attheMargins sectionon page 59). are realistic andreflect exogenous trends. (see assumptions to ensure thatrevenue projections include areview ofplanning and forecasting higher thanhistorical patterns. This should also taxes taxes atrates orhikingproperty property to taxleakage,aswellexplore progressive to ensure thatmisclassificationisn’t leading definitional review types ofvarious property from existingtools to Explore opportunities amongst levels ofgovernment. Canada’s taxes andresponsibilities are allocated meaningful dialoguewiththepublicaround how provincial governments existing revenues, withboththefederal and Advocate forandexplore a , includingacomprehensive and engageina raise more revenues realignment of in OntarioandCanada. The existingapproach and relationships municipalitiesoperate within landscape are proscribed by theexistingroles from achangingemployment andtechnological consider to address stemming revenue shortfalls ultimately, theoptionsthatRegionofPeel can efficiencies fromfurther existing expenditures. Yet, review frameworks theirservice-delivery andwring Municipalities should,ofcourse,alsolookto » » priority order: and expenditures are outlinedbelow, inranked address thegrowing imbalance betweenrevenues term optionsthattheRegionshouldconsiderto andmedium-to-longer- Some specificshort-term are well-known. introducing sales-taxrevenues, thesemeasures municipal incometax,orsimilarlysharing of income-taxrevenues ortherightto introduce to revenue sources suchasthegastax,ashare government. Whetherthrough dedicatedaccess government, ortransfers from seniorlevels of authority beinggranted from seniorlevels of revenue tools to theRegion,necessarilyinvolves transformational approach thatwouldyieldmore The broader, more systematicand strains are onlylikely to getmore acuteover time. showing significantsignsofstrain, andthose thisapproach isalreadyoutlined inthisreport, taxes, ordevelopmentproperty charges. As through ongoingcommercial andresidential on land,andtheconsumptionofland–whether to taxationby municipalitiesrelies inordinately » » (e.g., salestax,share ofincometaxes). Finally, measures suchasroad pricing. step withneighbouringjurisdictions),including usesandusers particular Then lookto explore general purposerevenue tools new revenue tools specificto (ideallynotoutof

81 | THE MOWAT CENTRE 82 | RETHINKING MUNICIPAL FINANCE FOR THE NEW ECONOMY » » » TermShort » » » » » » » Discuss withthefederal government, province discussion onprogressive taxes). property occupied residences. (seepage60foradeeper households andhigherrates fornon-owner- including rebates orexemptions forlow-income international jurisdictionssuchasSingapore, rates,property-tax modelledonexperiencein Explore optionsforintroducing progressive review inCanadafor50years. the taxsystem,whichhasn’t hadafundamental to advocate foraRoyal Commissionto explore depoliticize suchanexercise, itmay beprudent responsibilitiesservice andrevenue sources. To public, province andfederal government about pointfordiscussionswiththe as astarting a businesscaseforchangethatcanserve identify similarlysituatedjurisdictions.Develop the Region.Work with othermunicipalitiesto of revenues andexpenditure pressures in and evidence regarding theshiftingnature gatheradditionaldata Building onthisreport, Paulo, Transportation NetworkCompanies revenue from platformssuchasAirbnb.InSao accommodationtaxto generateand short-term City of Toronto have recently instituteda hotel abroad. For example,theCityofOttawaand actions by otherjurisdictionsinCanadaand suchasAirbnbandUber,services inlinewith Explore options fortaxingnewlyemerging digital potentially ashare ofcannabis-taxrevenues). amusement tax,tobacco tax(aswellas alcoholic beverage and tax,entertainment with theprovince, includingroad pricing, Explore theoptionof“Toronto Act”toolkit calculations. PILT rate, aswellinclusionofcargo traffic in generated revenues, andan updateto the2001 and GTAA optionsforalarger share ofPearson- » » fund-infrastructure net/blog/ride-sharing-companies-charged-mileage-fees-to-help- fees to helpfundinfrastructure.” Shareable. 198 Sharon Ede (2018)“Ride-sharing companiescharged mileage » » » » » » reductions. activities, andassociatedtaxrevenue warehousing andaway from manufacturing commercial spaceto reflect thetrend towards Reconsider definitionsofindustrialvs warehousing andland-usage. industrial taxes, reflecting shiftsinthenature of (as opposedto area asurface approach) to province andadoptavolume-based approach to workwiththe Explore opportunities page 67formore examples). Tapping into DigitalEconomic Activitysectionon infrastructure maintenancecosts. per vehicle perkilometre travelled to helpwith (TNCs) suchasUberare required to pay fees as socialimpactbonds. exploration ofinnovative financingmodelssuch outcomes-based fundingmodels,and integrationservices thatPeel undertook), (modelledonsuccessfulhuman departments integrationsuch asservice across siloed side approaches to improve efficiencies, service Continue to explore andimplement expenditure history onthisfront. cautious revenue assumptionsto reflect recent point, buttheRegionshouldalsoadoptmore have notbeenaccurate shouldbeastarting the province to understandwhytheseforecasts development-charges revenues. Working with overly optimisticwhencompared withactual Recent projections forgrowth have been that budgetsforworst-casescenarios. Adopt a“future-proof” approach to development . https://www.shareable. 198 (seethe » » » residents. Someoftheseoptionscouldinclude: revenue tools to necessary discharge theirobligationsto transformational changesthatequipthemwiththe municipalities mustbeprepared to advocate formore levels failto keep paceformanyfamilies.Consequently, aswagesandincome other costpressures, particularly taxesincrease to property expectationsand meetservice nature withrespect to income,there islimitedscopeto municipalities inCanada.Given their, arguably, regressive levels, are ill-suitedto provide sufficient revenues for It’s already taxes, apparent atcurrent thatproperty Medium andLonger Term strategic foresight exercise. 199 SeethePlausibleScenariossection onpage48foranexampleofa » » » » » with seniorlevels ofgovernment to reflect revenue Explore uploadingofexpenditure responsibilities section onpage69). Others? Revenue Tools inInternationalJurisdictions section onpage63andtheWhatCanWe Learnfrom (For abroader discussion,seetheNewRevenue Tools and adevelopment levy to capture landvalue gains. a municipalincometax(bothcorporate andpersonal) municipality inOntariosuchasamunicipalsalestax, Revenue optionsthat,currently, aren’t available to any adaptable to changingcircumstances. systems andensuringthatpoliciesare flexible and evaluations andeffectively utilize data,streamlining increasing analyticscapacityto conductongoing conducting pilotsto determineeffectiveness, robust andforward-looking. Utilize strategic foresight to ensure thatpoliciesare orback-officefunctionsmoreservices efficiently. whether technologicalsolutionsmay existto deliver non-profits ortheprivate sector. Similarly, assess withothermunicipalities, by delivery partnering service forefficienciesandcostsavings in Find opportunities capacities ofeachlevel ofgovernment. 199 This shouldinclude

83 | THE MOWAT CENTRE Modernizing revenue approaches to reflect the 21st century economy will position municipalities to thrive as the technological and economic landscape continues to evolve. 84 | RETHINKING MUNICIPAL FINANCE FOR THE NEW ECONOMY THE NEW FINANCE FOR RETHINKING | 84 MUNICIPAL 8 evolve. economy willpositionmunicipalitiesto thrive asthetechnologicalandeconomiclandscapecontinuesto place municipalitiesinaperiloussituation.Modernizingrevenue approaches to reflect the21 Reliance onland-basedrevenue tools thatsustainedgrowth andprosperity inthe20 the Region’s strengths andpositionitto beasresilient and nimbleaspossible. by Councilandstaffto develop aforward-looking, action-orientedstrategic approach thatwilloptimize andauthoritygranted fromsupport senior levels ofgovernment andwillrequire asignificantcommitment emerging markets to becomealeaderintheneweconomy. Yet, thisleadershippositionwillrequire The RegionofPeel specificallycantake advantage ofitsstrategic location,diverse populationand revolution to improve andinvest delivery municipalfiscalhealth,enhanceservice inthefuture. fiscal andlegislative constraints, forlocalgovernments there are opportunities to benefit from the digital to challengeoutdatedpolicyandprocesses atevery level ofgovernment. Whilemunicipalitiesface Ongoing trends andemerging issueshave reshaped theeconomyandlabourmarket, andwillcontinue CONCLUSION th century will century st century century

85 | THE MOWAT CENTRE