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Saturday, May 21, 2011

Public Sector Budget Reform Gets Started in Canada

By Amy Erixon (Toronto)

Last Tuesday, recently elected Toronto Mayor Rob Ford secured nearly 3:1 support from the City Council to privatize a portion of the City Garbage Workers contract, a reversal of decades of City policy. This contract was a sore point with local residents who suffered through a near summer-long garbage strike in 2009, resulting in contract concessions far in excess of the city’s ability to pay. While the City Council’s actions will disrupt the status quo, most of the 200 currently part-time city garbage workers are expected to find replacement work with successful bidders under new private sector contracts, and the city will obtain performance criteria in the new contracts which will be established at fair market pricing.

Two weeks ago any doubt about whether the Ontario public wants change was laid to rest with the Conservative sweep of the Toronto area in the Federal election; delivering Prime Minister Steven Harper with the coveted majority government needed to contain both taxes and spending at the Federal Level. A majority government outcome was not anticipated, and the massive exodus of support for the Liberal Party was truly remarkable. The Liberals campaigned for a balanced budget but promised at the same time to increase health care spending and failed to deliver specific proposals that could accomplish either. Their message fell so deaf to public ears that even the Liberal party leader lost his “safe seat” re-election bid to return to Parliament.

Could this be a precursor to upcoming electoral trends in the United States?

Local and National leadership is needed to deal with the vexing problem of shortage of public resources against rising need for public services. Creativity and technology will be essential components of delivering lasting solutions; the status quo is not financially sustainable. Commercial Property taxes in Toronto are already nearly double those of surrounding suburbs, in part reflecting the disproportionate inner city services burden, a common malady of older, large urban centers across North America.

A noteworthy illustration of the kind of innovation required in the years ahead is the retrofitting of the Mississauga public library system recently implemented by the 89 year old Mayor of Mississauga, Hazel McCallion. She used federal stimulus money to convert to an on-line delivery structure saving millions in operating costs while providing increased access and library services to Mississauga residents and workforce. During her tenure as Mayor, the City of Mississauga has grown from a bedroom community to urban center with population in excess of 750,000 while enjoying one of the lowest municipal tax burdens and highest service levels in Canada. This is the kind of innovative fiscal leadership needed to rise to the times.

The Canadian real estate industry through its trade association, RealPac, is working with the City of Toronto and other urban centers across Canada to develop strategies to cope with their growing financial burdens that will not disproportionately cost jobs, impair property values, or deny residents essential services. Contrary to some commentators, I don’t believe this is a case of “we” against “them”. The work required to get the balance of taxes and services “right” has just begun and it must be a collaborative effort between public and private sector. And strong political leadership matters.

The postings on this site are those of the bloggers and do not necessarily represent the views or opinions of Avison Young.