Canadian Treasurer

May 31, 2013

Canada’s big cities headed for financial crisis

VANCOUVER — With municipal leaders from across the country gathering in Vancouver later this week for the annual Federation of Canadian Municipalities (FCM) conference, the Canadian Federation of Independent Business (CFIB) is calling on them to take action on municipal overspending. CFIB today released a report showing that spending has grown more than three times the rate of population over the past 12 years in Canada’s three largest cities – Toronto, Montreal and Vancouver – and in Canadian municipalities overall.

“Most of us can appreciate that the cost of running our cities must keep pace with population growth, and factor in the cost of inflation,” says CFIB executive vice president Laura Jones. “But our research shows spending is increasing by as much as three to eight times the rate of population growth in Canada’s largest cities. Municipal officials claim they lack sufficient revenue, and argue that cities need even more revenue and increased taxing authority. Our report shows the real problem is overspending.”

This spending problem is not just confined to Canada’s largest cities. From 2000 to 2011, inflation-adjusted spending grew by 55 per cent in all Canadian municipalities while population only grew by 12 per cent. The increases in spending are largely driven by public sector wages and benefits which consume between 52 to 67 per cent of local government operating spending in the three big cities.

“From 2000 to 2011, city staff in all Canadian municipalities increased by 25 per cent, more than double population growth,” says Mike Klassen, CFIB BC director of provincial affairs. “Combine that with wages and benefit packages that are more than one-third higher than comparable occupations in the private sector, and you can begin to understand the causes of overspending by our cities. It adds up to a cost of over $10,000 per Canadian family of four during the same period.” 

“It’s time that we changed the conversation to move away from the persistent requests for new tax revenues from our local governments to one that addresses spending challenges—responsible policy-making depends on it,” suggests Laura Jones. “CFIB hopes this report is a catalyst to start this critical conversation.” 




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