Who Pays for Municipal Governments? Pursuing the User Pay Model

Tedds, Lindsay M. (2019): Who Pays for Municipal Governments? Pursuing the User Pay Model. Forthcoming in: Who Pays for Canada? Taxes and Fairness. E.A. Heaman and David Tough eds.

Abstract

It is undeniable that the goods, services, and privileges that municipalities provide are vital for Canadians’ well-being and that municipalities are facing increasing pressure to provide more infrastructure and services to more Canadians at a higher level of service. In order to provide this infrastructure and these services, however, municipalities have to increasingly find a way to pay for them. The key challenge then becomes, how do cities pay for these services and infrastructure? How do cities raise enough revenue to deliver these high-quality public services that will attract and retain businesses and residents in a way that does not undermine their competitive advantage and that is fair, accountable, equitable, and within their authorities? As it turns out the answer to this question is “wherever possible, charge.” That is, where possible, the direct users should pay the cost of providing municipal services.

The rest of this chapter will outline what are the two main funding choices, property taxes and user levies, for Canadian municipalities and why. If the choices for municipalities for its own source revenues are between property taxes and user levies, what are these instruments? If the choice then is between user levies and property taxes, what has been the take up of these revenue instruments by municipalities in Canada and what might be driving these decisions? Finally, which revenue tool is preferred and why, using the principles tax fairness, tax accountability, and tax equality? In essence, it boils down to establishing a strong link between expenditures and revenues, leading to a preference for user levies.

• Item Type: MPRA Paper
• Language: English
• Keywords: Municipal Public Finance, User Fees, Regulatory Charges, Proprietary Charges, Municipal Revenue, Benefits Received, Tax Fairness
• Subjects: H - Public Economics > H2 - Taxation, Subsidies, and Revenue > H21 - Efficiency ; Optimal Taxation; H - Public Economics > H2 - Taxation, Subsidies, and Revenue > H27 - Other Sources of Revenue; H - Public Economics > H7 - State and Local Government ; Intergovernmental Relations > H71 - State and Local Taxation, Subsidies, and Revenue; H - Public Economics > H7 - State and Local Government ; Intergovernmental Relations > H77 - Intergovernmental Relations ; Federalism ; Secession

References

Elsbeth Heaman, Tax, Order and Good Government (Montreal: McGill-Queens University Press, 2017).

Statistics Canada. 2017. Census in Brief: Municipalities in Canada with the Largest and Fastest-growing population between 2011 and 2016. Statistics Canada Catalogue no. 98-200X2016001. Ottawa, Ontario. March 7 2017: http://www12.statcan.gc.ca/census-recensement/2016/as-sa/98-200-x/2016001/98-200-x2016001-eng.cfm (accessed June 14, 2018).

Statistics Canada. 2018. Table 10-10-0020-01 Canadian government finance statistics for municipalities and other local public administrations (x 1,000,000). Statistics Canada. Ottawa, Ontario. June 2018: https://www150.statcan.gc.ca/t1/tbl1/en/tv.action?pid=1010002001 (accessed June 14, 2018).

Geordon Omand. 2016. Big-city Mayors see themselves at heart of issues closest to people. CTV News April 21.

Catherine Althaus, Lindsay M. Tedds, and Allen McAvoy, “The Feasibility of Implementing a Congestion Charge on the Halifax Peninsula: Filling the “Missing Link” of Implementation, Canadian Public Policy, 37, 4, (2011): 541-561

Kelly Farish and Lindsay M. Tedds, “User Levy Design by Canadian Municipalities: Considerations Arising from Case Law,” Canadian Tax Journal 62, 3 (2014)

Catherine Althaus and Lindsay M. Tedds, User Levies in Canada: A Municipal Design and Implementation Guide (Toronto: Canadian Tax Foundation, 2016)

Lindsay M. Tedds. 2017. “Municipal User Levies in Western Canada,” in Enid Slack and Richard Bird, eds., Financing Municipal Infrastructure: Who Should Pay? (Montreal and Kingston: McGill-Queen’s University Press, 2017)

Lindsay M. Tedds, “Non-tax Revenue for Funding Municipal Governments: User Levies—Adoption, Constraints, and Emerging Opportunities,” in Enid Slack, Lisa Phillips, Lindsay M. Tedds, and Heather L. Evans eds. Funding the Canadian City (Toronto: Canadian Tax Foundation, 2019).

Peter W. Hogg, Constitutional Law of Canada, 5th ed. (Toronto: Carswell, 2014).

Toronto Distillery Co. v. Ontario (Alcohol and Gaming Commission) 2016 CarswellOnt 19995; 2016 ONCA 960; 135 O.R. (3d) 637; 274 A.C.W.S. (3d) 138Ontario Court of AppealOntarioDecember 20, 2016

Québec (Procureur général) v. Algonquin développements Côte Ste-Catherine inc. (Développements Hydroméga inc.) 2011 CarswellQue 11739; 2011 QCCA 1942; [2011] R.J.Q. 1967; 211 A.C.W.S. (3d) 461; 343 D.L.R. (4th) 272; J.E. 2011-1853; EYB 2011-197199Cour d'appel du QuébecQuebecOctober 21, 2011Docket: C.A. Qué. Montréal 500-09-019625-094Subject: Constitutional; Natural Resources; Public.

C. Richard Tindal, Susan Nobes Tindal, Kennedy Stewart, and Patrick J. Smith, Local Government in Canada, 8th ed (Toronto: Nelson Education, 2012).

Enid Slack and Richard Bird, “Municipal Taxation in Canada’s Federal System: Linking Taxes and Expenditures?” in Slack, Phillips, Tedds, and Evans eds, Funding the Canadian City.