Federation of Canadian Municipalities urges governments to develop new fiscal plan for cities

The Federation of Canadian Municipalities (FCM) has released new recommendations calling on federal, provincial and territorial governments to modernize funding and commit to a new support framework for municipalities.

In a discussion paper released Thursday, the FCM says municipalities are "struggling to fund, maintain and improve" municipally-managed services because of an "outdated revenue framework that is creaking under Canada's record population growth."

A key recommendation being made in the paper is the development of a new fiscal framework to better support services used daily by Canadians, such as transportation, water services, housing and other city-run infrastructure.

"To ensure that Canada's growth is successful, FCM is urging the federal government to bring together all orders of government to discuss and develop a municipal growth framework: a new, more equitable way to fund local governments," it reads.

Some components of the FCM's suggested fiscal framework include increasing direct annual transfers to municipalities by $2.6 billion (bringing the total to $5 billion), indexing federal transfers to gross domestic product (GDP) and broadening the eligible expenses under federal transfers to include operating costs and infrastructure.

Plus, they're asking that provincial and territorial governments match the annual funds from the federal government, providing an equivalent of $5 billion per year in new funding to municipalities.

Scott Pearce, president of the FCM and mayor of the Township of Gore, Que., says mayors and councillors across the country are struggling to meet the demands and needs of their municipalities.

"With the growth of the population in Canada, it adds revenue to the federal government, provincial government, but for municipalities, it costs more and more to give those services that people need and they count on every day," Pearce told CBC News.

This discussion paper appears as over a thousand municipal politicians from across Canada gather in Calgary over the next few days for the FCM's annual conference. It's where mayors and councillors will attend a trade show, tour various local facilities and, this year, discuss the recommendations made in the paper.

Municipalities struggling to accommodate record growth

Mayor Jyoti Gondek says Calgary is an "economic engine" for the country, so developing a new fiscal framework for municipalities is necessary as population continues to grow in the city.

"We generate a lot of revenue for the federal government through income taxes, and when Calgarians are paying into income taxes, they deserve to get them flowing back to their city," said Gondek.

"I would once again remind the federal government that they are benefiting from the prosperity of our city and we are not receiving that benefit back."

In an email statement to CBC News, Ashley Stevenson, acting press secretary for Ric MicIver, the municipal affairs minister, says the provincial government is reviewing the paper and "considering what implications its recommendations might have for Alberta and its many communities."

"We have committed to predictable, sustainable funding for municipalities, including through the recently launched Local Government Fiscal Framework," reads the statement.

"The LGFF was also created in cooperation with municipalities, using a model that has been requested by municipalities that ties funding for municipalities to provincial revenues."

Legislation for the Local Government Fiscal Framework (LGFF) was introduced in 2019. It's a mechanism that allocates funding to municipalities. After being delayed, it officially replaced the Municipality Sustainability Initiative this year.

Under the program, the province is providing local governments with $742 million in capital funding and $60 million in operating funding in 2024.

Over-reliant on property taxes, says FCM

A key problem with the current state of financial affairs outlined by the FCM's paper is that municipal revenue is limited by an over-reliance on property taxes, arguing that such funds were never intended to be used for services such as wastewater, garbage collection and social housing, among others.

Gondek says she's happy to see the FCM's recommendations as Calgary's population continues to grow at record levels and the city has been "overwhelmed" supporting housing and infrastructure without enough money to do it.

"Municipalities have been contributing to the Confederation and we need help. We need money flowing back to us," she said.

Gondek is a member of the FCM's Big City Mayors' Caucus, a group made up of 23 mayors representing Canada's biggest cities.

Canada's big city mayors will hold meetings on Thursday, and some of Canada's federal political party leaders are expected to drop by and address the delegates.

Calgary last hosted this conference in 2007. During the four-day event — which will be held at the Telus Convention Centre — it's expected visitors will pump several million dollars into the local economy.