Monday, December 19, 2016

Toll Roads and Bridges

The mayors of five major cities across Canada have come together to call on the provinces to give them “increased revenue powers” to charge tolls on roads and bridges. The full text of open letter is reproduced below.

The mayors complain they don’t have the money necessary to build the infrastructure Canadians need. They say “city governments have been required to rely on property taxes alone to support our growing operating budgets, with dollars stretched thinner and thinner as we serve the growing needs of the public.” Apparently, property taxes are not enough.

I find it frustrating that the substantial property taxes I pay don’t seem to be enough. Over the past decade or two, city governments have added user fees to everything they can. So, I pay these fees in addition to my property taxes. The prospect of greatly “increased revenue powers” for the city isn’t a happy one for me. I believe it’s important to fix and grow infrastructure, but why can’t some of my property taxes fund these projects?

Here is a quote that definitely did not come from any of the 5 mayors:
“The problem is that so much of property taxes gets soaked up by huge city administrative work forces. It’s not that these people are lazy. Most of them work diligently at their jobs. There are just so many of them and their job functions often contribute little to serving city residents. We have a management culture of empire-building. When we try to do something about these problems, the effort is half-hearted and the unions don’t help. With so much of property taxes diverted into salaries, there just isn’t much left for infrastructure projects. If we can get these toll collections going, it will greatly reduce the financial pressure. We’ll be able fund a few projects and take some pressure off as city administrations inevitably keep growing.”

An open letter from Canadian Mayors calling for increased revenue powers
"You rarely have to ask permission to do the right thing.

But this is the position our cities find themselves in as we attempt to do right by our growing populations.

There is no doubt that Canadian cities are where economic and social policy hits the pavement.

We are the financial engines of the country. We are where young people are looking for jobs and families are raising their children.

Cities are where our kids go to universities and where researchers are battling the diseases our loved ones suffer.

The innovations and technologies developed in our cities are providing new tools to help Canadians live and compete in the modern economy, improving our approach to everything from agriculture to construction to financial services.

When cities do well, our entire country benefits.

But still, we find ourselves begging for control over our own finances.

For too long, city governments have been required to rely on property taxes alone to support our growing operating budgets, with dollars stretched thinner and thinner as we serve the growing needs of the public.

At the same time, our transit systems, roads and vital infrastructure are suffering from decades of underinvestment.

It's time for that to change.

Across the country, mayors stand ready to lead a new approach - championing reasonable measures to increase municipal revenues so we can make a positive difference in our residents' lives.

Great responsibilities require great powers, and Canadian cities are at the forefront of a growing housing crisis, overwhelmed transit systems, alarming fentanyl abuse, mental health issues and the growing divide between haves and have nots.

As the federal government introduces stimulus funding for transit and infrastructure, cities are also required to match these funds.

This is a good deal - a real partnership that can put cities on a strong footing. But we must still ask permission from provincial leaders to introduce new revenue measures to generate these dollars, requests that are always weighted against the particular political realities of a given moment in time.

As mayors of Canada's biggest cities we are ready to champion real solutions. In Toronto, road tolls would finance a long-overdue transit expansion and ease congestion that is choking the most populated region in the country.

In Metro Vancouver, a lack of new funding tools has put a strain on property taxes and delayed crucial transit investments for years - while residents deal with crammed buses and gridlocked commutes.

In, Edmonton and Calgary, a new fiscal framework would enable more predictable, stable funding to manage growth.

And in Ottawa, we have just completed a feasibility study that outlines the possible construction of a subterranean truck tunnel to eliminate dangerous and disruptive heavy truck traffic in Ottawa's downtown core.

These large infrastructure projects come at a great cost, and it is imperative that we collaborate with the provincial and federal governments to move forward with a solution that works for all.

Canadian cities should be able to control their own destiny: mayors and councilors are elected to serve their residents and create a bright future for our cities but the fiscal power to do so sits with other levels of government.

As a result, we're forced to do our job with one hand tied behind our backs.

Our request is simple: give us the tools to do the job and the accountability that goes with them and we'll build great cities for the benefit of all Canadians."

Naheed Nenshi, Mayor of the City of Calgary
Don Iveson, Mayor of the City of Edmonton
Jim Watson, Mayor of the City of Ottawa
John Tory, Mayor of the City of Toronto
Gregor Robertson, Mayor of the City of Vancouver


  1. Maybe these cities should invest their toll road taxes in index funds for 10 years before they can access them.

  2. I often don't even know where to start on these issues.

    I don't disagree that government bureaucracy is an issue. Conversely I also know that municipal (and really all) levels of government are expected to continually provide more and more services, at higher and higher cost, and really have no way out as everything is an expectation.

    I don't love user fees, but I want my drinking water to be safe and sure don't want "skimping" of expenses there. Nor would I like "skimping" on first-responder services, should I need them. And then some people want all services provided to them in two languages. And all facilities have to be accessible to those with disabilities. And I want more, better roads. Etc.

    All worthy causes and hard to argue with any in isolation. But the cumulative effect, the number of layers and amount of requirements, are just so massive that one doesn't know where to begin.

    Again I think that the cost and motivation of government employees is AN issue. My fear is that it may not be the primary issue - so if we make the discussion too much about that (which is tempting, because it's conceptually simple, and an "us vs. them" sort of thing) that we will miss focusing on the real root cause, which I think has to do with complexity, regulations, layers of gov't, and frankly our own expectations & priorities.

    1. @Anonymous: I think we're talking about two mostly separate issues. The job of government is important and complex. We suffer if they do it poorly. I want them to do it well, and I'm willing to pay for that.

      The second issue is extreme inefficiency. Having a large number of unnecessary workers around diverts money and actually makes it harder to get the important jobs done.

      I don't know what the answer is to these difficult problems, but trying to extract ever more money in fees and taxes from city residents while growing huge debt isn't sustainable. Diverting huge sums for administrative salaries necessarily means skimping on other spending.

  3. I agree with most of the post and comments. What has not been discussed is that we are already paying for roads with taxes collected elsewhere.
    What seems to upset people is the fact that price of roads will now be visible.

    1. @John: It's certainly true that making costs visible generates complaints, but I'm more concerned with paying twice. I pay taxes to cover fixing existing roads and to build new roads as necessary. These taxes will continue to be collected and rise each year. On top of this, I will pay tolls.

  4. One of the problems with municipal tax is that the city has monopoly power to raise taxes. I can't just seek out a cheaper provider for city services. This also happens with electricity and natural gas in my province of Manitoba. There's also only one provider of car insurance here, though that somehow remains a relative bargain compared with other provinces.

    1. @Gene: Yes, that's a potential problem with any monopoly. And it's what permits a monopolies to grow inefficient. Private sector companies that aren't monopolies can grow inefficient too. For example, the research and development arm of Nortel, called BNR, developed a culture of moving poor performers around instead of firing them for about the first 7 years I worked there. Subsequently, this changed in a big way. It was Nortel's profitability that made it possible to get inefficient, but market pressures eventually turned this around. There is less pressure in government for such a turnaround.

  5. Government efficiencies aside, we have to pay for the roads we use somehow. So nobody is really paying twice but in fact light road users subsidize heavy road users. I'd be in favor of a 100% user pay system, preferably through gasoline taxes to pay for not only roads, but also traffic policing, traffic accident injury care, and even insurance. But that would probably result in $5/litre gas and most people would hate that. It would be a powerful incentive for efficient transportation though.

    1. @Greg: If we accept that we must pay for bloated administration in governments, then I agree that there is no double-paying. With this line of thinking, property taxes used to cover building and maintaining roads, but that has been diverted to government worker salaries over the years.

      I like the idea of a 100% user pay system through gasoline taxes. It should come with a substantial drop in property and income taxes to make it tax-neutral. This would change the current balance in a big way. Right now we subsidize trucking and other driving substantially. Even if you could get ordinary people to accept high gas prices in trade for lowering all other taxes, you would get massive opposition from car and oil companies among others. I still like the idea, though.

    2. We could also then get rid of driver license fees if, after all, the burden goes to only those who drive on a per mile basis. In Montreal there is already an additional municipal tax on the price of gas.
      Governments, at all levels, do not seem to have a handle on how to admisister money. They only know how to spend it unfortunately at times on worthless administrative grandeur.
      As teachers once told me about school budgets, if you don't spend it the money gets withdrawn from the next years budget. So the incentive is to spend to the max so that the next budget is not reduced. Never mind that some of the money goes to unnecessary spending, just get it spent.


    3. @Ricardo: I've heard friends who work in government (and a few in private industry) talk about cases where they scramble to spend the rest of their budget before the next fiscal year starts.