Municipal Consolidation, Regional Planning and Fiscal Accountability: The Recent Experience in Two Maritime Provinces

In the recent debates on municipal consolidation in Canada, the importance of regional planning has emerged as an important aspect of the discourse. The advocacy for consolidation has been particularly apparent in regions affected by rapid physical change. A number of Canadian provinces experiencing rapid population growth in suburban and rural regions -- including Ontario, Quebec, New Brunswick and Nova Scotia -- have advocated consolidation to try to address the dilemmas associated with population spillovers. Establishing new boundaries that encompass the whole area of geographic expansion and in the process establishing a single coordinating political administration, is considered beneficial for both the urbanised municipality and the neighbouring jurisdiction where the population overflow is occurring. The single government is expected to provide much more effective regional planning, allowing the municipality increased capability to deal with issues associated with environmental protection, infrastructure investment and waste management. One particularly important area of concern within the context of regional planning is fiscal accountability. Several provinces have expressed concern over residential and business investors locating just beyond urbanised boundaries, making extensive use of more expensive customised services in the urban jurisdiction, while paying lower rural tax rates (Nova Scotia 1992; New Brunswick 1992; Quebec 1996a, 1996b, 1996c; Vojnovic 1998, 2000a). Thus, while paying only rural rates these residents are able to make use of both the services provided to them by the rural district, and many of the more expensive services available in the urban areas -- such as recreation facilities, libraries and schools with more customised educational amenities. This is the classic dilemma of externalities. It is a common concern in rapidly growing urban regions where population growth spills over beyond municipal boundaries. Supporters of municipal consolidation argue that in instances of spillover benefits, enlarging municipal boundaries and incorporating all the relevant economic agents is an initiative that will ensure fiscal accountability (Nova Scotia 1992; New Brunswick 1992; O'Brien 1993; Quebec 1996a, 1996b, 1996c). Thus, put simply, a single government that encompasses all the beneficiaries of its services will have authority to charge everyone for the public amenities provided within its jurisdiction. However, there are potential problems of merging and harmonising tax structures when there are different service standards and levels, and therefore costs, of providing services to different municipalities. The difficulties are further exacerbated when some merging member municipalities do not have the fiscal capabilities to take on the associated increases in costs of the new service levels or standards. As research on service delivery has shown, variations in service provision are particularly apparent between urban and rural districts -- although more subtle differences will exist between urban and suburban areas, and even urban areas that maintain different preferences for municipal service levels and standards. Some of the major cost differences between urban and rural service delivery exist because rural municipalities generally do not provide water and sewage networks, recreation facilities, libraries, fire hydrants, sidewalks, street and sidewalk snow removal, streetlights, public transit and the general administration that is required to support these municipal functions. Recent studies on per capita expenditures in different sized municipalities in Quebec and Ontario have demonstrated that per capita municipal expenditure can vary by over 300% between smaller rural municipalities and larger urbanised districts. These differences are largely caused by differences in the mix, the levels and the standards of services.(1) If after an amalgamation, the cost variations in service provision between municipalities are not considered in the design of the new tax system, considerable inefficiencies and inequities could be generated -- particularly if the restructuring involves the merger of urban and rural areas. …

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