It Takes Three: Making Space for Cities in Canadian Federalism

The COVID-19 pandemic and the economic crisis it has produced have highlighted pre-existing cracks in Canada’s federal structure, particularly in relation to Canada’s cities. On the one hand, Canadian cities are on the front lines addressing and dealing with the impacts of Canada’s major policy challenges – not only COVID-19, but also climate change, the opioid crisis, homelessness, housing unaffordability, and insufficient transit development. On the other hand, cities remain “little siblings” in Canadian federalism: the federal government and the provinces and territories dominate the political and policy conversation, the powers and responsibilities of cities are subject to unilateral provincial change, and provinces maintain a strong presence in municipal affairs through oversight and regulations. Cities face four specific challenges because of this situation: 1. Paternalism: Cities have a semblance of authority in several policy areas, but often little actual power to make changes unilaterally. 2. Constrained finances: Cities have inadequate revenue sources and insufficient fiscal flexibility to meet their responsibilities. 3. Poor coordination: Unclear and overlapping jurisdiction between orders of government leads to poorly coordinated programs and disputes over responsibility. 4. Fragmentation: A lack of appropriate regional governance structures in much of Canada prevents necessary coordination among cities in a metropolitan region. How can these imbalances be addressed? This report recommends two fundamental steps. First, a clarification of the powers and responsibilities of cities is needed. In practice, this entails a review of provincialmunicipal relations, which should take place in the context of a similar review of the imbalance in federal-provincial relations. Six core principles should underlie the review: 1. Take a collaborative approach 2. Start with who does what 3. Follow the pay-for-say principle and avoid unfunded mandates 4. Consider revenue capacity and fiscal flexibility 5. Accommodate differences among municipalities 6. Look forward, not backward Second, trilateral relations in Canada should be deepened. Cities, provinces, and the federal government should have formal avenues for regular meetings and collaborative governance. At the same time, governments should pursue trilateral agreements to address policy challenges that require coordinated action and multi-level funding. In combination, these measures will not only put cities on a firmer footing, but they will also ensure the effective funding, coordination, and delivery of public services across all orders of government. Canada will be better able to “build back better” from COVID-19, including by addressing climate change, reforming social policy, and improving health care, if the governments best able to deliver on these efforts can afford to take them on. Canada will also be better equipped to handle these challenges with better coordination and cooperation among all three orders of government.

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