the cities issue The Political Economy of Cities
How do we pay for libraries and police?
Enid Slack says strong nations need well-financed cities by Jenny Hall
Money can’t buy happiness. But it can buy libraries, garbage collection and parks. The question is, how? Municipal finance is about the services cities deliver — fire, police, parks, libraries, water, public health — and the ways they pay for them. This can include property taxes, user fees, transfers from other levels of government and development charges.
Enid Slack, director of the Institute for Municipal Finance and Governance (IMFG) at U of T’s Munk School of Global Affairs, has made a career delving into the fiscal health of cities, which she defines as more than just whether cities balance their budgets.
“At the IMFG,” Slack says, “we look at cities’ needs, not just what they’re actually spending. needs are a function of demographics, socioeconomic characteris- tics, age of infrastructure and geography. needs have to be balanced against cities’ ability to raise revenues — not the taxes cities actually levy but their ability to levy taxes or collect fees. This is a function of the wealth of the community.”
Slack and colleagues have conducted dozens of studies on everything from whether Toronto’s 1998 amalgamation saved costs (no) to whether there are economies of scale in providing police and fire services (yes, but only until cities hit 50,000 people).
Cities, says Slack, are increasingly important to national economies. “It’s become commonplace to say that cities are the engines of the economy, but they are.” Cities have to compete globally for talented — and mobile — labour, and so they must offer services. Toronto, she says by way of example,“not only has to provide basic services like sewer and water, it also has to provide good parks and cultural facilities. To thrive, Toronto has to be a place where people want to live.”
One of Slack’s primary research interests is the property tax, which she calls “the tax everyone loves to hate.”
“For most people, income taxes are withheld at source. If you ask someone what they paid in income taxes last year, they probably don’t know. With sales tax, people know what they pay on each item, but nobody can possibly know how much sales tax they pay in a year. But if you ask how much they paid in property taxes, people know. Because they get a bill for it, it’s a very visible tax, even though it might be much smaller than the other taxes they pay.”
At the same time, she points out, municipal services are also visible. You get up, take a shower, take transit or drive on streets to get to work, perhaps eat lunch in a park.
“The services are visible, the tax is visible. I think that’s great. It makes local governments accountable. But it also makes it a difficult tax to increase or reform. Yet, many countries around the world are looking at introducing or increasing property taxes to fund municipal services.“
In addition to conducting evidence-based research, hosting events and providing advice to policymakers, Slack hopes the IMFG is changing the way students think about the cities they live in.
Like the rest of us, many of them are uncomfort- able with numbers. But, she says, the numbers are what it’s all about.
“We want better transit — that’s a classic example. To think we can get it without paying for it is naïve. At the end of the day, we can talk about better transpor- tation, we can talk about more affordable housing, we can talk about more police services. But we have to find a way to pay for them.”