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C.D.Howe Institute March 20, 2001
UTILITY AND REVIEW BOARD Data bank
Central link UARB source
Look for case number M07050
Municipal Amalgamation in Ontario
The 1990s and 2000s were tumultuous decades for Ontario municipalities. Hundreds of municipalities across the provinces were amalgamated amid claims that restructuring would produce local governments that would be more efficient and less costly. Taxpayers, it was argued, would benefit from lower costs and lower taxes. Others have examined these claims, largely finding that these claimed benefits did not materialize. Much of this work, however, has focused on Toronto and the province’s other largest cities. Instead, we focus our attention on three smaller municipalities—Haldimand-Norfolk, Essex, and Kawartha Lakes—and examine whether the scale of municipal operations and politics in these areas affected the outcome of restructuring.
Using data for years 2000 to 2012 from the Financial Information Return published by the Ontario Ministry of Municipal Affairs and Housing, we compare various financial indicator trends for our three subject municipalities and a number of comparable municipalities that were not amalgamated. While for various reasons the data are not amenable to a rigorous econometric before-and-after analysis, our simple analysis suggests amalgamation did not result in cost savings or lower property taxes in the cases we examine. We find significant increases in property taxes, compensation for municipal employees, and long-term debt in both amalgamated and unamalgamated communities, suggesting there was no tangible, financial benefit from amalgamation. In fact, many of the claims put forward by those favouring consolidation failed to materialize. In most of our cases, the per-household municipal tax burden increased. We also find that spending on certain services and remuneration also increased significantly. The data largely indicate that post-2000 intra-municipal trends in cost indicators, such as protection costs per household, have remained stable within the group analyzed, or even increased after amalgamation, a finding inconsistent with the cost savings promised as a benefit of amalgamation.
We also analyze primary interviews with those involved in the amalgamation process to provide more context for the data on costs and tax increases. We find that in part this may be explained by the speed with which the province implemented restructuring. The process was quick and received little provincial assistance. As a result, wages were harmonized upwards in this period, which had a significant impact upon the cost of service delivery. Local actors con-fronted with mandated consolidation found themselves in an unenviable position and made quick decisions about governance and servicing issues without the benefit of time or access to comparable information and best practices. Very little central oversight was provided to those on the ground. Further, there was not enough time to negotiate new labour contracts with public-sector workers, further reducing any chance at cost savings. Specific to our cases, we found that, when rural areas were amalgamated with urban areas, residents began to demand more urban services, which further stretched municipal budgets in the years following the initial consolidation. Subsequent policy “downloading”—that is, the transferring of responsibility for services from the provincial government to municipalities—and a change in provincial government in 2003 entrenched these institutional structures.
De-amalgamation in Ontario: Is it the answer?
Study after study has found that the benefits of municipal amalgamation have failed to materialize. Costs generally increase after amalgamation, largely due a harmonization of costs and wages, and increases in service-efficiency remain elusive. The transitional costs after amalgamation are often quite high and, in some cases, reduce or even eliminate any anticipated immediate cost savings.
Mounting evidence suggests that amalgamation in Ontario has not led to more efficient service production or delivery. Municipal mergers reduce competition between municipalities, which weakens incentives for efficiency and responsiveness to local needs, while also reducing the choice for residents to find a community that best matches their ideal taxation and service rates. Since municipal mergers rarely result in boundaries that encompass entire metropolitan regions, externalities may still exist in transportation and land-use planning. And municipal amalgamations have sometimes forced rural residents to pay for urban services they do not have access to.
With so many negative aspects, it’s no surprise that local restructuring proposals have often been met with stiff resistance from local residents. It also comes as no surprise that many residents argue that their communities were better off prior to consolidation. In the wake of lingering resentment regarding amalgamation, de-amalgamation is often suggested as a solution.
We have seen the call for de-amalgamation emerge in many cities and towns across Ontario—including Toronto. Yet very rarely have we seen municipalities de-amalgamate—for good reason. There are significant costs to de-amalgamation, there is no guarantee a municipal government would be any more efficient after de-amalgamation than before and, finally, there is no guarantee there would be community consensus to move forward with such a plan.
Despite these concerns, de-amalgamation proposals continue to emerge in amalgamated communities. Some more vocal than others, but lingering concerns about the efficiency, cost and the nature of representation within amalgamated communities persist.
Taken together, the prospect of de-amalgamation raises two important questions, which we spotlight in our recent Fraser Institute study. First, is it possible to reverse a municipal amalgamation? And, second, if so, is it even desirable to de-amalgamate? Two examples are worth taking a look at: Montreal and Headingley, Manitoba, which seceded from Winnipeg. After provincially-imposed amalgamations, residents of both communities demanded institutional reforms.
In Montreal, a change in provincial governments led to a de-amalgamation referendum and communities within the newly amalgamated city were given the opportunity to leave. While many opted to stay, some did leave, forcing the creation of a new level of government to coordinate government activity on the island of Montreal.
In Headingley, community residents demanded they be allowed to secede from the amalgamated City of Winnipeg. After many years of trying, the province finally took up their case and legislated their removal from the City of Winnipeg, sparking bitter separation negotiations that nonetheless finally restored Headingley’s independence.
There is no reason why de-amalgamation cannot be pursued; nonetheless, it is not often desirable. Provincial governments have the ability to amalgamate municipalities and, therefore, also have the ability to separate them. While Headingley provides support for de-amalgamation proponents, Montreal should give us pause. Post-merger Headingley remains small, which is what the de-amalgamation proponents advocated. They are also a fiscally healthy community with a $30 million surplus in 2011.
Yet the Montreal example demonstrates that if de-amalgamation is not done correctly it’s very possible to further complicate the governance of a region and distract from much more important conversations about regional policy integration and planning. The key lesson from Montreal’s experience with de-amalgamation is that allowing certain areas to de-amalgamate and others to stay can create a fragmented patchwork of governance across the region.
If de-amalgamation were to be pursued in Toronto, the return of a two-tier structure would be the best option, but, of course, there’s always the possibility that the city’s governance structure could look very much like Montreal.
The difficulty in successfully implementing de-amalgamation means that amalgamation is something that cannot—and should not—be easily entered into. More care needs to be taken in finding the best institutional structure for our municipal governments.
…the costly experiment that failed Regional Ottawa’s rural townships are worse off
now, than before amalgamation with the city.
If it’s not broken …why break it?
Rural residents in general, as those within the townships of the former Region of Ottawa-Carleton, seem to have developed the good old-fashioned, sustainable character traits of self-reliance and independent-mindedness. The hard-working residents of the rural municipalities learned, long ago, to live within their means. Yet, rurals have always been big-hearted. Volunteerism has always thrived, along with the classic rural characteristics of good neighbourliness, open generosity, civility and hospitality.
Whenever political issues needed to be dealt with, in the rural townships, residents would address matters directly through one of their local councillors, or if required, speak to it at the local council chambers. The rest of the time, people went about their private business, making their living with minimal disruption or incursion from local government, which, over time had learned it had best work diligently, in the public interest, applying the requisite degree of thrift and prudence.
Lost representation means less democracy
How things have changed since amalgamation! At present, we are under-represented, and overtaxed. To make matters worse, the new mega-city of Ottawa has spent most (if not all) of our reserves, and is now continuing the self-appointed task of squandering money we don’t have, to satisfy its insatiable spendthrift appetite for non-essentials such as costly over-harmonization and petty social engineering. The city is now in our face, at every turn, with some new wasteful social program, invasive by-law, or other spending boondoggle – ‘flavour-of-the-week’.
The new City of Ottawa, in three short years, has managed to evaporate all of its transition grants and burn through most of the reserves frugally put aside by its newly acquired “family members” —the rurals. It has raised rural taxes while reducing services, and has closed most of the rural community centres (which we built and fully paid for, before amalgamation, and staffed largely with volunteers). Now the centres are closing, the volunteers are gone, yet the bureaucratic costs of running the city keep skyrocketing.
Where we once had a functional, democratic say in our day-to-day rural affairs, we have now been rendered virtually voiceless under the amalgamated city’s “new deal”.
The bureaucratic “take-over”
Representation of rural constituents has suffered enormously under amalgamation. With that, comes the double curse of reduced political accountability. A single ineffectual representative at the council table is no longer capable of serving us. He/she is simply outnumbered by the urban councilors, who are mere “rubber stamps” for city-focused agendas. Part of the diminished accountability is achieved by councilors deferring matters to unelected bureaucrats (city staff and outside consultants). This gives the unelected bureaucrats untold power over both the councillors and thus, over the public, as well. Urban councilors are all too quick to defer to staff because that makes their own high-paying “jobs” relatively worry-free, without the previous levels of stress or responsibility. And since the staff are not accountable to the public, and since the councilors can no longer do anything without them, (since they’re doing their job for them), they’re happy, too. Outside consultants are even happier, since they are being paid five to ten times more per man/hour to do the same work their internal counterparts should be doing it for. However, by hiring outside consultants to do the work, responsibility has now passed onto the “outside experts” —whose level of incompetence can no longer be challenged, because of all the money they’re being paid.
City Council’s disservice to its unwilling rural partners (by shotgun marriage), is made worse by Ottawa’s Mayor, himself. He directs council proceedings like a mean-spirited despot, producing a narrow-minded, centralist-controlled cabal, with outward appearances that are eerily similar to the operation of the federal cabinet …and its attendant, disgraced, sponsorship program.
If amalgamation got past us on the thinly veiled rationale of “cost savings”,(1) “economies of scale” and “built in efficiencies”,(2) then time has shown such logic to be a lie and a fraud. Sadly, amalgamation has been the precise opposite of what it was touted to be.(3)
What to do about it? … If it’s broken …fix it!
If one certainty has developed over the last three years, it’s that the present abuses of process, through amalgamation, cannot and will not be tolerated by rural residents for much longer.
We are basically faced with two options:
Option One, is to go straight to de-amalgamation. This is self-explanatory. The longer we wait, the more difficult it would be to realize this option. (At present, at least, most of the former municipal buildings have been retained by the city. Be suspicious of any fast approaching “fire sales” of these buildings, organized by the city, to “burn our bridges”, as it were).
Option Two, is that prior to taking steps to de-amalgamate, there would be a concerted attempt made to work within the present amalgamation framework —by substantially “changing the deal”. Rurals would need to have proper respect and representation restored. There would have to be checks and balances put in place to restore local representation, and to proportionately balance the rural taxes to fairly reflect the relative level of services received. Urban bylaws often do not suit in the rural areas. When it comes to many of the urban bylaws, one size does not fit all. Governance of the rural wards should be handled locally (as it always had been) for greatest democracy –and cost efficiency. Ward boundary “tinkering” does not solve the governance / effective representation problems brought on with amalgamation. Likely, a rural borough system should be one of the first options looked at, to provide more democratic local representation.
These are just a few of the many areas requiring immediate re-adjustment, if we rural citizens are to recover some of our “stolen democracy”.
Now is the next-best time to begin.(4)
1: The Economic Arguments Against Municipal Mergers – Rather than expanding cities, we should break them up into an array of independent, neighbourhood-based governments that would set their own property-tax rates, elect their own officials, and…..
2: “Low Expectations for Municipal Amalgamations in Ontario” – Frontier Centre for Public Policy – From an Ontario perspective, the cost savings benefits of municipal amalgamation have been exaggerated. Costs do not go down for two reasons. “Levelling up” happens when wages are raised to the highest levels in the area being amalgamated. Costs increase when free, volunteer labour is replaced with paid labour. Amalgamation discourages the “discovery process” where smaller governments have the freedom to innovate and experiment with different ways of service delivery.
3: Discredited ideas and Utopian ideals driving municipal amalgamations – C.D. Howe
Institute study – Toronto, March 20, 2001: “Amalgamations forced on municipalities by provincial governments are the product of flawed nineteenth-century thinking and a bureaucratic urge for centralized control. …What’s more, says the study, smaller and more flexible jurisdictions can often deliver services to residents at lower cost, throwing in doubt the financial assumptions typically used to defend amalgamations.”
4: A feeling of ownership – Stittsville News – Editorial – April 6, 2004 – “We had something special in our previous lives under our 11 local municipal governments. We have to get that feeling back and we have to get back the aura of ownership by the people that we had prior to amalgamation in 2001.
Rural Council, is there a need – Having a “rural voice” at City Hall is paramount! Many residents however, sense that their concerns are often over shadowed by the demands of their urban/suburban cousins. Quite frankly, they are right! Rural services and service levels have unquestionably decreased since 2000. Residents, citywide, are becoming increasingly concerned about rising costs of all levels of government. None, more so, than in the rural areas of this province! (By Councillor Glen Brooks, Ward 21, City of Ottawa) Municipal restructuring – The subject of election promises to allow returning to “pre-existing local governments”, and post-election concerns over lost local democracy through amalgamation, were discussed in the Ontario Legislature during Oral Questions on March 29, 2004.
“Eulogy for The Death of Democracy” – News Release #7 – Flamborough, Ontario – April 22, 2004 – (Quote from Eulogy: “The will of the people shall be the basis of the authority of government.“ …United Nations Universal Declaration of Human Rights)
Selected Quotes On Amalgamation, Democracy And Referenda – Link to Victoria County Website on: “Selected Quotes On Amalgamation, Democracy And Referenda -Dalton McGuinty and John Gerretsen”
Citizens of Ancaster working towards the De-Amalgamation of the NEW City of Hamilton – “For many decades, our Town of Ancaster was run by accountable, approachable councilors, who balanced the yearly budget without tax increases. We had no user fees or long lines. We knew the policemen & the firemen and our children had parks, pools and arenas to play in. Everyone took pride in our historical core–which instilled a sense of community in all of us. Have we lost all of this?” (Sound Familiar?)
Argument for de-amalgamation – by former Toronto Mayor, John Sewell – (Eye -Oct. 4, 2001) …”city councillors should be talking about how the megacity will be dismantled and how the two-tiered system of government that worked in the past will be re-established.”
“Chaotic city council is no accident” by former Toronto Mayor, John Sewell – (Eye – July 25, 2002) – “The starting point for change should be to roll back amalgamation. Toronto needs to restore a two-tiered system of local government, with one tier looking at things from a regional perspective and another keeping a local perspective. The clash between those two perspectives — and there are always clashes — should be resolved in public, with public debate. Those wishing to strengthen local government in Toronto should press this kind of agenda. Dealing with the mess of amalgamation is the only real restructuring issue in Toronto. It’s what should be on the agenda, not these diversionary proposals that would only entrench the bad things that have already happened.”
“Charest’s megacity lesson” by former Toronto Mayor, John Sewell – (Eye– May 8, 2003) – “Here’s the great secret about Toronto: the megacity doesn’t work. … I mean, pretty well everyone knows that the costly, centralized city governance model forced upon us by the Harris Tories doesn’t work. The local democracy delivered by the former six municipalities has been replaced by high-priced lobbyists, while attention to the delivery of good local services has disappeared.”
Power in the hands of the few – by John Sewell, former Mayor of Toronto – (Eye – Oct. 2, 2003) – “As we know from a century of experience, the centralized model is a disaster for any public organization. It didn’t work in the Soviet Union or in any of its satellites, and there’s no reason to think it will work here in Toronto.”
Local and Regional Governance in the Greater Toronto Area: A Review of Alternatives – Other things being equal, smaller governmental units are more democratic than larger ones. – Smaller governments are more accountable …Smaller governments are more responsive …Larger governments are more susceptible to special interests …Smaller local governments are more attuned to communities and neighborhoods …Large governments are less controllable.
Amalgamation bad for rural areas: opposition
The Opposition Saskatchewan Party says it’s done the math on the government’s amalgamation plans and it doesn’t look good for rural areas.
Amalgamation benefits …Fact or Myth – (Comment by Councillor Glenn Brooks – Ward 21, Ottawa)
Includes, Councillor Glenn Brooks’, June 21/04, Notice of Motion for Council consideration:
…”THEREFORE, BE IT RESOLVED that the City of Ottawa requests that the Province conduct an independent third party public review of the benefits of amalgamation, with the results to be released to the public no later than May 31, 2006.”