What makes municipal amalgamation work?

By Ainslie Pierrynowski (AIMS on Campus Student Fellow) 

In October 2017, five communities on Prince Edward Island’s South Shore took the first steps toward potential amalgamation. Their goal: to pool the towns’ resources together, reflecting an existing political push for “fewer but larger communities” in the province. These words may ring familiar for many communities across Atlantic Canada. Municipalities in Atlantic Canada often grapple with depopulation, rising administrative and service delivery costs, and seemingly inefficient, overly decentralized, or redundant forms of local governance. Amalgamation is frequently invoked as a possible solution to these difficulties. This idea has spread throughout the region, from the much-studied 1996 merger that created the Halifax Regional Municipality (HRM), to the formation of the Regional Municipality of Tracadie-Shelia in 2014, on to talk of a potential amalgamation of Labrador City and Wabush, as of 2017. Nonetheless, several voices have questioned whether amalgamation has truly made the region’s communities better off. Indeed, a closer look at amalgamation in Atlantic Canada reveals that while it can be a powerful way to address the area’s demographic and economic challenges, amalgamation does not necessarily lower costs and produce more effective governance in and of itself. Rather, several key considerations must be taken into account for successful amalgamation to occur.

To begin, how the initial stages of the amalgamation process—research, economic analysis, and consultations—are carried out can influence whether amalgamation ultimately proves beneficial for residents. In particular, former AIMS President Brian Lee Crowley points out that relatively few municipal services have substantial economies of scale, a term referring to situations where the per unit cost of production decreases as the size of one’s operation increases. It is true that some public services, such as policing in the HRM, can benefit from increased economies of scale post-amalgamation. Yet, failure to distinguish between which services may see greater economies of scale and which services may experience few or no cost-saving effects can distort financial projections with regard to amalgamation can produce unexpected, costly challenges for newly amalgamated municipalities.

The governance structure of amalgamated municipalities also matters. Rather than rendering service delivery more efficient, single-tier, centralized governments overseeing large municipalities may find it difficult to determine which services residents want and what they are willing to pay for. In contrast, local government structures focused on smaller communities have an advantage in this area because residents, as Crowley notes, “cannot vote themselves benefits at the expense of other taxpayers” elsewhere in the municipality. Instead, the smaller scale of such municipalities means that residents, generally speaking, solely request the services which they want and are able to pay for.

That is not to say that small municipalities are always the answer, nor that amalgamation should be taken off the table. In fact, given regional demographic trends, many small communities in Atlantic Canada have ageing, shrinking populations—and thus a declining tax base—which makes it difficult to afford public services. Instead, successful amalgamation requires a careful balance between the coordinated regional economic development afforded by centralized, unified municipal governance structures, as with the HRM’s public-private development partnership, and the key role of municipal governments in addressing specialized, community-level needs and concerns. This balance can vary due to how much power the Mayor and executive have relative to the council, whether councillors are elected or appointed by the Mayor, whether elected public officials are voted in by ward or at-large, the population distribution and rural-urban make-up of a given municipality, and whether municipal services are delivered by regional agencies or at the local level. Indeed, amalgamated municipalities seeking to reconcile regional and local concerns might adopt a two-tiered political system with provisions for local, small-scale governance like that initially proposed for the amalgamated City of Toronto—although this approach requires a clear delineation of the powers and responsibilities of each component of the municipal government, to avoid confusion and political deadlock.

Overall, Atlantic Canada’s demographic challenges and the growing political and economic importance of cities globally suggest that the amalgamation debate will continue to occupy a central place in the region’s political discourse. It is crucial to remember, however, that the decision to amalgamate is a complex one with a variety of potential outcomes. It is an option which entails significant preliminary economic analysis on a case-by-case basis. Additionally, the choice to amalgamate is merely the first step in a long process that can produce many, diverse forms of local governance, each with multiple, important implications for the futures of the residents therein. As more and more communities in Atlantic Canada opt for amalgamation, we would do well to bear these considerations in mind.

 

 

 

 

 

New Brunswick’s latest budget could have disastrous consequences

By Henry Gray (AIMS On Campus Student Fellow) 

In its latest budget, the Government of New Brunswick punted its responsibilities by projecting a cumulative provincial debt of $14.4 billion by the end of April 2019, steadfastly refusing to address the province’s looming debt crisis. In fact, in promoting their budget, neither the Premier nor the Minister of Finance devoted much time to discussing those two ‘D’ words: debt and deficit. This was akin to a sports reporter discussing the local team’s performance in the game last night without mentioning that the team was shellacked. Finance Minister Cathy Rogers even had the temerity to claim in her budget speech that the Liberals had “restored fiscal order” in the province. By all the key metrics, however, New Brunswickers lost decisively in the 2018 budget.

 

Reality has begun to set in. Last month, DBRS, a Toronto-based credit rating agency formerly known as Dominion Bond Rating Service, downgraded New Brunswick’s economic trends from “stable” to “negative”. This is not merely a symbolic categorization. It means that New Brunswick could soon be slapped with higher interest payments on its debt.

 

In a press release, the agency announced that it “questions the credibility of the current fiscal plan, given the lack of flexibility to respond to unforeseen pressures or fund new programs that are likely to arise as a result of campaign commitments in the upcoming fall election.” Indeed, electoral considerations seem to be what is motivating the government to make these policies of questionable long-term wisdom. With an election set to take place September 24, the Liberals, in crafting their final budget before the next election, have bet that voters will prefer an upsurge in government spending to the government staying the course on the balanced-budget targets that it has laid out.

 

Up until this point, the government had done a commendable job of sticking to its deficit-reduction objectives. In fact, the government managed to exceed its deficit-reduction goals the past three years. This year, however, the Gallant Liberals will be running a deficit of $189 million – far greater than the projected deficit of $117 million. This has also pushed back the date at which the government will supposedly be in surplus. The initial forecast had predicted a $21 million surplus in 2020-21. Now, the government is saying that it will run a $79 million deficit that year, and it will only return to surplus in 2021-22, which will be the first time that New Brunswick balances the budget in 14 years.

 

New Brunswick already carries the dubious distinction of having the highest debt per capita in the Maritimes. By adding $372.3 million to the net debt, the Gallant Liberals have now increased the province’s debt per capita to $19,050 for every man, woman, and child in the province. All the government is doing is pushing difficult decisions into the future. One presumes that the members of the government have told themselves that they can worry about these matters once re-election has been secured.

 

There is an old adage that says you have to spend money to make money,” Finance Minister Cathy Rogers said as she defended her government’s decision to blow a massive hole in their plans to arrive, eventually, at fiscal rectitude. The literature is clear, however. Governments that succeed in reducing their deficits and debt tend to do so primarily through restraining spending rather than raising taxes.

NAFTA: TRUMP & TRUDEAU

By Patrick O’Brien (AIMS On Campus Student Fellow) 

As we near the end of the first quarter of 2018 NAFTA discussions are being prolonged. At this point it seems as if there may be no resolutions or discussions may last continue throughout 2018, into 2019. The new topic that surrounds the NAFTA deal is the implementation of steel and aluminum tariffs imposed by the United States. The duties on imports worldwide into the U.S for steel and aluminum were 25 percent and 10 percent respectively. Canada and Mexico are ironically exempt from this tariff, although that may change based on the outcome of NAFTA discussions says President Trump. According to Finance Minister of Canada, Bill Morneau: “The fact that Canada won an exemption was a positive sign”.

This could be looked upon as a point of leverage in the NAFTA discussions where the U.S can negotiate better terms for their Country, as the tariffs seem more likely to be subject to a better NAFTA for the U.S and could be imposed if their terms in the agreement are not met. To illustrate how much leverage the U.S has with the subjective tariffs, last year Canada shipped over $10.5 Billion dollars’ worth of steel and aluminum combined. If the tariff was imposed roughly $2 Billion dollars of the imports would have been lost to tariffs alone.

What has Trudeau done to combat this in terms of trade negotiations/new opportunities? Besides stating that Canada would not “take any old trade deal” and that Canada would be willing to walk away from NAFTA if the deal was not beneficial, there have been brief discussions of potential post-Brexit talks with U.K of eliminating trade barriers. This would be extremely beneficial to Canada given the case that NAFTA discussions are nimble and little progress grows from the prolonged conversation.

In a fundraising event U.S president Trump has repeatedly stated that they are running a trade deficit with Canada and that terms of the new NAFTA agreement need to reflect upon this and restructure to make it fair. The president falsely states that the U.S runs a “$17 Billion dollar deficit with Canada”. This was backed up by the 2018 Whitehouse Economic Report which showed that the U.S ran a surplus of $2.6 Billion on a balance of payment basis.

While Canada remains optimistic of a deal coming together, and Trump urgently looking to close a deal with recent phone discussions with Trudeau, how will we reach a final negotiation, and what factors may hinder the process? One factor which may prolong the final decision is the Presidential election for Mexico, with voting beginning July 1, 2018. The current presidential nominee Andres Manuel Lopez Obrador is calling for “the suspension of NAFTA discussions” until a new president is elected, as he warns Mexico could be “sold out” in the discussions under the current administration succumbing to U.S pressure.

The certainty of a NAFTA agreement continuing is uncertain. Although if it is to be completed, and all parties are going to come to an agreement it will have to happen soon. Preparation for U.S midterm elections in November of 2018, and upcoming Provincial campaigns in Ontario and Quebec will be a factor in the likelihood of a deal wrapping up quickly.

As we enter what is “perceived” to be the ending months of the NAFTA negotiation due to political constraints, it will be interesting to see the upcoming propositions and if they will benefit all parties mutually for the continuation of NAFTA.