Laws that make cities poorer

INTEREST ARBITRATION GIVES MORE TO POLICE AND FIREFIGHTER UNIONS AS FIRE AND CRIME RATES DROP.

It’s becoming harder to run a Canadian city with traditional revenue sources such as property taxes and user fees. With respected economists looking at new local tax sources and with the City of Toronto exploring introducing toll roads, it’s clear that much discussion will be forthcoming on how to keep cities financially healthy.

To be fiscally sustainable over the long term, Ontario cities are going to need help from the provincial government. It is important to recognize that some of that help can come in the form of policy changes that will assist municipalities in controlling costs without imposing new burdens on taxpayers.

One of the most significant things the province could do to assist cities is reform Ontario’s broken interest arbitration system. Interest arbitration is used by municipalities when they can’t conclude collective agreements with unions representing emergency services personnel — police, fire and EMS.

In principle, interest arbitration is supposed to “replicate and mimic freely bargained agreements” by weighing the costs of essential services against the local government’s ability to pay. In practice, it’s frequently resulted in generous awards going to police and fire unions with little regard for how they will impact local finances. This unbalanced approach has led to escalating salaries and benefits driving the costs of policing and firefighting higher, even as longterm trends of decreasing crime rates and fewer fires continue.

The flaw of the arbitration system is that it has created a self-perpetuating “me-too” environment. Too often, arbitrators determine increases based on settlements made elsewhere in the province, while the economic circumstances of individual municipalities are given inadequate consideration. Arbitration has seen costly awards where there is little justification, whether it is 24-hour shifts for firefighters or retention bonuses for police. There may be sound rationales for having these perquisites in some municipalities in the Greater Toronto and Hamilton Area, but those rationales don’t exist in smaller cities or in rural and northern Ontario.

According to the Association of Ontario Municipalities, between 2010 and 2014 compensation increases to police and fire have increased much faster than the rate for all other municipal employees. To be specific, between 2010 and 2014 police and fire employees have received $485 million more than their municipal colleagues. That is a staggering number.

We respect our police officers and firefighters and their very important roles in our communities. They have challenging jobs and we have to recognize that but we also have to be able to afford them. This is becoming more and more difficult in large part due to the interest arbitration system.

The province could also help municipalities by ensuring that legislation provides for a fair and open tendering process for construction projects. Under the Ontario Labour Relations Act, public sector employers, especially municipalities and school boards, are treated as businesses and are thus subject to collective bargaining rules. This in turn limits competition on local construction projects and drives up costs.

Worse still, in a few cities — including Sault Ste. Marie — this has led to a virtual monopoly on construction projects being created for the benefit of a handful of trades unions. Other municipalities bound up in this situation are Waterloo Region, Hamilton, and Toronto.

There is a simple fix to address this: The province could amend the act to specify that municipalities and school boards are not construction employers. However, provincial governments of all political stripes have consistently refused to touch the issue.

As cities grapple with challenges like infrastructure deficits and aging populations, discussions on new local taxing powers may have to happen. But in Ontario, the first conversations should also focus on policy changes that can help cities stretch their existing revenue sources further. Reforming interest arbitration and ensuring fair tendering for construction contracts are two examples of low-hanging fruit. There are clear policy solutions for these issues that can be implemented quickly and without adding costs to taxpayers. What is needed is political will at Queen’s Park.