War on deficit is no time for a fire sale of public assets

Posted on January 27, 2010 in Governance Debates

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The almost unavoidable fallout from the global financial meltdown of 2008 will be the deficit wars of 2010. Governments across the world have been called on to do extraordinary things in the past year to avert a massive depression. As a result, Ontario projects a $25 billion shortfall, and the federal government twice that amount.

But because municipalities are forbidden to run an operating deficit, Toronto is said to have an exceptional budget crisis. There will be lots of free advice offered about dealing with the problem, but some of the cures proposed are far worse than the ailment. Imagine selling off a money-making operation like Toronto Hydro just when the potential of alternative energy is opening up. It only makes sense if you’re related to the guy who wants to buy it, since it’s like getting a licence to print money.

Because there is a lot of money at stake, we need to be pretty skeptical about the well-rehearsed script being presented by a chorus of business interests: sell off public assets, reduce public services and give more corporate tax breaks. It’s no surprise to hear that from representatives of the wealthiest firms on Bay Street. On one hand, they want services outsourced, wages checked and assets sold or “monetized.” On the other hand, they demand that tens of millions of dollars in property taxes be shifted from business onto the backs of single family homeowners.

Let’s be clear. The funding crisis hits every large downtown municipality in Ontario. It has existed since the province downloaded social service costs, transit and other obligations to cities without an equivalent source of revenue. Toronto gets only about 6 cents of each tax dollar collected from its residents. With that, it needs to provide police, emergency services, roads, transit and a myriad of other programs that are vital to our quality of life. The math is very simple – you can’t have a great city for 6 cents on the dollar.

The real solution lies in a fair share of revenues. Queen’s Park and Ottawa have access to many different revenue streams, starting with progressive taxation. While the province has provided significant capital investment in transit, there is no guarantee there will be enough money to operate the system. Social services uploading won’t be complete for nearly another decade. As for Team Harper, we heard in clear expletives its attitude toward the country’s largest city.

A key objective in the looming deficit wars is to open up the public sector to private operators. The motive is very simple. The typical return on investment translates into tens of millions in profit if a company can access public sector operations in health, transit, utilities or waste treatment. Fortunes have been made on child care in Australia and prisons in the United States. For business interests, the only question is: Why not Canada? And why not Canada’s largest city

But for ordinary people, it’s not such a good deal. Across Canada the health-care sector has outsourced much of its services to three multinationals, and in the process transformed a lot of decent salaries into poverty-level jobs. The P3 (public-private partnership) development of hospitals brought skyrocketing costs – more than $200 million extra just for the Brampton site, according to Ontario’s auditor general. Hamilton’s water system went through three private operators and a massive sewage spill before it was finally brought back under public control. York Region has spearheaded the delivery of transit by private or P3 operators, but it needs a subsidy of $4.55 per ride compared with only 59 cents for the TTC. And now Metrolinx is poised to expand the P3 model across the region.

These are the issues at stake in the debate over Toronto’s finances. Public services and programs are the foundation of a decent quality of life for working Canadians. They are the legacy of wise investments by past generations. Torontonians kept hydro public through the great depression and two world wars. Why would we give up a crucial asset like that now, after the bitter experience of Highway 407?

Toronto’s long-term budget dilemma won’t be fixed by selling off public property. But important revenue sources are available.

Cities are challenging private telecoms that pay almost nothing for burying their lines under our roads. Senior levels of government pay only a fraction of the property tax rate on their buildings – that should change. Energy retrofits of all public buildings would reduce utility costs tremendously, while Toronto Hydro could partner with our schools and universities to take advantage of the new feed-in tariffs for alternative energy. There could be a surcharge for new developments that fail to meet stringent green building standards. And yes, there could be a moratorium on locking commercial tax rate increases to only one-third of homeowners.

Fixing our broken EI system would save the city millions in welfare payments, as well as provide dignity to those of our neighbours who have lost their jobs. Allying with other large cities to demand a responsible federal transit strategy could secure millions more to expand rapid and accessible transit.

We are Canada’s largest city, with a huge leadership role to play in economic development, the environment, racial diversity and social cohesion. Yes, it takes money and effort to succeed in that role. Future generations will say it was well worth the investment.

<  http://www.thestar.com/opinion/article/756234–war-on-deficit-is-no-time-for-a-fire-sale-of-public-assets>.

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