Lies Our Municipal Governments Tell Us

"Taxpayers have a choice of either paying higher taxes or receiving reduced services". How often have you heard that comment by your elected representatives at municipal budget time? If you follow municipal politics, you have likely heard it many times.

The problem is that this is the most popular and most frequent lie told by municipal politicians.

Typically well over 50% of a municipality's costs are made up of the salaries and benefits paid to their employees. In most cities those employees are virtually all members of powerful public sector unions. As a result, they receive pay and benefits that are significantly higher than are received by individuals in the private sector that perform similar functions (see my post of Jan. 23/09 for a link to a recent study on this topic).

Even though their pay and benefits are much higher, the productivity of municipal employees is much lower than it is in the private sector. To cite one visible example - you can always tell when a city crew is carrying out a street or sidewalk repair because the majority of the crew will be watching, rather than doing, the work. It sounds like a tired cliche, but it remains true to this day. By contrast, a work crew hired by the city from the private sector to do a similar repair will have fewer people at the work site and the majority will be actually working.

Other examples of inefficiency in municipalities abound. Recall the famous case a few years back of a camera crew that followed a group of municipal workers around Montreal for several days. The municipal workers were nominally responsible for patching holes in city streets. They actually did little of this. Instead, they spent most of the time in restaurants or aimlessly driving around the city.

So what the municipal politicians are actually telling us when they say that the choice is higher taxes or reduced services is that they are unwilling to confront their public sector unions and make them work as efficiently as the private sector, and at the lower wage and benefit levels that prevail in the private sector.

In the private sector there is relentless pressure to cut costs and improve efficiency particularly in the depths of a recession. The last thing a company in the private sector wants to do in a recession is to raise prices.

Unfortunately this is not the world of municipal governments. Since they levy property taxes and can seize your home if you don't pay them, it is easy for municipal politicians to raise taxes well in excess of the rate of inflation even in a recession.

How much are your municipal taxes increasing this year? Likely much more than the rate of inflation and more than the increase in your salary (at least if you work in the private sector). In the city of Ottawa, they are going up by 4.9% in an environment where inflation is about 1%.

For municipal politicians the path of least resistance runs directly to the wallets of taxpayers.


[The next post will present a short report card on the recent performance of Canada's municipalities. You won't be happy with the results.]