1. Is Bigger Really Better? Lessons from Municipal Amalgamation in Quebec and Ontario Tasha Kheiriddin Executive Vice-President and Acting President, Montreal Economic Institute

2. Montreal Economic Institute 2

3. 3 Historical background  In December 1997, Ontario’s Progressive Conservative government passed Bill 103, forcing the merger of municipalities province-wide, including 7 which became the new MegaCity of Toronto  In December 2000, Quebec’s Parti Quebecois government passed Bill 170, forcing merger of 200 smaller municipalities into 40 larger ones, including 28 municipalities on the Island of Montreal

4. Montreal Economic Institute 4 Reasons given for amalgamation  Lower costs  Smaller workforce, fewer elected officials  Lower taxes  Less duplication of services  Improved accountability  Increased global competitiveness

5. Montreal Economic Institute 5 Hidden objectives?  Quebec: Many English-speakers from the West Island believed that the Parti Québécois intended to undermine their language rights  Ontario: The Progressive Conservative government wanted to shift control of Toronto from left-leaning inner-city politicians to conservative-minded suburbanites

6. Montreal Economic Institute 6 Number of employees  Montreal Prediction: Workforce would shrink by 1,260 people after five years  Reality: 330 more people work for the city today than in 2002 Employees who serve the public directly have declined by 2% while managers and supervisors have increased by 9%  Toronto Prediction: Number of employees would decline  Reality: Staff count since amalgamation has risen by 2400 positions

7. Montreal Economic Institute 7 Wages of workforce (Montreal) 2001*20022004Increase** Managers and supervisors99 83097 821108 41310% Professionals and white collar workers60 82259 52760 7552% Blue collar workers63 19962 84166 6446% PolicemenN/A76 39579 8534% Firefighters82 99986 50593 7158% Crossing guardsN/A27 25826 3913% TOTAL67 84169 17872 9765% * City of Montreal only ** From 2002 to 2004 Average annual income (adjusted for inflation), by type of employee (in 2004 dollars)

8. Montreal Economic Institute 8 Administrative Costs  Montreal Prediction: Drop in spending of 7%  Reality: Increase of 16.3% (inflation for the period was 6.7%)  Toronto Prediction: Amalgamation would save $300 million a year by eliminating duplication, revised downward to $240 million, then to $150 million  Reality: It is impossible to determine savings. Meanwhile, the city’s operating budget has increased from $4.2 billion in 1998 to $7.6 billion in 2006.

9. Montreal Economic Institute 9 Taxes and fees  In Toronto, Average property tax bill is up 27% since 2000 User fees increased for permit parking, commercial garbage removal, planning applications and building permits User fees were imposed on many people for recreation services  In Montreal, Taxes from all sources (mostly on property and water) are up 12.5% since 2002 Many low-income households now pay higher property taxes as a result of the mergers

10. Montreal Economic Institute 10 Competitiveness  Prediction: Bigger, unified cities would spur investments  Reality: The unity of Montreal island has not been a factor in a single investment in the last four years Toronto continues to see head offices and jobs flee to neighboring lower-tax jurisdictions “There is simply no connection between the municipal organization of a metropolitan area and its rank in the hierarchy of global cities. For example, the central city of Sydney, Australia has a total population of 20,000.” (Andrew Sancton)

11. Montreal Economic Institute 11 Why these additional costs?  Pressure to provide all services previously offered in various merged municipalities  Unions bid wages up to highest, not lowest level  Hard to fire people – more likely reshuffled to new positions  No more competition between smaller cities  Easier for interest groups to hijack political process  No real economies of scale

12. Montreal Economic Institute 12 Montreal and Toronto are not alone  “Study after study has shown that the efficiency gains of bigger government do not materialize” – Andrew Sancton Study of 48 metropolitan regions in the Southern U.S. by David Sjoquist Study of Miami area by Milan Dluhy Study of Bay Area and Minneapolis/St. Paul by Daniel Elazar Essay by Charles Tiebout, “Tiebout model”

13. Montreal Economic Institute 13 Political Consequences - Quebec  Intense public protest helped put Liberal government in power in 2003 on demerger platform  In 2004 Montreal went through tremendously flawed demerger process, which saw 15 cities and towns secede  Many powers are still retained by a so-called “agglomeration council” of the City of Montreal, resulting in higher taxation without control over spending

14. Montreal Economic Institute 14 Political Consequences - Ontario  In 2006, Toronto City Council is more left-leaning than ever before, and now controls a city of 2.5 million people, larger than 5 provinces  Toronto now seeking expanded powers of taxation and regulation in new City of Toronto Act which threatens to increase taxes and hurt business  Deamalgamation movements have sprung up in other Ontario communities (Victoria-Haliburton, Flamborough)

15. The verdict on municipal amalgamation ? Bigger is not better - rather, small is beautiful.