Big City Spenders
The article provides an overview of the expenditures of the three largest cities namely Vancouver, Montreal and Toronto. From the article, it is evident of the divided views on the inadequacy of revenues for Canadian municipalities compared with the expenditures accrued by municipalities of the three main cities. The report relies on the research conducted by Canadian Federation of Independent Business (CFIB). The report supports the fact that the municipalities of the three cities have increased their respective operational expenditures beyond sustainable and acceptable levels. Furthermore, the report illustrates the differences between expenditures and population increase. Increase in population would demand increase in services provided by municipalities, which is not the case as provided in this report.
The first question and issue that is contentious in this report is the increase in operational expenses in the municipalities. It is agreeable, as evident in the content in the report, of the effects of increased costs or expenditures of local governments on the costs of business for small and medium sized entities. An increase in spending for a majority of municipalities around the world is largely driven in the increase in demand for social services and resources provided by municipalities due to increase in population. However, the municipalities indicate significant increase in expenditures. Operational expenditures for municipalities have increased by a significant 55% over the past 12 years. This is not line with expectations of demand for services as a result of population growth. Common expectations are that the increase in expenditures for the municipalities because of increase in population and cost of business operations.
The increase in expenditure for the municipalities to high costs of operating businesses in these municipalities than would be expected given the population levels. The expenditure has outpaced the population growth and inflation levels recorded the respective municipalities. Additionally the increase in expenditure means that businesses have to fund such expenditures in the form of increased taxes and overall high costs of doing business in the municipalities at the same time contending with low quality of service provided by the municipalities. The problem can be termed as an expenditure problem as opposed to a revenue problem.
It is a spending problem in the sense that the municipalities are unable to associate the increase in expenditure with enhanced services, population growth and inflationary pressures in the economy. From the report, the three municipalities associated the high spending with increase in employee compensation over the 12 years. Wages, salaries and employee benefits form the largest share of costs of operation for the municipalities. This has been achieved despite the slow increase in population, which would demand increase in services and quality of services provided by the municipalities.
Additionally it is evident that staffing needs have increased over the 12 years as featured in the report. The staffing levels increased by an estimated 25% between the years 2000 and 2011 as compared with a 12% increase in the population figures within these municipalities. This brings questions as to the need for additional labor by the municipalities that is not matched by the increase in population levels. Population increase results in increased for demand of services and resources by the public that should be provided by municipalities. The spending in the public sector and private sector varies greatly and provides an insight as to the variations in revenue and costs of operation.
Private sector entities are largely driven by the need to maintain their respective costs of operation at the lowest level. On the other hand, public sector entities are bound by trade unions and public pressure to increase the wages, salaries and benefits accruable to their employees. Suggestions have been made that there should be harmony in payment of salaries for both private sector and public sector employment. This would ensure fair competition for the employees and the entities as well. Similar positions in both private and public sector should attract identical levels of remuneration or compensation.
Sustaining the high levels of expenditures for the municipalities in the country is impossible, as the costs are an impediment to capital projects and development in the respective municipal jurisdictions. There is a need to evaluate the approach applied by the municipalities to reduce costs of operation that are the main hindrance towards development. Given that the costs of salaries, wages and benefits for the employees assume the largest share of costs for the municipalities, the remuneration formulas should be reevaluated.
The focus on spending should not be limited to the remuneration costs for employees in the municipalities; rather it should extend to other items in the expenditure list. The growth of small businesses is reliant on the business environment provided by municipalities and the government as whole. Decreasing the costs of business by using new formulas for remuneration in the municipality would enhance the growth of small businesses in the cities identified. This may provide avenues for new revenues that could be used for various developmental or capital projects.
The spending of the municipalities should be relative to factors such as population growth and inflationary pressures in the market. Additionally, seeking means of reducing the costs of staffing for the municipalities would provide an effective means of developing solutions to reduce increased spending. This would provide freed incomes or funds that can be directed to development and capital projects within the cities’ jurisdictions. The report is appropriate for business owners as it provides an insight as to the reasons for increase in taxes, levies and other business costs imposed by local authorities.