Designing Proper Fiscal Arrangements for Sub-Local Decentralization in Montreal

ABSTRACT:

The amalgamation and de-amalgamation period in Montreal (2001–2005) led to the creation of a city in 2006 with 19 decentralized boroughs integrated in a multi-tier metropolitan governance structure. Most recent work on Montreal municipal issues has focused on describing its complex governance structures. Very little attention has been given to the new fiscal relations between the City and its boroughs. Because of the extent of its fiscal decentralization process, the case of Montreal raises the question of how far can it go? Using information collected during meetings with elected officials and public services directors in 2012 and fiscal data analysis, we draw some conclusions on the right level of sub-local decentralization for Montreal. Based on efficiency considerations, the evidence suggests that some responsibilities need to be rescaled leading to more centralization. On the other hand, fiscal autonomy, which enhances accountability at the sub-local level, is also a crucial factor that makes fiscal decentralization work.

Notes

As Slack and Bird () and Sancton () point out, many large municipal governments are still too small to encompass an entire metropolitan region, which weakens their capacity to tackle metropolitan-wide challenges.

Fragmented metropolitan areas typically have more residential segregation in the United States than unified ones, but not necessarily economic segregation (Jimenez & Hendrick, ).

New York and Los Angeles have sub-local units (boroughs and neighborhood councils). However, most local services provided at the sub-municipal level in United States are undertaken by business improvement districts or other forms of private governments (Baer & Marando, ; Morçol, Hoyt, Meek, & Zimmermann, ; Rosentraub & al Habil, ).

Differences in demand can also be due to differences in income, which do not refer to Oates’s () argument. A key governance issue in this case is the extent to which differences in preferences are to be met, while at the same time redistributing resources to equalize service levels.

As well as two adjacent islands, Ile Bizard and Ile Dorval.

Before amalgamation, the City of Montreal was not divided into boroughs. After amalgamation, the suburban municipalities became boroughs (or parts of boroughs) of the city, while inside the city nine new boroughs were created, generating a new sense of community in these boroughs that had not existed before or at least had no political institution to express itself.

Trains are the responsibility of a provincial agency.

The Montreal Metropolitan Community (MMC) is a weak structure with a very small budget. Even though it has a responsibility in metropolitan public transportation, the coordination of services at the metropolitan scale is carried out by a provincial agency. The mayor of Montreal is the president of the MMC. The 28 council members are chosen among the mayors of the 82 municipalities included in the community.

Except for the departure of Montréal-Est.

Because there is no independent administration for the Agglomeration, the City of Montreal is responsible for managing these expenses.

Acceptability (by local officials or the population) and simplicity (low administrative and compliance costs) are also considered as important criteria in the analysis of public finance. These were not mentioned however during discussions regarding the reform of boroughs’ financing in Montreal. The main reason is that all financing tools discussed in the process already existed and seemed to be widely accepted. The impact of the reform on administrative and compliance costs also remain low. There might be some acceptability issues in the implementation of the reform in future years (some boroughs might be losers), but at the time of writing this article, this was not observed.

Centralized but delegated activities are activities that had been the responsibility of former municipalities before amalgamation, but became the responsibility of the central city afterwards. The central city is accountable for its financing and its services, but the borough delivers the service. For example, a major park in the borough of LaSalle is maintained by the borough just as it maintains all of its parks. That activity’s financing is embedded in the transfers to the borough without distinction from the financing of other parks. In this sense, we can say that the responsibility for major parks has been centralized, but that budgets have remained local (at the borough level). That is true for all delegated activities.

A formula indexed both to inflation and changes in indicators (such as population or length of roads) to ensure predictability of revenue growth for the boroughs.

And vice versa when there is asymmetric service provision by the central city to boroughs, a rarer case.

A $0.05 tax per $100.00 of property value generates different amounts of revenues in the boroughs because the property tax base is unequally distributed. An equalization mechanism has been put in place to neutralize this fiscal effect in 2013. Transfers to boroughs were adjusted accordingly, so that the first $0.05 of tax had no effect on boroughs’ budgets (see Martinez-Vazquez & Searle, for discussions on fiscal equalization).

In a context where the previous elected mayor had resigned and his replacement was arrested for corruption, this change was necessary for Montreal. However, this situation cannot be linked to any institutional consideration regarding Montreal and its boroughs. Scandals of corruption have affected many other cities in Quebec in 2013, including suburbs and rural municipalities.

Additional information

Notes on contributors

Jean-Philippe Meloche

Jean-Philippe Meloche is Assistant Professor at the Urban Planning Institute, Université de Montréal, and Associate Fellow at CIRANO (Center for Interuniversity Research and Analysis of Organizations). His research focuses on the economics of urban policies and planning with special attention to local public finance. He is the author of a number of articles and working papers and has worked with many municipalities, mainly in the Montréal metropolitan region.

François Vaillancourt

François Vaillancourt is a Fellow at CIRANO, Professor Emeritus (Economics), Université de Montréal, and a member of the Royal Society of Canada. He has published extensively in the area of public policy (fiscal federalism, taxation, and language policy). He has acted as a consultant for both Canadian government departments and agencies (Auditor General; Finance Canada and Finance Québec; Law Reform Commission; Finance Committee–Parliament; Statistics Canada) and international bodies (Agence française de développement, Organization for Economic Co-operation and Development, United Nations Development Program, and the World Bank).