February 21, 1957

LIB

Allan Henry Hollingworth

Liberal

Mr. Hollingworlh:

Mr. Chairman, I would

say that is not the concept that I understand. As I understand it, in 1867 certain lines of jurisdiction were given to the federal government and certain lines of jurisdiction were given to the provinces. That is the set-up in any federal system.

Topic:   MUNICIPAL GRANTS ACT
Subtopic:   AMENDMENTS TO EXTEND BENEFITS AND PROVIDE CHANGES IN ADMINISTRATION
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SC

Frederick George Hahn

Social Credit

Mr. Hahn:

You have not said by whom, though.

Topic:   MUNICIPAL GRANTS ACT
Subtopic:   AMENDMENTS TO EXTEND BENEFITS AND PROVIDE CHANGES IN ADMINISTRATION
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LIB

Allan Henry Hollingworth

Liberal

Mr. Hollingworih:

By the fathers of confederation. As I was saying just a moment ago, Mr. Chairman, I think it is true that the federal government has given assistance and has recognized this problem by helping in the way in which it constitutionally could do so. In other words, in tax rental agreements provision has been made to give the provinces substantial payments and then in turn those provinces can help the municipalities if they see fit to do so. But certainly that is something that is to be determined by the provinces concerned. In other words, we will help but we cannot and will not infringe upon provincial jurisdiction. If we did that and if we went ahead and gave substantial grants to the municipalities- something which I say constitutionally we cannot do-of course we would be centralizing, something which my friend the hon. member for Edmonton East has been talking about; and centralizers, of course, are very bad. In other words, we are damned if we do something and we are damned if we do not. I think the federal government has shown an admirable attitude towards the municipalities and I think that fact is most clearly seen by the fact that this legislation has been brought in today.

What I should like to say is that the great advantage of this legislation, as I see it, is the simplicity of it. It is simplicity itself. It provides grants for federal property in lieu of taxes. Several of us in this house deplored the fact that there was a floor of 2 per cent and it has now been removed. As I say, I think this again shows that the federal government is interested in doing everything it can possibly do to help the municipalities.

If I may, Mr. Chairman, I should like to allude for a few moments to the situation in my constituency of York Centre. I think it will be shown by these figures which I shall quote how much this legislation is helping the people in this part of Ontario. In 1955, for example, the federal grant for Downsview airport amounted to $338,000. At that time the airport operated its own school. If the township had operated the school at that time it would have received another $175,000 but it received only $338,000.

I might say, Mr. Chairman, that this Downsview airport is a tremendous undertaking. The people of North York are extremely pleased to have it in the township, notwithstanding the fact that sometimes the planes fly a bit low. The interesting thing is the way this amount has increased. In 1956, it went up to $500,000. Last year, one of the able members of the Department of Finance and myself were able to negotiate with the township of North York school board and as a result the school children from the Downsview airport will be educated by the township of North York. This, of course, means that more money will be provided by the department for the township.

At the present time the grant, as I say, will be in the neighbourhood of $800,000 per year. There are three reasons why the amount has gone up. First of all, the assessment has gone up considerably because of the extension of the Downsview airport through the erection of scientific and research facilities. A recreational centre has been built and we hope it will be used by the township people. Another reason also is found in the removal by the government of the 2 per cent provision. The township will be receiving full taxes, plus school taxes. Thirdly, of course, there is the payment of the school rate which, alone, would amount to $300,000 out of the $800,000.

I feel that these facts show how important this bill can be to certain constituencies. I might point out that the budget of North York township, the general rate, is $4.5 million this year. As I say, of that $800,000 will be paid by the federal government on

Municipal Grants Act account of this great property in North York. Of course, the total township budget is $16 million and the $4.5 million is exclusive, of school and metropolitan taxes. The township of North York has grown to a size of

175,000 people and is the third largest city in Ontario now. These are the municipalities which need assistance. Metropolitan Toronto and the metropolitan areas of other cities in Ontario and the other provinces are the ones that need assistance. My submission is that this bill is very definitely assisting those municipalities that really were desperate.

In conclusion I might say one thing, and that is that I feel this whole matter of municipal taxation and municipal assessment is one that has to be considered primarily from the provincial level. I do not know the problems of my friends from Alberta or British Columbia but, as I stated in this house last year, I do know there has been no revision of the Municipal Act in Ontario since 1917. Of course, the Municipal Act was first passed in 1837 under the Baldwin-Lafontaine ministry. It is an act that needs to be overhauled. The council and people of North York feel it is unfair for the general taxpayer in the township to pay taxes on real estate to support everything. In other words, this is a fundamental problem and must be resolved by the provincial governments. We cannot escape from the fact that the municipalities owe their existence to the provincial governments and the provincial governments must solve these problems. Certainly, the federal government is willing to help. This legislation is evidence of the fact that it is willing to help. I should like to commend the Minister of Finance for his attitude and I feel the government has done a splendid job. As I say, I know the people from my part of the country are extremely grateful for this generous assistance.

Topic:   MUNICIPAL GRANTS ACT
Subtopic:   AMENDMENTS TO EXTEND BENEFITS AND PROVIDE CHANGES IN ADMINISTRATION
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PC

Michael Starr

Progressive Conservative

Mr. Starr:

In rising to speak on this resolution, may I say it is my intention to be quite brief because I have spoken many times in this house on the financial condition of the municipalities. The minister is well aware of my thoughts on this matter. It is rather difficult to stay within the scope of this resolution itself because the whole financial problem of the municipalities intertwines itself around, and is part and parcel of, the difficulties that are being confronted by governments at other levels.

The resolution we have before us now in the name of the Minister of Finance is one that is heartily welcomed. It has been advocated by various members of this House of Commons. At the moment, may I say that in my opinion it is a step in the right direction. It will help some municipalities, to

Municipal Grants Act some extent, in alleviating the heavy financial burden now being borne. I only hope that the, scope of this amendment will be favourable and will give the various municipalities affected their full share of taxes on federal property within their boundaries. It is understood of course that these grants will be made in lieu of taxes on properties owned by the federal government which require the normal municipal services.

The municipalities are faced with many financial problems in connection with schools, waterworks, etc. These represent capital expenditures which are unavoidable and which cannot be postponed at the present time. In many instances the municipalities are unable to finance these capital expenditures because of the tight money market. If they are able to sell their debentures, they must pay a premium in interest rates. I brought this to the attention of the minister earlier this session, and asked him whether or not consideration was being given to this question. Many municipalities, Mr. Chairman, that are unable to find a market for their debentures in Canada are forced to sell them in the United States at a high rate of interest.

In answer to a question of mine relating to this difficulty, the minister stated that possibly the municipalities are selling their debentures in the United States because they are able to sell them at a low rate of interest. This is far from the truth, because most municipalities are selling their debentures in the United States market as a result of being unable to sell them in Canada. In order to finance their necessary projects, they must go to the United States to obtain the money and as a result pay a high rate of interest.

Each year the Canadian Federation of Mayors and Municipalities as well as the association of mayors and reeves have presented a brief to this government regarding the plight of the municipalities. The government has turned a deaf ear to most of their pleas. In some cases, after many years of representation, as in the case of these municipal grants in lieu of taxes on federal property, something is done. The association of Ontario mayors and reeves recently presented a brief to this government. One of their representations deals specifically with interest rates on municipal debentures. They also request the earnest consideration of the government of Canada in providing means by which municipalities could obtain capital funds at reasonable rates of interest. The brief states that this is necessary so that they can supply essential municipal services to their expanding populations. The needs of these municipalities, Mr. Chairman, are not the needs

of tomorrow or the day after, but they are the needs of today. The government should give serious consideration to the problems that are being brought to their attention by the municipalities. I feel that the government should act as quickly as possible and not wait until tomorrow or the day after to take steps to alleviate these problems.

In regard to these grants, Mr. Chairman, I wish to ask the minister-and I hope he will be able to give me an answer-whether these grants in lieu of taxes will be paid on the full assessment of a particular municipality and at the prevailing mill rate of that municipality. The question now being asked by most municipalities, because they are in the process of preparing their budgets and establishing their mill rates, is whether these grants will be paid on the full assessment and at the prevailing mill rate.

Topic:   MUNICIPAL GRANTS ACT
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LIB

Walter Edward Harris (Minister of Finance and Receiver General; Leader of the Government in the House of Commons; Liberal Party House Leader)

Liberal

Mr. Harris:

Have we not paid the going rate on every occasion we have paid in the past?

Topic:   MUNICIPAL GRANTS ACT
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PC

Michael Starr

Progressive Conservative

Mr. Starr:

In municipalities that have federal property representing 2 per cent of the total value of property within their borders? I do not know that. That is the reason I am asking the minister to say whether this amendment will pay grants in lieu of taxes on the full assessment of that municipality and at the prevailing mill rate. Those municipalities are concerned because they are now preparing their budgets and are ready to set the mill rate. In smaller municipalities these grants in lieu of taxes will make some difference in their setting up of their mill rates.

There is also the question of airports. The federal government has an airport within the city of Oshawa which was used as an elementary school in the days of world war II. After the cessation of the war the air field was rented to the city of Oshawa at a nominal fee of $1 a year on a year-to-year basis. The municipality of Oshawa is maintaining this airport at a deficit each and every year. Will this airport be subject to these grants in lieu of taxes on the same basis as buildings which are the property of the federal government?

There is one other thing that I should like to bring to the attention of the minister. I urge him to endeavour to promote a conference of the provincial, municipal and federal governments in order to discuss a distribution of a fair share of the tax dollar. We should give this serious consideration. The municipalities, the provincial and federal governments should have an opportunity to discuss this very important question.

In ending my few remarks, Mr. Chairman, I wish to say that we welcome this legislation very much. We hope that the attitude of the federal government shows a tendency more

and more toward helping municipalities in their present financial difficulties.

Topic:   MUNICIPAL GRANTS ACT
Subtopic:   AMENDMENTS TO EXTEND BENEFITS AND PROVIDE CHANGES IN ADMINISTRATION
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LIB

William James Henderson

Liberal

Mr. Henderson:

Mr. Chairman, I rise to take part in this debate because the subject matter is of considerable importance and because I wish to support the resolution and the legislation. I wish also to commend the Minister of Finance on bringing it forward. I might say that this legislation is of great importance to my riding of Kingston, and particularly of great importance to Kingston city, the townships of Kingston and Pittsburgh where there are many government installations.

The minister has explained that the proposal will eliminate the 2 per cent formula and will mean that the government will pay grants in lieu of taxes on its main properties with some exclusions.

It is quite correct that the payments are grants in lieu of taxes. No one is insisting that crown property is taxable, but so long as the appropriate payments are made no one will argue about the proper title for them. The present propospal will increase the government payments on this account to about $16 million to $20 million a year, and will affect some 1,300 municipalities in Canada. Therefore, I think we can all consider this to be very important legislation. Further,- and I think this is very important-these grants will be effective from the first of this year. No doubt there will be places where improvements could be made in the legislation but I know that under the direction of our competent and very able Minister of Finance these amendments will be made later. Again I would like to commend him on bringing this progressive legislation forward. Incidentally, this legislation was originated and put into effect by this government. At the same time we all realize, as some of the previous speakers have said, that under our constitution the municipalities actually are the creatures of the provinces.

I do not think that the position of the municipalities is at all appreciated. To many they are but a lot of noisy spendthrifts who are always hard up. Nothing could be farther from the truth. There is some basis for their complaint. The fact is that our society has been subject to the full impact of modern science and technology, a thing which is commonly known to us and which has many effects upon our way of life, and sometimes we fail to appreciate it. I mean by "technology" the application of scientific knowledge to production. We are all aware that the industrial revolution which started some 200 years ago is still in full swing. It has revolutionized our lives in many ways, but my immediate point is its impact on municipal governments.

Municipal Grants Act

Our growing technology has brought about much larger populations in the western world with much higher standards of living. This simple matter of mere numbers is important because it has increased the problems and difficulties of social organization simply because there are more people in an area and in the social and political organization. Here may I quote-and I am sure the hon. member for Greenwood will appreciate this-from a report of the meeting held at Queen's University on municipal planning in August, 1956:

An example of the kind of change I mean is in the field of transportation where the development of the internal combustion engine has revolutionized our life. The aeroplane, the motor car, and other means of transportation have not only facilitated the development of large areas of the world but have revolutionized our modes of living. The motor car, for example, is responsible for a good part of the current problems of local government. It allows people to be transported relatively long distances in relatively short times; it permits them to live in one part of the country and work in another. It creates all the problems that go with urbanization, density of highways, density of traffic and so on. I do not wish you to think this is just a statement deploring the motor car; fundamentally, it is merely a statement of fact of what the motor car has done to our society.

The modern means of communication-telegraph, telephone, radio, television-all have developed a set of common tastes which have made people everywhere all want the goods and services which others have. There are now fewer differences in taste between rich and poor and between urban and rural dwellers than ever before. There is a commonness in taste which has in effect made most of our communities urban in their way of life. Everybody has now an urbanized or sophisticated taste in personal goods, consumers' durables, the social services, sanitary services, and overhead community services which the governments must provide. And it is this point that the impact of this change in tastes comes to bear on the municipality.

Thus the increase in numbers, advanced technology and changes in taste has developed population which makes demands on all municipalities for more and better service. This demand has to be met out of the traditional sources of municipal revenue which are inadequate, and so we get the "financial problem" of municipalities. Municipal governments are not just spendthrifts which spend all they have and then cry for more. The local governments are bearing the brunt of this social change-thus the need for funds.

That is the end of the quotation, Mr. Chairman, and I felt that this should be on the record. I feel that the municipal governments need all the attention, help and direction that can be given to them. It is primarily, legally, constitutionally the responsibility of the provincial governments but I am exceedingly pleased to see that our present government is taking the lead in one place where it can do so.

Since the hon. member for Ontario has quoted from the pamphlet entitled "The case for the municipalities of Ontario" which embraces the representations of the association

Municipal Grants Act of Ontario mayors and reeves to the government of the province of Ontario and the government of Canada, I should also like to quote two paragraphs from page 30 of the booklet, as follows:

This association has been one ol the municipal organizations urging that the federal government pay municipal taxation, or the equivalent thereof, in respect to all federal properties in all municipalities.

The association was highly gratified to note that in a recent announcement contained in the speech from the throne, the federal government proposes to extend the Municipal Grants Act to authorize payments of grants in lieu of taxes on federal property in all municipalities, where such property receives the normal municipal services.

Mr. Chairman, may I through you congratulate the minister and the officials of his staff who have been handling the administration of this act. I believe they have endeavoured in every way possible to assist the municipalities seeking grants. They have given them advice and direction and have performed their task with integrity.

Topic:   MUNICIPAL GRANTS ACT
Subtopic:   AMENDMENTS TO EXTEND BENEFITS AND PROVIDE CHANGES IN ADMINISTRATION
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PC

George Stanley White

Progressive Conservative

Mr. White (Hastings-Fronienac):

Mr. Chairman, I should like to ask the minister a few questions based on a portion of his remarks which are found on page 1354 of Hansard of February 15 and read as follows:

This means that the federal government will, subject to certain exceptions, pay the equivalent of full municipal taxes, including school taxes, on its land and buildings in municipal areas.

The first question I should like to ask the minister is what he means by "certain exceptions". Am I to take it that this includes the exceptions now set out in the act? Are those the exceptions to which he referred in' his remarks?

My second question is this. What is the correct legal meaning of "pay the equivalent of full municipal taxes"? Does this mean that the government will pay the taxes based on the assessment made by the assessor of the municipality? What cognizance if any will be taken of what is defined in the present act as "accepted value"? Will the local assessor have the whole say as to the assessment of government property or will the assessment be subject to the opinion of the minister or officials of his department?

My third question relates to the property that is described in the act as class B property. Will any of the property which is now termed class B property be subject to taxation? In his remarks the minister referred to the situation that exists at Camp Gagetown in New Brunswick. I would like to ask the minister what will apply to the large airport in the county of Hastings located at Trenton which comprises a vast area of valuable land, extensive hangars and buildings and a large number of dwelling houses

[Mr. Henderson.!

in which the personnel employed by the air force and enlisted personnel reside.

Topic:   MUNICIPAL GRANTS ACT
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LIB

Azel Randolph Lusby

Liberal

Mr. Lusby:

Mr. Chairman, I wish to express briefly my approval of this resolution. I think the principle of municipal grants in lieu of taxation on federal property represents a deviation from the old doctrine that the crown is in the fortunate position of being exempt from local taxation. I believe that doctrine is of considerable antiquity and from conversations I have had with municipal officials from time to time concerning the doctrine I gather that in their opinion it is also of considerable iniquity.

Every hon. member realizes that there were extremely sound reasons for establishing such a doctrine in the remote past, and many also realize there are undoubtedly sound reasons today for not completely scrapping or eliminating that doctrine. I think it is clear, however, that under present day conditions the application of this doctrine does lead to a great many anomalies and inconsistencies, but the principle of the payment of municipal grants in lieu of taxation on federal property tends to remove a great many of these. This principle was inaugurated in 1950 on a somewhat more narrow basis and the legislation enacted in 1955 broadened and expanded the principle to a considerable extent. In the beginning at least there was a considerable element of unfairness in the application of this principle as between the municipalities. Those municipalities containing heavy concentrations of federal property benefited the most and, shall we say, skimmed the cream off the proposition. I believe it is fair to say that generally speaking a concentration of federal property is considered in itself a great advantage to any municipality, and it seems to me the result was a sort of double advantage. In other words a few fortunate municipalities benefited substantially while a large majority of less favoured ones benefited comparatively little or not at all. However I think the 1955 changes greatly reduced the element of unfairness and I believe that this pending legislation could be said to be designed to almost if not entirely eliminate the element of inequality.

I was pleased to note that more than 1,300 municipalities-I think that is something like two and one-half times the previous number -will now share in the enlarged grants, the annual total of which, estimated at from $16 to $20 million, if I recall the minister's figures correctly, will be about double the $9,500,000 estimated as payable for the current fiscal year.

Actually this resolution covers a comparatively narrow field but I suppose it was inevitable that the debate would tend to

wander off into the much broader general field of aid to municipalities and I suppose it was equally inevitable that the fathers of confederation would take something of a beating, which they have.

In his remarks the minister said that the present extension of the principle of municipal grants is not based upon municipal fiscal need, which he pointed out was a provincial matter. I do not think the element of municipal fiscal needs can be entirely ignored even in the narrow field embraced by this resolution and it is something that must be taken into account. It is perfectly true of course that the municipalities are merely emanations of the provincial governments and their fiscal needs are constitutionally a provincial matter. That of course is not to say-and I think this is a point that should not be overlooked entirely-that increased federal activity in many fields has not had a beneficial impact upon the monetary needs of the municipalities. For example, the great expansion of social security measures including old age, disabled and blind pensions, unemployment insurance and other federal aid in respect of the unemployed, all have relieved the municipalities of a considerable financial burden in relation to caring for the aged, the indigent and the helpless.

I would like to say also that I think the hospital insurance plan now pending will have very much the same effect; it is likely to benefit them greatly in their financial arrangements. Nonetheless, it must certainly be recognized that the present monetary resources of municipalities everywhere in this country are increasingly inadequate, one reason being that their existing taxation structure is based so largely on the real property tax and, in most cases, is too narrow. It seems to me that any proposal to assist municipalities merits consideration. On the other hand, Mr. Chairman, I do not believe that any satisfactory solution to this problem will be obtained by a piecemeal approach to it-aid here, aid there, and so on. I believe the proper approach would be through the provinces themselves. It might even be that some changes would be required in the constitution in order to solve these difficulties.

I would like to see some provision inserted in these tax rental agreements by which it would definitely be specified how much of the money paid to any province under such an agreement would be allocated to the municipalities. That would be a great advantage to the municipalities in that they would then have knowledge of exactly how much money they would receive as a result of any tax rental agreement. At the present 82715-974

Municipal Grants Act time they are largely dependent on the generosity or lack of generosity of the province.

In any event, Mr. Chairman, it is my opinion that this present resolution represents a very welcome measure of fiscal aid to a large number of municipalities across the dominion, and that, as I said before, it will eliminate an element of unfairness which previously existed between municipality and municipality. For that reason I would like to put myself on record as endorsing it wholeheartedly.

Topic:   MUNICIPAL GRANTS ACT
Subtopic:   AMENDMENTS TO EXTEND BENEFITS AND PROVIDE CHANGES IN ADMINISTRATION
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CCF

Owen Lewis Jones

Co-operative Commonwealth Federation (C.C.F.)

Mr. Jones:

Mr. Chairman, I would like to join with those who have complimented the minister on having introduced this bill. It is certainly a step in the right direction, though it does not entirely satisfy our needs or our hopes. However, it is an indication that he is giving thought to the plight of the municipalities-rightly so, I think, because part of the plight of those municipalities is the result of government policy, in particular the tight money policy resulting in high rates of interest on bond issues. Some municipalities, as a matter of fact, have found it impossible to market their bonds at all; they certainly cannot meet the high demands of the international market.

Since the municipalities are unable to borrow at reasonable rates, and are finding themselves badly "squeezed" I respectfully suggest to the minister that he would not give the same reply today as he did some two or three years ago when I asked him to re-open the Municipal Improvement Assistance Act so as to lend money to the municipalities under that act at 2 per cent. The minister said, then, that the act was brought forward during a crisis, and was intended to help the municipalities out. I suggest that a similar crisis is facing the municipalities today; they are being "squeezed" on the money market in connection with the improvements they must undertake to meet the needs of their growing populations. They cannot afford to pay the interest rate demanded, and, therefore, I think the minister should reconsider the answer he gave and find out whether such a crisis as the act was meant to provide for does not exist now.

In addition to this aspect of the situation, the action of the government in curtailing loans for homes and other buildings has had the effect of cutting down the number of potential taxable properties in the municipalities. Moreover, the cost of operating the municipalities is continually increasing; more has to be paid in wages, for the purchase of equipment and everything else. Yet, at the same time, the natural increase in the

Municipal Grants Act number of home^ and other buildings has definitely been set back as a result of government policy. I feel it is now time for the government to review the situation with regard to municipal loans and grants and also to review the whole question of municipal, provincial and federal relationship.

I suggest that a joint conference should be held with equal representation from the three bodies. Between them they could reallocate their fields of operation. When the British North America Act came into force 90 years ago, only the two senior levels of government were represented. The municipalities were not recognized. They had no part in the agreement neither have they in the course of the past 90 years been asked to enter a conference to see whether their rights could be recorded under the B.N.A. Act. For this reason I think it is time for a revision to be made, particularly since the bulk of Canada's wealth today is derived from within municipal boundaries. Factories and other concerns with earning power are usually to be found within municipal areas.

Municipalities have to provide facilities not only for their industries and for the people who live within their boundaries but also for the dominion services situated in their towns-I am referring to armories. Tanks use the roads, troops use the roads, the post offices, and so on. Thus, the federal government has a definite responsibility toward the municipalities, both directly and indirectly, as this bill acknowledges.

On January 17 I dealt briefly with the grants to municipalities, pointing out that the principle of the grant is wrong. We fought against grants from the provincial government of British Columbia for many years. We need something more stable; something that can be relied on, and the only stable thing I can understand is the full taxation of the property involved. A grant can be anything which the whim of a minister inclines him to make; it need bear no relation to the value of the service given. I think, therefore, that the only fair way of proceeding would be to assume the usual tax levied in the municipality in respect of the full value of the government property involved.

I would like to point out, Mr. Chairman, that for generations the municipalities have borne the cost of building and maintaining the roads and highways within their boundaries. Today, particularly in my own province of British Columbia, the provincial government has assumed part of the cost, especially of the main highways which pass through a municipality. It has also taken responsibility for some side roads, and this is a splendid move. One might well ask: Who should pay

for these roads; or, why should the federal government enter municipal areas and spend money raised in taxes on such roads.

In order to find an answer we should check the uses made of these roads and highways. Part of the traffic is purely municipal, made up of road users who live within the municipality; part is provincial, consisting of cars and trucks from other centres in the province, and the rest is composed either of interprovincial traffic, which is steadily growing- trucks and cars moving from one province to another-or of international cars and trucks which cross our borders daily with heavy loads, chiefly from or to the United States. The responsibility for the first two types of traffic I have mentioned is now accepted, quite rightly, by provincial and municipal governments. As to the growing volume of international traffic, we welcome it in general, but I would point out that huge trailer trucks are crossing the border and using our roads in increasing numbers each year. These heavy trucks, carrying fruit, vegetables, and other commodities, are very hard on our roads and highways.

Therefore both the provincial and municipal governments should receive some compensation for providing such suitable roads. The municipalities, with the assistance of the provincial government, look after municipal roads, and it is only just and fair to ask for assistance from the federal government to cover roads that carry international or interprovincial traffic. I think the federal government has a responsibility to help.

The federal government assumes the responsibility for other interprovincial and international matters such as international rivers and waterways, railways and pipe lines when they cross provincial borders or the international boundary. It is logical that they should assume the responsibility for the movement of fruits, vegetables, wheat and minerals from one province to another or across the international boundary. This traffic is definitely the responsibility of the federal government just as much as waterways are. Therefore the federal government should assume the responsibility for providing good highways for such traffic. I need hardly point out that this traffic brings in large amounts of revenue to the federal government.

For many years the policy of the United States government has been to accept this responsibility. Now that country has a fine network of highways thanks to the co-operation of the three governing bodies. I believe the time has arrived when we in Canada should have a similar policy and not just one long, unfinished trans-Canada highway but a network of feeder roads as well.

Obviously the federal government has a major part to play in this field. It could begin by paying full taxes on municipal property, thus assuming its fair share of building and maintaining roads within municipal limits. Later it could assume its responsibility for feeder roads in the provinces. The cost could be justly covered by the excise and sales taxes which the government now collects on automobiles and parts amounting to between $300 million to $350 million a year. Some of that money could well be allocated to assist municipalities and provinces in building and maintaining roads.

I was going to refer to the brief submitted to the government by the Ontario municipalities but it has been referred to so often that I am satisfied the minister will look into what they have to say, particularly about the cost of education. They point out that the cost of education is more a federal than a municipal or provincial matter. The well-being of the children of the nation and the standards of their education are a national matter. They are a matter of national pride. Therefore the federal government should see to it that all our boys and girls are in a position to receive the best education possible.

For many generations now we have imposed the total cost of education on the land, land that at one time possibly did represent wealth but no longer does because sometimes one can have a lot of land and be land poor and have no ability to pay. I think the basis of taxation for education should and must be changed. I know that the provincial governments are willing to do what is necessary if other sources of revenue are available, and in my opinion the revenue should come from the logical and natural source, the federal government.

In my opinion the municipalities, as one of the three governing bodies, are not getting their fair share of the national revenue. I am not saying they can get more under the present set-up but I urge the government to consider calling a joint conference to reallocate the fields of revenue and responsibility among the three levels of government as equal partners. Therefore I suggest that the minister should immediately assume a greater burden of taxation on federal property and also, as one speaker advocated abolish the present sales tax on municipal purchases. I do not think it is fair for the senior body to impose its will and collect money from taxpayers within municipal limits on the things they buy with which to provide streets and other essential services even for government buildings.

Topic:   MUNICIPAL GRANTS ACT
Subtopic:   AMENDMENTS TO EXTEND BENEFITS AND PROVIDE CHANGES IN ADMINISTRATION
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PC

Daniel Roland Michener

Progressive Conservative

Mr. Michener:

Mr. Chairman, the resolution indicates that the Minister of Finance has

Municipal Grants Act a heart which can be reached even though he is reluctant to assume the role of a reformer. I do not need to labour the point that the resolution, which contravenes the old established immunity of the crown from taxation and in that sense is a reform, is really an act of simple justice which will not astonish anyone in the house or the country except from the point of view that it has been so long delayed.

The federal government has become big government to the extent that its properties comprise a very large percentage of properties in municipalities throughout the dominion. The government will spend over $5 billion and if you take that amount as a percentage of the gross national product it is at least one-sixth. That expenditure indicates to some degree the extent of activity under the control of the federal government in Ottawa and to a large extent under the control of the Minister of Finance and his associates. With this great enlargement of government it has become a pressing problem to recognize the services rendered by lesser levels of government to the federal government in its multifarious activities.

This measure, which we shall soon see, is designed to pay a proportionate amount of municipal taxation on federal property. How far it goes we shall know in due course and also what federal property is involved. Whether it extends to the great many varieties of federally owned and federally controlled property remains to be revealed, but I rather think it is limited more directly to federally owned property.

That in itself is a pretty extensive item when you consider the military establishments, the industries that are federally owned, the broadcasting commission, the film board and the great number of crown corporations with their subsidiary properties. There are also the properties having to do with grain storage and grain marketing. The activities of the government reach into every field and I am hopeful that recognition will be given to the simple justice of the claim of municipalities to receive payment for the services given to properties owned or controlled by the federal authority.

The basic services received and enjoyed by federal properties take about 63 per cent or 64 per cent of municipal revenues. These basic services have been described by others and are well known. They are really services to property and the justification for charging them to the home owner and property owner is that they are services to property.

So the federal government as a property owner should properly contribute, even though the crown, in view of its prerogatives,

Municipal Grants Act

has not been subject to taxation. I therefore say, with others, that this resolution is an act of simple justice which is somewhat overdue. It does not solve the problem of the municipalities and I think the Minister of Finance will admit that fact. I do not think he intends to solve the problem of the municipalities; certainly not in this measure. The municipalities in Canada are now embarking on capital expenditures which were delayed during the war period but which are mounting to the extent that their resources are simply unequal to the task confronting them. May I read a paragraph which I have gathered from various sources here about the trend in post-war capital spending of both provincial and municipal governments:

In 1946 total capital expenditures of provincial and municipal governments and their agencies amounted to $276 million, representing an increase of more than 80 per cent over the previous year.

That is the last year of the war.

Since that time, however, provincial capital expenditures have increased many times over-* from $138 million in 1946 to $677 million in 1955. Municipal capital expenditures,-

And this is what I want to emphasize particularly.

-although rising somewhat less than those of provincial governments, increased by 1955 to more than four times the 1946 level-from $138 million in the earlier year to $546 million last year. While it may not be possible for the provincial and municipal authorities to carry out their total planned capital spending for 1956, there is little doubt that these expenditures will be higher than in 1955; . . .

They are the last figures which I have. That is a recognition of these problems which, as I say, this act is not designed to solve. There are many other ways in which the federal government could help the municipalities to discharge their serious and growing responsibilities. The often quoted brief which the minister has had presented to him by almost every hon. member who has spoken calls for assistance from the federal government under five headings. I will remind him of those headings. Only one of them is dealt with here. At page 3 of the representations of the Ontario mayors and reeves they make representations to the federal government with regard to revenues derived by the federal government from motor vehicles and accessories; federal contributions towards the cost of education;-and that is not a new item in this house-increased federal contributions to social welfare and health services; federal responsibility for civil defence; and finally payments to be made by the federal government to municipalities in lieu of taxes on federal properties in all municipalities.

That by no means is an all-inclusive list of suggestions that have been made by the municipalities and on their behalf to this

[Mr. Michener.l

government in rather desperate efforts, I think, to meet their problems. For example, they have asked for relief from sales tax for themselves and their school boards. There have been suggestions that if the municipal taxpayer could deduct the amount of his municipal property tax from his taxable income under the Income Tax Act of Canada, that would put him in a stronger position to meet increased property taxes which have been his fate in the course of the last ten years.

The pressure, Mr. Chairman, with regard to these and many other requests for assistance from the federal treasury for matters under provincial and municipal jurisdiction shows an appalling confusion in the public finances of Canada. That confusion is what concerns me more than does the immediate problem which we are discussing, but I am not going to dwell on it because this is not the proper time to do so. However, I think that, in dealing with this immediate issue, the minister should be giving thought to the longer-range problem of the municipalities and the provinces which will not be met at all by anything we are proposing to do here today.

The simple reason that there is such a great clamour for money from the federal authority is that that is where the revenues are collected and that is where the surpluses are seen. The accumulation of taxpayers' funds in Ottawa, as compared with what other governments are able to collect even with high rates of taxation, is such that naturally a strong demand develops for money from Ottawa for things which are no responsibility of this government. We do not have to look far for example of it. Primary and elementary education is no responsibility of the Minister of Finance. Yet people are asking him to provide money for that purpose. They are asking for money for roads which are a provincial responsibility. They are asking for money for all kinds of things which are definitely provincial and municipal responsibilities. The reason is clear.

With that demand developing it seems to me that, in a federal system, the federal authority should give some leadership in finding a solution for that state of affairs. It cannot go on. As I say the confusion that is developing in the public finance of this federal country is appalling, and it should not be allowed to continue to grow in the pattern which was developed after the war. That pattern of tax rental agreements, which was a temporary palliative or a temporary expedient for restoring to the provinces the taxes which they had voluntarily given up for the purpose of the war,

has not been improved on substantially in the intervening years from 1946. The same pattern is followed.

Topic:   MUNICIPAL GRANTS ACT
Subtopic:   AMENDMENTS TO EXTEND BENEFITS AND PROVIDE CHANGES IN ADMINISTRATION
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LIB

Walter Edward Harris (Minister of Finance and Receiver General; Leader of the Government in the House of Commons; Liberal Party House Leader)

Liberal

Mr. Harris:

There has been a great

improvement.

Topic:   MUNICIPAL GRANTS ACT
Subtopic:   AMENDMENTS TO EXTEND BENEFITS AND PROVIDE CHANGES IN ADMINISTRATION
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PC

Daniel Roland Michener

Progressive Conservative

Mr. Michener:

The improvement, may I suggest, Mr. Chairman, comes down to a matter of a few dollars more here and a few [DOT]dollars more there but in principle there has been no improvement. The principle to which I object is this. Our public finance now becomes a matter of patchwork payments from one governmental authority to another. As I understand it, the hon. member for Cumberland suggested that it was the province's responsibility to look after its municipalities; and so it is constitutionally. But, as a matter of practical finance, the provinces are giving about as much as they can give by way of grants to the municipalities. Last year, as the minister knows, Ontario paid $185 million or thereabouts to the municipalities. Of that amount $84 million was for education and the rest was for roads and various services. Over 40 per cent of the revenues received by the provincial government was handed to the municipalities.

Topic:   MUNICIPAL GRANTS ACT
Subtopic:   AMENDMENTS TO EXTEND BENEFITS AND PROVIDE CHANGES IN ADMINISTRATION
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LIB

James Joseph McCann (Minister of National Revenue)

Liberal

Mr. McCann:

They are taking it back this year.

Topic:   MUNICIPAL GRANTS ACT
Subtopic:   AMENDMENTS TO EXTEND BENEFITS AND PROVIDE CHANGES IN ADMINISTRATION
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PC

Daniel Roland Michener

Progressive Conservative

Mr. Michener:

I should think that the

grants will be even larger this year. As the minister probably knows, the budget will be introduced in a few days.

Topic:   MUNICIPAL GRANTS ACT
Subtopic:   AMENDMENTS TO EXTEND BENEFITS AND PROVIDE CHANGES IN ADMINISTRATION
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LIB

James Joseph McCann (Minister of National Revenue)

Liberal

Mr. McCann:

It is right here in the paper, the Ontario budget.

Topic:   MUNICIPAL GRANTS ACT
Subtopic:   AMENDMENTS TO EXTEND BENEFITS AND PROVIDE CHANGES IN ADMINISTRATION
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PC

Daniel Roland Michener

Progressive Conservative

Mr. Michener:

The minister refers to the newspaper. I think the forecast was that the municipalities' share of the revenues would be even larger. But even the province of Ontario receives a substantial part of its revenues from grants from the federal government.

Topic:   MUNICIPAL GRANTS ACT
Subtopic:   AMENDMENTS TO EXTEND BENEFITS AND PROVIDE CHANGES IN ADMINISTRATION
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LIB

James Joseph McCann (Minister of National Revenue)

Liberal

Mr. McCann:

Read the newspaper and you will quit.

Topic:   MUNICIPAL GRANTS ACT
Subtopic:   AMENDMENTS TO EXTEND BENEFITS AND PROVIDE CHANGES IN ADMINISTRATION
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?

An hon. Member:

They are not grants.

Topic:   MUNICIPAL GRANTS ACT
Subtopic:   AMENDMENTS TO EXTEND BENEFITS AND PROVIDE CHANGES IN ADMINISTRATION
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PC

Daniel Roland Michener

Progressive Conservative

Mr. Michener:

As I have been reminded, these are not grants, they are transfer payments. The province of Ontario receives a very substantial part of its revenue from the federal authority, as do all the provinces. An average of something like 22 per cent to 25 per cent of the total revenues of the provinces comes by way of transfer payments from the federal authority. It ranges as high as 51 per cent for Prince Edward Island and 55 per cent for Newfoundland. So I say, we have developed a system of public finance which is a patchwork of transfer payments.

Municipal Grants Act Taxes are not collected by the authority which is responsible for spending the money. They are collected by one government, paid to another government and then there is a transfer from the second government to a third government.

You have transfers from Ottawa amounting to hundreds of millions of dollars, and that money is collected from the same taxpayer who pays all the taxes. This money is not collected by the federal authority in its own right because the federal authority is occupying provincial fields. These payments are made by the federal authorities to the province, and the province in turn is making grants to the municipalities. Even the federal authority is making grants to the municipalities. We are getting so unsystematic in our public finance that if we continue in this pattern eventually the taxpayer will not know how to call a government to account for misappropriation of his funds. It will not be evident from the authority that is spending the money, the authority that collected the taxes. It is not a sound principle, and I think the Minister of Finance agrees with that. The former leader of the present government made that quite clear in earlier days. He did not believe in this system of one public authority raising funds to be spent by another public authority.

Numerous suggestions have been made by members in this debate that there is a need for a more rational review and planning of our system of intergovernmental fiscal relationships. The fact this suggestion has been made by almost every member who has spoken is, I feel, ample evidence that the people of this country are alive to the problem. They have been educated and their governments have been educated to look to the federal authority to raise the money and to make it available to other levels of government. I believe the people realize that is not right, and they would like to see a more truly federal system of taxation devised under which the government raising the money has the responsibility for spending it. In this way you get a direct accountability by the government to its electors for the money which it takes from them and which it spends on their behalf. I do suggest that while this kind of thing is necessary it is necessary because this government has failed to grasp that problem which developed as a result of the war, has been growing ever since, and for which no sound remedy has been found. It does involve the co-operation of the provinces and the federal government but that co-operation is essential to any effective action under the federal system. It is not too much

Municipal Grants Act to expect that such co-operation will be forthcoming if the leadership which is needed comes from this authority.

(Translation):

Topic:   MUNICIPAL GRANTS ACT
Subtopic:   AMENDMENTS TO EXTEND BENEFITS AND PROVIDE CHANGES IN ADMINISTRATION
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February 21, 1957