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Canada Politicians dreamed of a halcyon megacity that would save millions. Citizens were promised better order, lower property taxes. But Harris also had a mandate to reduce government expenditure ... ... And feuding and confusion reigned in 1998

During the frenzied spring of 1997, when Queen's Park felt more like a bunker under siege than a seat of government, John Matheson, then a 32-year-old Tory staffer, liked to tell a battle-weary joke that captured something essential about a pivotal moment.

At the time, he had a gig as a senior adviser to municipal affairs minister Al Leach, whose Bay Street office was juggling at least half a dozen pieces of major legislation linked to Mike Harris's Common Sense Revolution.

"I used to say that we were going to change the name of the ministry to 'Policy Depot,' " chuckles Mr. Matheson, now a busy lobbyist with Strategy Corp.

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"There was a huge amount flowing through there, but it all had to be done."

These included reforms to rent control and planning, an overhaul of Ontario's antiquated property tax and, lastly, the government's ballsy plan to amalgamate Toronto's balkanized local governments (while untangling fiscal responsibility for local services, ranging from education to transit).

Buried deep inside all the experts' reports and technical documents were a couple of simple ideas about local government: that municipalities should be responsible for purely local services, while the province should fund social services such as education; and that costly bureaucratic duplication ought to be eliminated in favour of economies of scale.

In Toronto, the older municipalities had long since grown into one another, so it didn't make sense to have so many parallel administrations delivering the same services.

The Tories didn't invent these ideas. In the late 1980s, says University of Western Ontario political scientist Andrew Sancton, David Peterson's Liberals tried to disentangle municipal and provincial responsibilities.

It was a project Prof. Sancton describes as "naïve and misguided" because of the considerable overlap in services from land-use planning to policing.

During the early 1990s, NDP premier Bob Rae tried again, asking urban expert Anne Golden to lead a taskforce to study reforms to local government across Greater Toronto.

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Her panel called for the creation of a GTA-wide governing body to manage regional services such as transportation in a sprawling metropolis. The taskforce implicitly acknowledged that Greater Toronto's municipal structure, constructed between the mid 1950s and the early 1970s, had become outdated.

The Tories agreed with the diagnosis but not the treatment. Rather, they reckoned that the political sweet spot was the promise of more efficient municipal government, fewer politicians and, as a result, lower and more rational property taxes, all of which was to be served up as a garnish to the Harris regime's tax cut.

It looked great - beguilingly so - on paper.

"Nobody set out to shortchange anybody," insists Mr. Matheson. "But that is undeniably what happened, with the benefit of hindsight."

A decade on, Mr. Matheson remains a true believer in the Tories' amalgamation drive, although time and experience have given him a keener appreciation of some of the mistakes in the process, as well as the incompleteness of the overall project.

"The quality of the outcome had a lot to do with the preparatory work of delivering [amalgamation]into the hands of the new council," he says.

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The transition team assigned the formidable job of stitching together the former municipal bodies of Toronto, York, East York, North York, Etobicoke, Scarborough and Metro "didn't have the tools" to create a functioning administration and a council ready to govern on the day the amalgamated City of Toronto came into existence on Jan. 1, 1998.

Consequently, much of the first year was given over to feuding and confusion as the new city sought to invent itself from the ground up and maintain services while delivering on the promise of administrative savings estimated to be worth about $300-million a year, according to a provincially commissioned cost-benefit study by KPMG Inc.

But Prof. Sancton says KPMG "assumed amalgamation would be an opportunity for a major re-engineering" of local services, meaning far more contracting out.

The problem was the confusion inside the new city administration meant "it was the worst opportunity to do things differently. All of the re-engineering opportunities never came to anything." He also notes that KPMG failed to anticipate that wages and service levels across the amalgamated city would migrate to the costliest level, as critics predicted.

Local politicians and Mayor Mel Lastman, meanwhile, railed at Queen's Park for failing to provide financial bridging for the transition. More seriously, the new mega-council also attacked Queen's Park for lying about the true cost of the so-called "realignment" of services.

Those allegations proved to be a murky subplot in the amalgamation melodrama.

As Mr. Matheson recounts, during late 1996 and early 1997, Queen's Park was looking to upload some services and download others, with the promise that the result would be a wash - "revenue neutral," in the endlessly repeated phrase used at the time.

The process, known as "Who Does What" and headed by former mayor David Crombie, became a fraught exercise in horse-trading. Costly social programs - notably public housing and part of the welfare roll - ended up being downloaded to the new city, meaning that property taxpayers were footing the bill for social assistance programs that should have been funded through provincial income taxes.

As well, the province axed its long-standing support for the Toronto Transit Commission, worth hundreds of millions, even though local taxpayers would no longer be asked to fund Toronto schools.

The ultimate deal bore scant resemblance to the initial principles (that is, delivering the service at the most appropriate level).

"Everyone acknowledges that the end result of Who Does What had nothing to do with the original objectives," says Prof. Sancton.

THE REAL AGENDA

The reason, of course, is that the Harris government had a dual mandate to reduce government expenditure as well as deliver an income tax cut. As Mr. Matheson notes, the Tories were looking at an $11-billion operating deficit on a $50-billion budget. "We were short 20 cents for every buck we spent."

Further complicating the uploading-downloading exercise was the fact that provincial officials discovered it was extremely difficult to gauge the financial impact on individual municipalities across Ontario.

Then provincial expenditures came under additional strain when Tories negotiated a costly settlement to the 1996 doctors' strike.

The provincial auditor would eventually vindicate Mr. Lastman's contention that the downloading had not, in fact, been revenue neutral, as the premier had promised. So the bottom line is that, while amalgamating the seven former municipalities produced modest administrative savings, Toronto property owners were still stuck with the hefty financial burden of the downloading.

Mr. Matheson points out that the province eventually came to recognize the shortfall and has been transferring funds to the city for much of the decade. Yet to this day, Mayor David Miller and the current council are still pushing Queen's Park to upload financial responsibility for a range of social programs.

One of the lingering ironies about the amalgamation story is the fact that the provincial government's dicey fiscal situation - one of the key motivators in the Tories' municipal reform/downloading campaign - drastically improved by 1999 due to Ontario's surging economy.

By then, Mr. Matheson says, "no one could remember why we thought [the provincial shortfall]was so serious in the first place."

Nonetheless, he feels that Harris's municipal-reform exercise "was a great project that isn't finished" - a reference to the fact that local government in the 905 remains a confusing landscape of overlapping jurisdictions that is disconnected from the amalgamated City of Toronto.

Prof. Sancton disagrees: "I can't see any conceivable benefit in merging Mississauga and Brampton."

He also notes that the provincial Liberals have taken over regional planning in the Greater Golden Horseshoe, so there's no longer any need for a GTA-wide council of the sort urban expert Ms. Golden recommended back in 1996.

For his part, Mr. Matheson feels the 10th anniversary ought not to be an opportunity for recrimination and hand-wringing.

"We shouldn't be fighting about what did or didn't work. We should be talking about what to do next to make it work better."

What was said

"Having spent 10 years working in local government in Toronto and the last 10 years working in U.S. cities watching them try to recover desperately from the situation they put themselves in, my concern is that putting those two things together (amalgamation and offloading, not to mention others), the financial burden on the supercity, coupled with the loss of the current municipalities, will create a situation that is a road map straight to the U.S. experience. What we will get is a large weak city, not a large strong city." Ken Greenberg, urban planner,

in a Globe and Mail forum on

proposed amalgamation,

Feb. 15, 1997

Fire service

In 2007, the city ended up spending $8.28 more per resident per year.

Gross city
expenditures Permanent Cost per
1995 ($-millions) residents capita
Toronto 92.9 635,400 $146
Etobicoke 29.2 310,000 $94
Scarborough 36.0 507,700 $71
North York 49.2 557,900 $88
York 13.2 138,100 $96
East York 10.3 98,600 $104
1995 TOTAL 230.9 2,247,700 $102.73 ($130.63*)
2007 TOTAL 344.7 2,481,494 $138.91

Garbage collection

In 2007, the city spent $1.71 less per resident per year; service reduced

Gross city
expenditures Permanent Cost per
1995 ($-millions) residents capita
Toronto $30.1 635,400 $47
Etobicoke $10.6 310,000 $34
Scarborough $10.1 507,700 $20
North York $13.9 557,900 $25
York $3.1 138,100 $22
East York $2.1 98,600 $21
1995 TOTAL $69.9 2,247,700 $31.10 ($39.55*)
2007 TOTAL $93.9 2,481,494 $37.84

SOURCE: FRESH START: AN ESTIMATE OF POTENTIAL SAVINGS AND COSTS

FROM THE CREATION OF A SINGLE TIER LOCAL GOVERNMENT FOR TORONTO, KPMG 1996, ONTARIO MUNICIPAL DIRECTORY, 1996 AND 2007, BANK OF CANADA INFLATION CALCULATOR

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