Must Municipalities Muddle Along?

Webster's unabridged dictionary defines the intransitive verb "to muddle" as "to think or act in a confused" aimless way or in a way that tends to make a mess of the business in hand." I suppose that since the foundation of the earliest Roman municipalities, before the beginning of the Christian, era, many municipalities have been operated by persons who thought or acted in a confused, aimless way or in a way that not only tended to make, but actually made, a mess of the business in hand. To say the least, the last three decades in Canada have had their full quota of such municipal elected bodies who, like Columbus, didn't know where they were going, and, when they got there, didn't know., to use a colloquialism, "where they were at" and when they got back didn't know where they had beer. To be perfectly frank, the people who elected them by voting or staying home didn't know either, and in addition, in many cases didn't know or care whom they had elected.

Between 1921 and 1931, the population of urban municipalities in Ontario of 10,000 population or over, went up from 1,238,000 to 1,653,000; but the tax levy went up from fifty million dollars to eighty-four million dollars. Per person" man, woman and child, the taxation went up from about $41 to about $51. During the same period the tax arrears went up from about ten million to about 23> millions or per capita from $8 to $14. The gross debt went up from about $247,000,000 to over $397,000,000 or from $200 per capita to $240 per capita. The net debt (i.e. the gross debt less sinking funds) went up from about $196,000,000 to over $339,000,000 or per capita from $158 to $205. That is the public mortgage on the home of each average family of five went up from $790 to $1025, while presumably it was struggling to reduce its private mortgage. The most significant fact is that the total tax arrears of 1921 were very slightly over 2070 in the year's levy, while in 1931 they were almost 28% of the year's levy. Four of these municipality passed the 60% mark in 1931 and two of these four the 80% mark. All four defaulted in 1932 and are no under the control of boards of supervisors. Other municipalities not in this population class arrived at same result, if they followed the same path, and any municipality can attain the same end by adopting the same policies. In fact, the result is certain. Like causes produce like results. Natural law is no respecter of persons or municipalities. In fact the bigger they are, they harder they fall if they get in the way of the law. "Let him that thinketh he standeth take heed lest he fall." How May We Know When a Municipality Needs to' Watch Its Step or at Least Carefully examine its Position?

There was a time when a municipal debenture, in the minds of the investing public, was a municipal debenture. One was just as good as another, just as one dollar bill is just as good or bad as another. These days are past--not long past, but definitely past. There are differences between municipalities and differences which can be roughly measured. For example, when the total debt of a municipality, of 10,000 population and over less its sinking funds, if any, passes the mark of $200 per head, it may be perfectly sound or it may not, abut all the circumtances should be inquired into. If the debt includes a large public utility debt which bears, always has borne and presumably will continue to bear its own debt charges, he net general debt which is a direct charge on tax revenues may fall below $100 per capita; in which case, there is not only no cause for alarm, but even occasion for congratulation. If on the other hand, within the total per capita, there is little or no public utility debt, or if, when existing, the utilities do not carry their own debt charges out of their own revenues, the danger point is being approached, if it has not already been reached. This yardstick is of only monetary and relative value. The relative average earning capacity of the inhabitants of two municipalities may be very different. One municipality may be able to bear a $200 per capita load or debenture debt and. another not. Again the value of the dollar varies. $200 at one time may be worth $200 and at another $150. It is a shifting standard.

There is another standard. Some hold that when the debt reached 20% of the assessment for taxation purposes, the situation should be canvassed. When one considers what may be done with the assessment without seriously affecting the conscience, this yardstick is seen to be of restricted value. One may raise the assessment to reduce the percentage, or retain a swollen assessment in order to maintain the percentage.

Recently a third standard has emerged in the relation of total unpaid taxes to the annual tax levy. In the spacious days of ten and five years ago many municipalities were slack in collection. They didn't collect when collecting was good, and the time came when they couldn't collect and when they couldn't borrow further on tax arrears. But even in municipalities which have had active and efficient tax collection departments, the growth of tax arrears has become a sign of the times. It may almost be said that in a municipality the total unpaid taxes of which have reached 25% of the total tax levy it is time to watch. When they have reached 33 1/3%, it is time to pray without ceasing. When they have reached 50% it is time to repent in sackcloth and ashes and when they have reached 60% it is time to seek absolution. I shall leave the relative order to my theological friends.

No doubt at the present time many, if not most, municipalities which are in serious trouble attribute their difficulties to the world crisis. This is a natural but false view. Just as a man whose health has been undermined for years may first become conscious of his real condition when he is submitted to some unusual and severe strain, so a municipality which has neglected its health for years, may become conscious of its position only when it suddenly cannot meet its principal and interest payments. The conditions did not come suddenly, they only became evident suddenly. Just as a really healthy man is one who can stand up under an unusual strain, so a municipality can not be said to be in a healthy condition if it collapses long before others under an unusual strain. The seeds of disease and dissolution invariably are sown before the disease culminates. The depression may have brought out weaknesses before they otherwise would have appeared, but in the main the depression is the occasion for an excuse of the politicians not a fundamental cause.

1. Budgeting for a deficit.
A Canadian municipality of some 25,000 souls has budgeted for an average annual deficit of $50,000 for a considerable term of years, by appropriating the whole of its tax levy without setting up a reserve for uncollectible taxes. Another familiar and widely practised way to budget for a deficit, while seeming not to do so, is to pretend that the municipality will not have to meet expense which it is known will have to be met. Another is to pretend that revenues will accrue which it is known or shrewdly suspected will not accrue. All these practices result in revenue deficits. When these have accumulated to a sufficient size to be troublesome, the municipality is apt to go to the legislature to permit funding of those current liabilities, which, if it does not add insult to injury, at least adds interest to principal and passes on a delayed but increased burden for other Councils to worry over and the taxpayers to wrestle with, which brings me to a second fundamental cause viz:
2. Issuing debentures where there are no or insufficient corresponding Assets.
When a municipality issues debentures for sidewalks, it has the sidewalks and can use them. When it issues them to meet a deficit or for any expenditure which would otherwise cause a deficit, the final payment is postponed, but there is no added corresponding utility or use. There comes a time when neither the banks nor the public will lend on the security of such a municipality. This security in the last analysis is its ability to levy and collect taxes. Municipalities in this connection should pray that they be not led into temptation, and legislatures would render a real, if unexpected, service by making it impossible to yield to temptation. In these days not all people who are taxed have to pay taxes. They pay them as long as it is to their advantage. If not, they move out and leave their assets, if any, to the municipality. There are municipalities in Canada which own, say, a fifth of their whole area, which has been abandoned by taxpayers who were tired of paying taxes with no equivalent advantage. There is no worse fallacy than that a municipality can continue to issue debentures until the equity of property owners in their property disappears and still collect sufficient taxes to finance its current services at an inflated level and carry its debt charges at the same time. It is to be hoped that municipalities will not seek special legislation to refund debentures due. This is only a variant of the policy of issuing debentures for purposes which leave no assets. Recently I read the following passage
"How recreant we would be, if having been responsible for piling up a debt, we should seek to escape the burden by leaving it to future taxpayers to discharge. Such an incident did happen when many years ago-in the sixties -a municipality failed to meet in full an obligation of approximately $1,000,000, and left part of it to the future, with the result that when the debt is finally paid in a year or two, it will have required the payment of $4,000,000 to discharge the obligation."
3. Failing to Budget Capital Expenditures Over a Term of Years.
In former times when municipal needs were comparatively simple and inexpensive, municipal undertakings could usually be completed in a year or two and the borrowed capital involved was relatively small; but now municipalities undertake all sorts of improvements, some of which may take five or six years to complete and thirty or forty years to pay for. If it is necessary to plan annual expenditure from revenue;, it is even more necessary to budget expenditures from capital funds obtained by borrowing. Many a municipality has found itself with an unexpected burden of debt by following the custom of considering each proposed improvement as a unit by itself without relation to other community needs or the final ability of the taxpayer to pay debt charges. Simply drawing up a city plan or entering all proposed improvements on a map of the city does not produce a capital budget. A budget sets forth what is to be done, the order in which the various units are to be undertaken, how the money is to be obtained and how it is to be paid back. In many cases the financing should be assured before the work is undertaken. Such a budget plan would not be unchangeable as the laws of the Medes and Persians, but could be speeded up or slowed down as circumstances indicated and Councils decided.
4. Electing Members of Council for One Year Terms.
If any undertaking ever needed continuity of policy it is a municipal corporation. Yet most Ontario Municipalities elect their aldermen or councillors for one year terms. A new member keeps quiet if he is wise for the first three months. He begins to take notice in the next two. Then comes two months of vacation. Then he has to think about re-election. All through the year, if he wants to be re-elected, he keeps his ear to the ground. The tremors he looks for are not always from citizens and taxpayers, but frequently from other quarters. This system is the negation of democracy in the name of which it exists. We say, in practice, "we can't trust anyone we might elect for two years. It is necessary to keep a string on him so he can't do anything wrong." The same string which keeps him from doing anything wrong, also operates to keep him from doing anything right. The result too often is that he does nothing at all. In England, the home of political democracy, they have more faith. One-third of a borough council is elected each year for three year terms. A man can devote the first six months to getting acquainted with the job, two years to giving service and the last six months to mending his fences and consulting the auspices.
5. Sectionalism.
This is an extremely expensive luxury although I suppose we must have it. Its effects in the provincial and Dominion fields are obvious. The ward system of election establishes a conflict of loyalties--to the ward and the city, and too often the conflict is decided in favour of the ward which elects. In a municipality recently visited, not in Ontario, the appropriations or current street maintenance and capital improvements are usually divided equally among the wards, the accounts keep careful tab on these expenditures by ward, monthly reports thereon are submitted, there is a terrible time if any councillor thinks something is being put over on him and the municipality is now bankrupt. This is an extreme example, but it exemplifies what logrolling and the attempt to get something for the district at the general expense will do.
6. Too many and "water-tight" departments.
In a Western city some years ago, there were 29 departments of the city's work. The more independent departments, the more spenders, and the more spenders, the more spent. It is not unusual to find in a city some 1C departments with several independent boards and commissions. The difficulty of securing the advantages of unified command under such an organization is patent.
7. Carelessness in the selection of the Personnel of the Permanent Staff.
When budgets are not made and accounts not kept so as to show automatically the number of employees and the amounts paid to them, the task of controlling the salary and wage bill is stupendous. In well managed private business which must pay dividends, the urge is always to keep personnel at a minimum. In public business when departments are often in practice graded in importance according to their size, and department heads are often paid in proportion to the number of employees in their department, it is all the other way, with the result that the public payroll has become swollen to almost unbelievable proportions. Not all appointments are made for efficiency. Although there is no lodge way or non-lodge way of laying sidewalks, and no Tory or Grit way of cleaning streets, lodge and political affiliations may determine appointments. Too often men are appointed to a job because they need a job, any job. Recently the press reported that in a large Canadian city 15% of the total number of civic employees were related to one another. This was due undoubtedly to the well known efficiency of relatives. I have never known anyone's relative being inefficient if some one else was paying his salary. It might be well, in the interests of efficiency to appoint city managers on the understanding that they would appoint relatives only, his or ours.
8. Ease in borrowing money.

Easy money has been the downfall of many private concerns and individuals. If hanks and investors had been a little more hardboiled in the past, many municipal eggs wouldn't find themselves in hot water now. In the past, free spending has been good politics. Easy borrowing means free spending. Too often free spending means bankruptcy.

What must be done to substitute planned control for drift or muddle?

1. We must establish balanced budgets, not by increasing taxation but by reducing expenditure. We can't begin to expend until we have first established a solid point of departure.
2. We must limit tax levies to the ability of taxpayers to pay as shown by tax collections.
3. We must appropriate, for some years at any rate, only to the extent of the cash we know will be available.
4. We must pay as we go, issuing debentures only for absolutely necessary purposes and where valuable assets are left behind.
5. We must establish assured continuity of membership in elected bodies.
6. We must reduce the number of departments and centralize large spending operative departments under a single administration.
7. We must "scotch" sectionalism in municipal affairs.
8. We must give up the practice of going to the legislature asking for permission to issue debentures without the vote of the people and adopt the general policy, irrespective of the legal powers of Council of referring to general vote all such matters which may legally be so referred. Let the people whose property is mortgaged by public debenture issues, pass on the size of the mortgage.
9. Most important of all, we must build up sound, aggressive public opinion. The policy of hush, hush, dangerous as it has proved to be in large privately controlled business, is disastrous in public business. A statement of the truth never hurt any municipality's credit. Attempted suppression of the truth has. Nowadays, people who invest in municipal bonds have cut their wisdom teeth. They don't have to be told arid they can't be fooled. If a man is knocked down by a motor car his hurts don't result from the fact that the press report the accident. So a municipality's condition, credit or otherwise, is not due to some one telling the facts but to governing bodies allowing the facts to become facets. The surest way to prevent undesirable conditions is to draw attention to their approach. People rarely do wrong while someone is looking at them. The wisest public men and the most able and courageous officials welcome the fullest publicity, as they are conscious that sound public opinion alone makes possible the maintenance of the policies on which they have set their hearts.

In conclusion, looking over the field as a whole, we have too many local governments, too many public bodies with the independent right of spending public money, too many people on Councils, Boards and Commissions, and too many employees acting under their direction. In 1932 it was estimated that there were in Canada 3,955 municipalities, 23,380 school authorities and say, 100,000 to 125,000 members of local governing bodies and possibly 135,000 employees. If the number of municipalities were cut down to 2,000, the number of School authorities to 3,000 and the number of Council and Board members to 25,000 there might be less oratory and fewer opportunities for election to office, but there would certainly not be less service. To a large extent, the boundaries of our countries and townships were established before the coming of the motor car. The old gray mare might in the old days have taken half a day to reach the township hall. Now in a motor car one can traverse three counties in an hour and twenty in a day. Yet in some municipal governments the only visible effect had been to increase the cost of transportation payable out of taxes. The county is a middleman thrust in between the local municipalities and the provincial government. Why not abolish the county and enlarge the township

We love our municipalities but we could love them and support them better if there were fewer of them.

(Applause.)