The Megacity Threat to Toronto:
Less Democracy for More Money

Address by
Wendell Cox
A Joint Meeting of
The Empire Club of Canada
The Canadian Club of Toronto

Sheraton Centre
26 February 1997

It is a great honor for me, as an American, to address a Canadian audience on the very important issue of the proposed Toronto megacity. I want you to know that I do have some Canadian roots. My father was a preacher on Vancouver Island for a few years while McKenzie King was prime minister. But, as I'm sure you'll notice, I didn't live in here long enough to learn how to pronounce some of the words.

I am pleased to be on this panel with Anne Golden. The Golden Report, under her leadership, drew solid conclusions that are worthy of support.

I am also pleased to share the podium with parliamentary assistant Steve Gilchrist. As a Reaganite, market oriented conservative, I am sure that Steve and I agree about much more than we disagree. But today, we are talking about issues on which we disagree.

I will discuss three fundamental problems with the proposed megacity:

  • That it will weaken democracy

  • That it will not save money, and

  • That it threatens this city of which you are so justly proud.

First, the issue of democracy...

Megacity violates the most basic principles of democracy. For hundreds of years, your ancestors and mine fought to replace absolutism and privilege with democracy. This is no time to reverse course. By no stretch of the imagination can it be considered a victory for democracy to move city hall farther away. Communities will have less access to government. Bigger municipal government will be less sensitive to neighborhood concerns. People will be relegated to second class status, because effectively dealing with city hall will require the hiring of lawyers and lobbyists. Special interests will gain great advantage.

Because of the inaccessibility of larger municipal governments, secession movements are underway.

  • Staten Island is likely to secede from New York City in the next few years.

  • A strong secession movement has developed in the San Fernando Valley of Los Angeles.

  • Secession movements have developed in Boston, Oakland and elsewhere.

  • One city has already seceded from the Winnipeg unicity, and more could follow.

Megacity is just too big. If it were a province, it would rank fifth in population. It would contain more people than the four Atlantic provinces combined.

If amalgamating governments is such a good idea, why stop at megacity? Why not amalgamate all local governments into the province? Why not opt for a single government in Ottawa? Indeed, why shouldn't we combine it all in a single world government?

The reason, of course, is that there is an important --- a crucial role for local government. There can be no justification for diluting democracy.

Then there is the issue of costs...

We are being told that megacity will be less expensive. But that ignores the reality that larger governments are routinely more expensive than smaller government on a per capita basis.

Consider the evidence from the United States:

  • Cities of more than one-million population are 21 percent more expensive, per capita, than cities of 500,000 to one million.

  • Counties of more than one-million population are 42 percent more expensive than smaller counties.

  • School districts and transit districts become more expensive per unit of service as they get larger.

Let me digress here for just a minute. Some of these figures have been criticized locally, by citing exceptions to the rule. My data for cities is not a sample --- it is an analysis of all 171 cities in the United States with populations of more than 100,000. I have excluded amalgamated city-county governments. And I have adjusted the figures to account for services that are not provided by all cities.

But the data is even worse for the 24 US amalgamated city-county governments with more than 100,000 population. Amalgamated cities of more than one million population are more than twice as expensive, per capita, as smaller cities.

Further, from the 1940s to the 1970s, US school districts and transit districts amalgamated to an unprecedented degree --- and their unit cost increases were unprecedented.

So why are larger cities less cost efficient than smaller cities? Let me just mention five factors.

  • Services will need to be harmonized among the former municipalities. They are likely to be harmonized upward, which will cost more money.

  • Labor contracts will need to be harmonized among the former municipalities. They are surely to be harmonized upward. Can you imagine a trade union seeking parity with a less lucrative collective agreement?

  • Larger governments need more bureaucrats --- it is a geometric increase, not an arithmetic increase.

  • The bureaucrats get paid more --- because in the public sector wages and benefits are directly related to the size of budget and the size of staff.

  • Municipal trade unions wield more power. This raises the entire labor cost base of the larger city. Indeed this reflects the only economies of scale in larger municipalities --- economies of scale for special interests, of both the left and of the right.

And, finally, as Jane Jacobs has noted, larger cities are less open to innovation. So they are less likely to implement more cost effective alternative service delivery strategies.

Indeed, there is virtually no evidence that amalgamation saves money. Even the KPMG report, commissioned by the Ontario government hedged away its projected savings. And the Deloitte-Touche report, released yesterday by the Borough of East York found KPMG's illusory savings non-existent.

If you want to reduce the cost of local government, there is no better way than the competitive market. For example, the conservative state government of Victoria, Australia is requiring municipalities implement competitive tendering, and the savings have been far more than even the theoretical, though false savings that the government expects from amalgamation.

As the Trimmer report put it, savings from larger units of governments rely on false economies of scale. Larger cities mean higher taxes, which are likely to drive away the very middle class that is the secret of your success.

Let me suggest that the savings from amalgamation will begin after the GST is repealed!

You have been told that amalgamation is a "fait accompli" --- that Metro already accounts 72 percent of the combined Metro-municipality spending. But this is a false number --- it includes Metro utilities, such as TTC, but excludes municipal utilities. In reality, if you exclude welfare --- which really should be handled at the provincial level --- the six cities account for 56 percent of spending, while Metro accounts for 44 percent.

There is considerable, justifiable concern about metropolitan services --- services that go beyond municipal boundaries. Indeed, Metro is not the metropolitan area --- the region does not end at Steeles Avenue. The region extends far beyond Metro. Many of the arguments advanced by the government to support amalgamation make are appropriate only in this broader sense. And, the government has wisely suggested creation of a Greater Toronto Services Board that would coordinate services throughout the metropolitan region.

But amalgamation could torpedo metropolitan coordination and cooperation. Remember that Pierre Trudeau used to talk about how difficult it was to be "in bed with an elephant" --- that it was not easy sharing a continent with the United States. The same will apply to metropolitan cooperation in the context of megacity. The "905" municipalities will be reluctant to lend their full cooperation and support to a GTSB that is dominated by megacity.

You have a vibrant urban area in Toronto. It is admired around the world. It is internationally competitive. And, our American cities look to Toronto as a model of how to do things right.

But cities are fragile, as anyone who visits American cities finds out quickly.

If you implement megacity you are going to remove democracy, services are going to decline, taxes are likely to go up, the middle class will be driven away, and you are going to see businesses scatter to 905, 604, 403 and any number of other places.

The bottom line is that you are looking to pay two to found hundred million dollars in transition costs to dilute democracy and to create a structure that will be more expensive in the future.

So what is the answer? It is to establish the proposed GTSB --- to strengthen the existing municipalities and to abolish Metro. That will preserve democracy, and better position the area for improved competitiveness and cost efficiency.

And just a word on the transfer of social services to municipalities. Redistributive services should be financed at the societal level --- such as at the provincial level --- not at the municipal level.

It would make as much sense for Ottawa to download defense to municipalities as it does for the province to download welfare to municipalities.

Virtually all of the experts agree --- and virtually all of the evidence demonstrates --- that larger cities are less democratic and more costly. Amalgamation violatesa the fundamental principles that conservative governments hold dear. Margaret Thatcher's solution to muncipal governmence was to abolish the Greater London Council, not its constituent municipalities.

It is, in the final analysis, a question of values.

    It is about the right of the people to determine how they are governed.

Canada has often relied upon referenda to decide important issues --- and megacity should be no different.

To paraphrase Abraham Lincoln:

    Government of the people, by the people, and for the people is government that is closer to the people.

Thank you.

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