Is Bigger Really Better?

Lessons from Municipal Amalgamation in Quebec and

Ontario

Tasha KheiriddinExecutive Vice-President and Acting President,

Montreal Economic Institute

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Historical background

In December 1997, Ontario’s Progressive Conservative

government passed Bill 103, forcing the merger of

municipalities province-wide, including 7 which became

the new MegaCity of Toronto

In December 2000, Quebec’s Parti Quebecois

government passed Bill 170, forcing merger of 200

smaller municipalities into 40 larger ones, including 28

municipalities on the Island of Montreal

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Reasons given for amalgamation

Lower costs

Smaller workforce, fewer elected officials

Lower taxes

Less duplication of services

Improved accountability

Increased global competitiveness

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Hidden objectives?

Quebec:

Many English-speakers from the West Island believed that

the Parti Québécois intended to undermine their language

rights

Ontario:

The Progressive Conservative government wanted to shift

control of Toronto from left-leaning inner-city politicians to

conservative-minded suburbanites

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Number of employees

Montreal Prediction:

Workforce would shrink by 1,260 people after five years

Reality:

330 more people work for the city today than in 2002

Employees who serve the public directly have declined by 2% while managers and

supervisors have increased by 9%

Toronto Prediction:

Number of employees would decline

Reality:

Staff count since amalgamation has risen by 2400 positions

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Wages of workforce (Montreal)

  2001* 2002 2004 Increase**

Managers and supervisors 99 830 97 821 108 413 10%

Professionals and white collar workers 60 822 59 527 60 755 2%

Blue collar workers 63 199 62 841 66 644 6%

Policemen N/A 76 395 79 853 4%

Firefighters 82 999 86 505 93 715 8%

Crossing guards N/A 27 258 26 391 3%

TOTAL 67 841 69 178 72 976 5%

* City of Montreal only ** From 2002 to 2004

Average annual income (adjusted for inflation), by type of employee (in 2004 dollars)

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Administrative Costs

Montreal Prediction:

Drop in spending of 7%

Reality:

Increase of 16.3% (inflation for the period was 6.7%)

Toronto Prediction:

Amalgamation would save $300 million a year by eliminating duplication, revised downward to $240 million,

then to $150 million

Reality:

It is impossible to determine savings. Meanwhile, the city’s operating budget has increased from $4.2 billion

in 1998 to $7.6 billion in 2006.

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Taxes and fees

In Toronto,

Average property tax bill is up 27% since 2000

User fees increased for permit parking, commercial garbage removal, planning

applications and building permits

User fees were imposed on many people for recreation services

In Montreal,

Taxes from all sources (mostly on property and water) are up 12.5% since 2002

Many low-income households now pay higher property taxes as a result of the

mergers

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Competitiveness

Prediction:

Bigger, unified cities would spur investments

Reality:

The unity of Montreal island has not been a factor in a single investment in the

last four years

Toronto continues to see head offices and jobs flee to neighboring lower-tax

jurisdictions

“There is simply no connection between the municipal organization of a

metropolitan area and its rank in the hierarchy of global cities. For example, the

central city of Sydney, Australia has a total population of 20,000.” (Andrew

Sancton)

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Why these additional costs?

Pressure to provide all services previously offered in

various merged municipalities

Unions bid wages up to highest, not lowest level

Hard to fire people – more likely reshuffled to new

positions

No more competition between smaller cities

Easier for interest groups to hijack political process

No real economies of scale

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Montreal and Toronto are not alone

“Study after study has shown that the efficiency gains of bigger

government do not materialize” – Andrew Sancton

Study of 48 metropolitan regions in the Southern U.S. by David

Sjoquist

Study of Miami area by Milan Dluhy

Study of Bay Area and Minneapolis/St. Paul by Daniel Elazar

Essay by Charles Tiebout, “Tiebout model”

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Political Consequences - Quebec

Intense public protest helped put Liberal government in

power in 2003 on demerger platform

In 2004 Montreal went through tremendously flawed

demerger process, which saw 15 cities and towns

secede

Many powers are still retained by a so-called

“agglomeration council” of the City of Montreal, resulting

in higher taxation without control over spending

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Political Consequences - Ontario

In 2006, Toronto City Council is more left-leaning than

ever before, and now controls a city of 2.5 million people,

larger than 5 provinces

Toronto now seeking expanded powers of taxation and

regulation in new City of Toronto Act which threatens to

increase taxes and hurt business

Deamalgamation movements have sprung up in other

Ontario communities (Victoria-Haliburton, Flamborough)

The verdict on municipal

amalgamation?

Bigger is not better -rather, small is beautiful.