December 23, 2004
DeSmedt’s Amalgamation Folly
Like the fabled movie creature, a brutally unoriginal policy idea emerges every five years or so from the black lagoon of Winnipeg city politics. The stinker is “amalgamation,” supposedly the magic answer for Winnipeg’s financial problems. It didn’t work after 1972, the year of Unicity, because it offered a simplistic, bureaucratic non-answer to a complicated problem. Instead, it produced a bigger, even less efficient monster.
Today’s urban sprawl warrior who wants to tame the dragon by gobbling up the evil exurbs is Councillor Peter DeSmedt (St. Charles). His thoughts were the triggered by the mundane suggestion that the city should sell excess water and sewer capacity to the fast-growing municipalities of West St. Paul, St. Andrews and St. Clements. Winnipeg’s North End water plant operates at 50% capacity, so it makes more sense to run some pipes outwards and charge the new customers a price for the service that reflects the plant’s operating costs, rather than build duplicate, more costly facilities in these communities.
Not to DeSmedt, apparently. In his view, exurban areas that look like the city should be part of the city and service sharing somehow will give them an advantage by allowing them to keep their costs and taxes low. The inevitable result, in this “good guys, bad guys” scenario? Dreaded urban sprawl, where tax shirkers hollow out the city by fleeing to bungalows outside its limits.
Let’s bring the discussion back to earth.
First, service sharing agreements are common in most North American cities. The trick is to set the price properly so that both parties win, the supplying city because it lowers the cost of an underused facility, the consuming city because it can avoid an unnecessary capital outlay and associated operating expenses. This model of co-operation operates most famously through the California Contract Cities Association (CCCA), which represents 75 cities in 20 counties, mostly in the southern part of the Golden State.
These contract cities purchase all or most services by contract from either neighbouring cities, surrounding counties or private suppliers. The city of Dana Point, with a population of 35,000 in the early 90s, had 20 employees, all managers who devised and oversaw such contracts. The staff level in Santa Clarita, population 143, 000, sits between 100 and 125. Not only do these contract cities capture big cost savings, up to 50% less for many services than delivering them in-house, they also gain access to more sophisticated technologies and services, particularly for more complex functions like policing.
The challenges, unsurprisingly, are maintaining control and the calculation of costs and prices of services from neighbouring cities – both a function of good contract design and methodology. In a 2003 interview, CCCA director Sam Olivito explained that the contract model sets out a form of local government that is closest to the people. Even though services are provided by outside agencies, control of contracts by the local community preserves their local identity.
The water and sewer service contract so offensive and complicated to DeSmedt is the essence of this unique system. No doubt he prefers the “one size fits all” orthodoxy, with its hidden cross subsidies, that infects most Manitoba public policy.
Despite the ongoing flurry of public sector subsidies and investments, Winnipeg’s core is in permanent relative decline for the following reasons. It can’t compete with the shopping experience of the suburban mall, with convenient free parking, lower prices and greater product choice. We live in an increasingly wealthy, “car–centric” society which allows a greater range of living choices, including the exurbs. Working downtown is expensive and awkward compared to the virtual workplace emerging in the home, farm and cottage via the Internet. Manitoba’s uncompetitive taxes have exported downtown head offices to Calgary. Finally, regulatory blockages prevent the natural redevelopment of downtown structures into residential living spaces. The downtown’s future is residential, but that is not possible in Winnipeg.
Amalgamating with the exurbs is not an answer to these issues. But reinventing city government and city finance is. There is plenty of room to rethink how municipal government operates in Winnipeg. Why can’t city workers form their own companies and compete to supply services against outside suppliers? In the Indianapolis model of managed competition, workers earned the largest pay increases in the United States. It means getting politicians out of operations, particularly areas like zoning regulation and property disposals. Why not introduce performance pay into the police force and other services and inject private capital into municipal infrastructure, particularly water and sewage?
Finally, we need to exploit the thoughts of popular ex-mayor Glen Murray, that rarest beast in Manitoba politics, a person with new ideas. His "New Deal" for city financing directly addressed the issue of urban sprawl. If you fund a city primarily with property taxes, you encourage artificial sprawl, because a move across the boundary means a tax cut. The funding answer is user fees that reflect operating costs. A city that is dense will be cheaper to operate and have lower costs. One that is spread out will cost more. This simple paradigm, combined with leadership to modify the building and zoning codes and rent controls that undermine the downtown's economic base, will drive a more equitable sharing of costs.
Not amalgamation, Mr. DeSmedt.
The Frontier Centre for Public Policy
is an independent public policy think tank whose mission is "to broaden the debate on our future through public policy research and education and to explore positive changes within our public institutions that support economic growth and opportunity."