Fiscal Imbalance: The Case for Cities

The purpose of this paper is to explore the nature and extent of the fiscal imbalance at the municipal level in Canada. The first part of the paper sets the overall context by briefly reviewing the elements of the fiscal imbalance debate at the federal-provincial/territorial level. The second part provides some background on the trends in municipal finance in Canada over the last 15 years and compares municipal revenue-raising tools to those in other OECD countries. The third part identifies the fiscal challenges faced by Canadian municipalities. The fourth part discusses whether Canadian municipalities are fiscally sustainable and whether they could make policy choices that would reduce the fiscal imbalance. The final part suggests areas for further discussion and research.