IMFG Paper | 2013

Public Finance in Montréal: In Search of Equity and Efficiency

Montréal faces metropolitan governance challenges. Following the 2002 amalgamation, half of its pre-amalgamation suburbs de-merged in 2006, leading to the creation of a smaller megacity with 19 decentralized boroughs integrated in a renewed multi-tier metropolitan governance structure. Most previous research on Montréal’s municipal reform has focused on describing its complex governance structures. Questions are now arising regarding the fiscal relations between the City and its boroughs. Is Montréal’s sub-local decentralization process properly designed? Using information collected during meetings with elected officials and public services directors in 2012 as well as fiscal data analysis, we identify factors that affect the capacity of Montréal’s boroughs to fulfil their responsibilities. The evidence suggests that political autonomy for the boroughs makes sense only if sub-local fiscal decentralization is properly designed. Our main finding is that equity between the boroughs and efficiency in local service production depend on a suitable fiscal arrangement. Fiscal autonomy, which enhances accountability, and stability in transfers are also crucial factors that make sub-local decentralization work.

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