Opinion: Municipalities need economists, not just accountants

Karmageddon By Mr. ‘X’ ~ John Mutton CENTRAL EXCLUSIVE Opinion: Municipalities need economists, not just accountants Municipal governments in Ontario are widely regarded as financially disciplined. Balanced-budget requirements, strong audit practices and conservative debt management have created a culture of fiscal caution. That discipline has value. But in an era defined by housing shortages, infrastructure pressures and constrained revenue tools, caution alone is no longer sufficient. Most municipalities structure their finance departments around accounting expertise. Treasurers and chief financial officers are typically trained in audit compliance, financial reporting and budget administration. Their mandate is to ensure that spending aligns with revenues, that reserves are properly allocated and that statutory requirements are met. These functions are essential. But they are not economic modelling. Accounting is, by nature, retrospective. It records and categorizes what has occurred. Economic modelling, by contrast, attempts to forecast behavioural responses to policy decisions. An accountant asks whether the budget balances. An economist asks what will happen if a variable changes. The distinction matters. Municipal councils today are routinely making decisions about development charges, property-tax rates, infrastructure financing and long-term debt issuance. These decisions influence housing supply, business location, migration patterns and assessment growth. They shape the local economy for decades. Yet many municipalities approach these questions primarily through an accounting lens. Consider development charges. When rates are increased to fund capital projects, the financial logic is straightforward: growth should pay for growth. But what is the elasticity effect? At what point do higher charges suppress housing starts? How does that affect long-term assessment growth? Could a lower rate generate higher total revenue over time? These are economic questions. They require modelling. The same applies to property-tax policy. What level of increase begins to influence business investment decisions? How sensitive are commercial properties to tax differentials across municipal borders? How do households respond to cumulative cost pressures? Without economic forecasting, councils risk making technically balanced but economically inefficient decisions. The consequences are rarely immediate. A budget can be balanced while housing starts decline. Debt ratios can appear manageable while assessment growth slows. Tax rates can rise incrementally without recognizing the point at which competitiveness erodes. Over time, however, these effects compound. Senior levels of government routinely integrate economic modelling into fiscal policy decisions. Provincial and federal ministries publish forecasts, stress-test assumptions and examine behavioural impacts before implementing major changes. Municipal governments, which now manage increasingly complex infrastructure and growth mandates, should do the same. This does not mean replacing treasurers with economists. Accounting discipline remains indispensable. But municipalities would benefit from institutionalizing economic expertise alongside traditional finance functions. An in-house municipal economist – or a formalized economic modelling unit – could evaluate development-charge sensitivity, tax elasticity, infrastructure return on investment and long-term debt sustainability under varying growth and interest-rate scenarios. Major fiscal decisions would then be informed not only by compliance requirements, but by forward-looking analysis. Ontario’s municipalities are being asked to grow faster, build more housing and maintain affordability, often with limited fiscal tools. In that environment, optimizing spreadsheets is not enough. Municipal governance must evolve from budget management to economic strategy. Balancing the books is necessary. Modelling the future is essential.