Peter and Paul
By Chad Ingram
Published Jan. 10, 2019
Just before Christmas, heads of municipal councils throughout Ontario received a letter from finance minister Vic Fedeli, informing them the province is undertaking a review of the funding it provides to municipalities.
Actually, it is undertaking a review of all transfer payments the province provides, including those to municipal governments. In particular, it is reviewing the Ontario Municipal Partnership Fund, which gives annual financial allotments to municipalities with no strings attached; money they use to offset operating and capital costs, thus helping to mitigate property tax increases.
Municipalities are constrained in the revenue-generating tools available to them, property taxation being the central one. There are other, much lesser means such as various fees and charges by which municipalities generate their own funds, but property taxes are the main vehicle. When municipal governments encounter funding cuts from above, councils are faced, really, with only two choices – increase property taxes, or reduce services in some way.
It makes sense the Ford government wants to reduce provincial spending. Few would try to argue that, at more than $300 billion, Ontario’s debt is not out of control. And any government wants to be able to proclaim that it has eliminated the deficit or reduced the debt. However, this is often accomplished by passing the cheque to a level of government on the next rung down the ladder. Former Premier Mike Harris did this in the 1990s, balancing the province’s books by downloading billions of dollars’ worth of responsibility – social services, housing, transit, etc. – to the province’s municipal governments.
And make no mistake; municipalities are the bottom rung of the ladder. While the province may use fuzzy phrases such as “municipal partners” as Fedeli did in his letter, the reality is municipalities are wholly and completely creatures of the province. They have zero constitutional authority, deriving all of their power directly from the province, to which they are subservient. Ultimately, the provincial government will do what it wants. Look no further than Ford’s halving of Toronto council before last year’s municipal election, which was simply a shrewd display of power.
A reduction of the OMPF will impact municipal budgets, possibly quite substantially, depending upon the size of the decrease. In Haliburton County, the four lower tiers and the upper tier of county itself received a combined total of more than $7 million from the OMPF in 2018. Minden Hills, for example, received about $1.7 million, Algonquin Highlands $1.2 million. For small municipalities with small budgets, these are large sums of money. If a substantial drop in OMPF allotments creates a shortfall, to whom do you think that shortfall will fall?
You guessed it, folks, you and me – the property owner, the taxpayer. As the old adage goes, there is only one taxpayer. It’s the proverbial robbing of Peter to pay Paul. While the provincial government may decrease its expenditures and improve its books, that is likely to ultimately manifest itself in property tax increases throughout Ontario.