Province reviewing municipal funding
By Chad Ingram
Published Jan. 10, 2019
The Ford government is conducting a review of the Ontario Municipal Partnership Fund, which provides annual funds to municipal governments, as it seeks to decrease the provincial debt.
In a letter to heads of municipal councils dated Dec. 21, finance minister Vic Fedeli explains the process the province is undertaking.
“Ernst and Young, who conducted a line-by-line review of Ontario’s spending, confirmed in its report Managing Transformation – A Modernization Action Plan for Ontario that the growth in transfer payments and other provincial supports are key contributors to the province’s mounting debt,” the letter reads. “Getting this spending under control is why we are undertaking a detailed review of all transfer payments, including those to municipalities. We must continue to support municipalities in a way that is sustainable and responsible. To achieve this, we are reviewing the OMPF – which is why details of OMPF allocations will be released later than in past years.
“We will be looking to you, our municipal partners, to help us with the challenge that lies ahead – as we look to drive efficiencies and value-for-money in all of our transfer payments, including the OMPF,” Fedeli’s letter continues. “While we all will be operating within a smaller funding envelope, we want to work with you to return the program to what it was initially intended to do – support the northern and rural municipalities that need it the most.”
Algonquin Highlands Mayor Carol Moffatt told the Times that while seeking to reduce the provincial debt can surely be viewed as a positive step, people need to realize that the process may have ramifications for municipalities, ramifications that could manifest themselves in property tax increases.
“One would read that letter and say, thank goodness the province is doing their line-by-line review and getting their financial house in order,” Moffatt said. “You have to look at it from both sides.”
Property taxes are the central revenue vehicle for municipalities. If municipal governments are to absorb a funding cut, Moffatt said, councils essentially have two ways of dealing with it: a reduction in services, or an increase in property taxes.
In 2018, total OMPF payments to municipal governments in Haliburton County – including its four lower tiers, and the upper tier of the county itself – totalled more than $7 million.
Minden Hills’ OMPF allotment was $1.73 million; Highlands East’s $1.9 million; Dysart et al’s $1.8 million; Algonquin Highlands’ $1.26 million; and the upper tier of the county received $334,00 in its OMPF allotment.
Throughout the province, municipalities received a total of $510 million in OMPF allotments in 2018.
OMPF payments are for general assistance and not tied to any particular purpose, and are used to offset operating and capital expenses.
Making reference to the so-called “common sense revolution” of the Mike Harris government, which saw responsibilities such as social services and housing downloaded to municipalities as the province sought to lighten its books, Moffatt said, “We’ve seen that movie before, and we know the ending. And it’s not a happy ending.”
In the case of Algonquin Highlands, for example, an increase of $52,000 in the municipality’s budget translates to a tax rate increase of one per cent.
“They do make a good point about bringing the funding program back to what it was supposed to be,” Moffatt said, in reference to the letter’s indication that program was initially meant to assist northern and rural municipalities – essentially equalization payments for poorer local governments.
If the county’s townships are considered “rural” by the province, then it’s possible there may not be much of a change in the level of funding.
“At this point, the ministry indicates that they will undertake a review and reallocation of the funds with a focus on support for rural and northern municipalities, so it is hard to say what changes we will actually realize in terms of reduced OMPF dollars,” Dysart et al CAO Tamara Wilbee wrote in an email to the Times. “Hopefully that will become apparent very soon.”
Councils in the county work to expand its seasonal economy, attract new residents and grow the community. So, in that way, as Haliburton County transitions out of a largely seasonal economy, it may cause complications when it comes to receiving funding assistance.
“The less rural we become, the less eligible we become for rural funding streams,” Moffatt said.
On the same day Fedeli’s letter was issued, the Association of Municipalities of Ontario responded with a statement on “financial risks for property taxpayers and municipal budgets.”
“AMO’s advice to the new government has been to take a comprehensive approach rather than a ministry funding line review and to consider the cumulative financial impact of how any decisions affect the cost and delivery of frontline services,” the statement reads. “A comprehensive approach is the only way to understand how provincial decisions affect municipal governments. It is unclear if this advice is being taken or not. We also advised the Ministry of Finance to offer a status update on the Ontario Municipal Partnership Fund (OMPF). That advice was taken. Today the Ministry of Finance sent a letter to heads of council and treasurers advising that the OMPF will be reduced by an unspecified amount and allocation notices for 2019 will be delayed.”
This delay, the AMO indicates, will make it difficult for municipal councils, who normally find out what their OMPF allotment is going to be prior to the budget year, to do their 2019 budgeting.
“In recent years, the provincial government has announced OMPF allocations in the year prior,” the statement reads. “This practice facilitated local budget development and council approval for the year ahead. Councils cannot make accurate 2019 spending decisions without this information. As a result, council budget planning will be delayed. If allocations to municipalities are reduced, councils will need to compensate with property tax increases or local service reductions in 2019.”
Fedeli’s letter to heads of council acknowledged the AMO.
“As part of the OMPF review, we will seek your feedback on how to best renew the program,” it reads. “We will work through AMO and the recently signed joint Memorandum of Understanding (MOU). This agreement is a foundation of our relationship. The AMO MOU table has been an important forum for discussing and receiving your input on financial matters. I also understand that there has been a staff working group that has provided valuable feedback on the OMPF in the past. Ministry officials have been asked to engage with the group early in the New Year.
“Again, we want to provide you with the 2019 OMPF allocations as soon as possible. We are working to complete the review early in 2019.”