Ontario Taxes Will Indeed Go Up

It’s that time of year again across the Canadian landscape: the taxman cometh. And many are the howls of outrage here in Grey-Bruce, and elsewhere in Ontario, at the rate property taxes are going up to help support the cost of municipal government. Bruce County’s 13.2 percent increase in county taxes especially raised some local eyebrows. But it may be a sign of things to come for a lot more municipal taxpayers in Grey-Bruce and elsewhere in the province, if somebody at Queen’s Park doesn’t soon do something fundamental about fixing the Ontario eight-year-old downloading fiasco.   

The province’s present Liberal government has to take some of the blame now, essentially for not tackling the problem. But remember, this is a government that had at least one hand tied behind its back from the get-go. I can’t help but wonder how often Premier Dalton McGuinty wishes he’d never made that no-tax-increase promise in the 2003 election campaign. There are some good reasons for raising provincial taxes; and one of them is to take some of the growing pressure off homeowners and other property owners who pay municipal taxes. But McGuinty paid a big political price for breaking the promise once, in the form of health care premiums. You can bet there won’t be a second time in the two-and-a-half years the Liberals have left in office. If that’s not the political equivalent of painting yourself into a corner, I don’t know what is. As a result, the McGuinty government is in no kind of position to do much about the underlying problems facing municipal governments and municipal-property taxpayers, because that would no doubt involve uploading some big-money jobs back to the province. The $656 million the government has just given municipalities to help them cope with the downloading started by previous Conservative governments is at best a temporary band-aid.

But rest assured, unless something is done and done fast, taxes in Ontario will indeed go up. They will go up in the form of municipal taxes. And they will keep going up, probably into double-digit annual increases like the one Bruce County is already facing.

The root cause of the current municipal costs-tax problem goes back to 1995, and the onset of the so-called “Common Sense Revolution” in Ontario. Often in the past 10 years I’ve compared it to letting the proverbial bull into the china shop, with former Premier Mike Harris being the neo-conservative bull and Ontario being the china shop.

In case anyone has forgotten, the Common Sense Revolution was the name of the political platform that got the former gold pro elected Premier of Canada’s biggest province. The promise to make poor people work for their welfare cheques was one of the most popular planks in the common sense revolutionary platform. But it was vague about plans for municipalities and provincial downloading. “There was certainly no hint that, if elected, the Harris conservatives would sponsor more municipal change in a few short years than the province had ever experienced before,” Prof. Andrew Sancton, chair of the University of Western Ontario’s Political Science department, noted in a 2001 paper titled, The Choices of Ontario. What little the 1995 Tory platform said on the subject included the following: “Any actions we take will not result in increases to local property taxes” and “we will sit down with municipalities to discuss ways of reducing government entanglement and bureaucracy with an eye to eliminating waste and duplication as well as unfair downloading by the province.”

But a serious lack of sufficient prior consultation with municipalities was apparent after the Harris government made its initial Local Service Realignment (LSR), announcements in January 1997. Municipal reaction to the plan to download 50 percent of the cost of social assistance on to municipalities was so strong the government backed off, and cut that to 20 percent. But it also put half the cost of education taxes back on the municipal-residential property tax bill after initially planning to make it a wholly provincial expense. As Sancton said, “in terms of simplicity and clarity for the ordinary taxpayer, this decision was disastrous.”

Municipalities ended up getting saddled with major costs and responsibilities, including administration of the new workfare program still called Ontario Works, new funding responsibilities for public health, social housing, policing, and land ambulances. Fairly early in the process, Harris addressed hundreds of municipal delegates at an annual Association of Municipalities of Ontario (AMO) conference and promised on his “pinky” it would all end up being “revenue neutral.”

It never was, and it still isn’t. The removal of half the cost of education from the municipal-property tax bill was supposed to give municipalities “tax room” to cope with their increased expenditures without raising property taxes. But the province also imposed cost-cutting targets on municipal government. In 2001 and 2003 the Provincial Auditor said no one had bothered to determine if those targets were realistic, “supported by empirical or analytical evidence.”

The Harris government set up the Community Reinvestment Fund (CRF) in 1998 to supposedly keep the revenue neutral promise. From 1998 to 2003 the fund paid out a total of about $3.1 billion. The 2003 Provincial Auditor’s report said the Tory government still had a lot of work to do to ensure its LSR-downloading was indeed revenue neutral for municipalities.

The McGuinty government recently announced its Ontario Municipal Partnership Fund (OMPF), designed to replace the CRF. Ontario’s more than 400 municipalities have been told what their 2005 allocations are under the new fund. According to provincial allocation figures, Owen Sound is to get $2,612,542 from the fund this year. But city officials expect that amount will eventually decline by more than $1.9 million annually. Grey County’s allocation for this year totals $5,821,786, including one-time 2003 and 2004 “reconciliation” funding of $2,948,000. But the county is worried about a future shortfall of about $4.77 million.

However, those concerns pale in comparison to the position Bruce County council found itself in this year. The county’s total allocation is just $1,142,000, including one-time funding of $522,000. Most of the county’s eight local municipalities got far more OMPF money this year than the county government. Next year the county will get nothing from the OMPF, “zero,” said Bettyanne Cobean, Bruce County’s clerk-treasurer, and one of the most financially savvy municipal staffers in the province.

Cobean said Bruce spends about half as much money on social services that figure into the province’s OMPF funding formula, and that’s the main reason why it’s getting so much less than Grey. Meanwhile, the McGuinty government has put more emphasis on the financial challenges rural and small communities in the north especially are facing, rather than the costs of specific downloaded services, like land ambulances, public health and social housing.

Owen Sound council recently approved a 3.9 percent increase in residential property taxes this year, along with a 1.8 percent for commercial and industrial taxes. Grey County has approved a 2.5 percent increase in county taxes, which end up on local municipal tax bills in the form of a county levy. Not too bad, some might say.

But Bruce County is a sign of things to come. As long as the provincial downloading boondoggle rattles along without being fixed – like a badly designed and built, gas guzzling car – it will continue to suck money from the pockets of municipal taxpayers. It can only get worse before it gets better, or in other words, fixed.

Originally published in The Sun Times in 2005.

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