Tough luck for cities as boom busts

Posted on July 26, 2008 in Debates, Governance Debates – Columnist – Tough luck for cities as boom busts
July 26, 2008. Royson James

Even as provincial and federal politicians congratulate themselves this week on breaking the perennial funding logjam that slows a project like the subway extension to York University, some municipal officials have their eyes on the big prize.

When will the province of Ontario take back the huge funding burdens it dropped on municipalities in the 1990s? How much will it take back? And why is Premier Dalton McGuinty dragging his feet way past the target date he himself set?

The fiscal review panel of provincial and municipal staff and experts has been meeting since August 2007. The premier promised action by the spring of this year. That was amended to early summer. It’s now July.

“The report is seven weeks overdue,” NDP critic Andrea Horwath said Wednesday. “If this were the public library, Dalton McGuinty would be charged a hefty late fee. Instead, he leaves it to municipalities to pick up his mounting tab.”

Some kind of relief is coming. What municipal leaders fear is that the level of relief is dropping with each announcement of economic woe for Ontario. Gone are the dreams of full removal of all social services costs and the upload of social housing, to name two.

“What we keep hearing is, they can’t afford it,” said one municipal official this week. “They are so worried about the provincial economy.”

An announcement is expected by Aug. 25. McGuinty is the scheduled speaker that day at the annual meeting of the Association of Municipalities of Ontario, in Ottawa. He cannot afford to show up without the relief package in tow. It should be a historic – disappointing or liberating – day for Ontario municipalities.

In 1988, the province’s cities and towns spent 11 per cent of their property tax revenues funding housing, social services and health-care services the province forced them to provide. By 2006, the take was 16.4 per cent.

In the province’s largest city, with a nearly $8 billion budget – larger than that of several provinces – 39 per cent of the spending goes to fund provincially mandated programs like housing, child care, social services and drug benefits.

Toronto and just about every smaller town have been arguing for years that this burden must be lifted off the municipal shoulder, or soon the cities and towns won’t be able to provide traditional services like parks, recreation, garbage pickup, road and transit.

They point out that everywhere else, social services are paid for out of income tax, which the province or state controls, not from property tax, which is to be the preserve of the municipalities.

Ontario municipalities spend about $617 per capita on housing, health and social services while municipalities in the rest of Canada spend about $41 per capita.

All governments know the story. They agree it’s not fair and have promised to fix the relationship. But money always gets in the way.

It should have been easy as the province went through boom times. Now it will be more difficult. But despite changing economic fortunes, the case for reform is so pressing that McGuinty must act. Delay only increases the difficulty.

It’s the rare Ontario municipality that doesn’t report a fiscal imbalance – a gap between services the town or city has to provide and the available revenues to fund the service. In 2005, AMO put the combined province-wide gap at $3.9 billion – a whopping shortfall that suggests a long-term systemic problem. Repairing this will be McGuinty’s legacy.

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