August 2017
Backgrounder

In 2005, the municipal sector rallied around AMO’s $3 Billion Gap Campaign, which focused on the amount that municipal governments were paying to subsidize provincial programs.
 
During the 1990s, the property tax base was called upon to finance social programs – or income redistribution programs – which it was never designed to support. Municipal governments were mandated to assume social housing costs, including the unaddressed infrastructure deficit in social housing stock, half the costs of land ambulance services, as well as OPP municipal policing costs, among others. In 2003, Ontario’s municipalities faced a fiscal gap of $3.2 billion. By 2005, it had grown to $3.9 billion.
 
At the time, both municipal governments and economists argued that income taxes – not property taxes – should fund income redistribution. Ontarians were paying the highest property taxes in the country and were redirecting billions of dollars away from long-term infrastructure investments to finance expensive and highly variable social assistance benefits.

The provincial government, under former Premier McGuinty, agreed to take a serious look at the issue. The result was the Provincial-Municipal Fiscal and Service Delivery Review (PMFSDR), leading to the phased upload of many social assistance costs off the property tax base from 2008 to 2018.
 
From 2008 to 2011, major social assistance costs were fully uploaded by the Province. These included Ontario Drug Benefits and Ontario Disability Support Program benefits and administration costs. The Province now assumes these costs, along with the financial risk of rising costs and caseloads.

The phased upload of Ontario Works benefits and Court Security costs continues. By 2018, Ontario Works benefits will be fully uploaded, on top of $125 million in court security costs. The municipal sector continues to realize value from this long-term, predictable upload plan, which will be worth $1.9 billion to Ontario’s municipalities in 2017 alone.

How are Ontarians and the provincial government benefiting from the upload? Municipalities have been able to redirect dollars towards the long-standing infrastructure investment deficit. From 2003-2008, municipal own source spending on infrastructure, including debt, averaged $4 billion annually. After the upload, from 2008-2012 it has averaged $6 billion, an increase of $2 billion annually.

By 2018, the majority of income redistribution program expenses will be funded by the provincial government, as they are in every other Canadian province. The upload was achieved because of a committed provincial government and a united municipal sector.