Toronto, ON., February 20, 2003. The following News Release was issued today along with some critical information on municipal revenue as compared to the federal and provincial governments. This information may be useful in your contact with local constituents as the municipal budget and tax setting process proceed.

Why Leadership From The Province Is Needed

Ontario’s municipalities have been calling for a New Deal with the Federal and Provincial Governments to help with the growing challenges they face in financing all the services and infrastructure they are mandated to provide. Property taxes are being stretched to the limit to pay for a wide range of municipal services - from emergency services, to social services and community health, to infrastructure and soft services such as parks and recreation.

“It is unfortunate that the Federal government did not seize the moment to create a legacy of strong and sustainable communities.” said AMO President Ken Boshcoff. “Instead we get intergovernmental finger pointing. The public has little patience for this - they expect governments to work together. We hope the Province of Ontario will show the Federal government how to shape a new deal with its municipalities.”   

Why the need for a New Deal? While property taxes in Ontario raise about $9 billion annually, infrastructure needs alone require an estimated $21.1 billion dollars to fix water/wastewater and municipal roads and bridges (i.e., a five year rehabilitation requirement of $9.1 billion and $12.0 billion respectively).  

Added to this are transit, social and affordable housing and the other services that citizens want to enhance their quality of life.  Boshcoff said, “It is clear that municipalities cannot meet these investment needs with property taxes alone. We must match the investment to the appropriate tax base.”  AMO will continue to advance a number of ways of returning tax dollars to work for our communities, including zero rating GST and PST, and a share of the gas tax for transportation needs.

For additional background on how municipal revenue compares to federal and provincial revenue, and sources of revenue, please refer to the Backgrounder - What We Know. 

The Association of Municipalities of Ontario (AMO) is a non-profit organization with member municipalities representing 98 per cent of Ontario’s population.  AMO supports and enhances strong and effective municipal government in Ontario and promotes the value of municipal government as a vital and essential component of Ontario and Canada’s political system.

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What we know....
Why Ontario's Municipalities Are Disappointed in the Federal Budget and
Why Leadership from the Province is Needed
Some facts:
  • The 2001 average Ontario family total tax bill was $36,497.  The federal take was about 60%, the provincial share about 33% and municipalities got about 7%.  Income taxes make up the largest single component of the average Ontario family's tax burden at almost 35%, followed by sales tax at about 18%.  A typical family would pay about 6 times its property tax burden in income taxes and 3 times in sales taxes.
  • Income and consumption taxes, not property taxes are a better reflection of ability to pay.  Income taxes and consumption taxes as a share of total governments' revenue grew 15% and 22% respectively from 1997/98 to 2001/2002.  Property taxes grew in the same period by only 6.2% - clearly not as responsive a revenue source.
  • Federal government collected about $4.3 billion in fuel/excise tax alone in 2002.  The Federal budget announcement only earmarks $100 million/year nationally toward municipal roads and bridges, as well as sewer and water infrastructure.  In 2000, the federal contribution to the Canada-Ontario Infrastructure Program was $680 million over 6 years, but it was fully used before the end of the program's third year. 
  • The Ontario government collected about $2 billion in gas and fuel tax in 2001.  A re-direction of 3 cents per litre would contribute $435 million to transportation infrastructure needs. This would be helpful considering that in 1999, the average cost to maintain a kilometre of road in Ontario was about $3,100 - and more in Northern Ontario.
  • Municipalities pay GST and PST to the provincial and federal government for goods and services.  By zero rating the PST and the GST, Ontario's municipalities would retain close to $300 million/year. This would leave more tax dollars to work locally rather than being sent to the federal and provincial governments and there would be added savings by reducing redtape and streamlining government.
  • Property tax in Ontario is substantially above the average per capita in Canada.  Ontario’s municipal expenditure in 1988 was $1389/per capita; the Canadian average was $1216.  In 1998, it was $1650 and $1041 respectively.  The property tax burden in Ontario for an average family is about 14% higher than the next highest province in absolute terms.
  • User fees and charges cannot be used to generate new discretionary revenues for municipalities.  User fees represent about 20% of municipal operating revenue and with property taxes total about 70%.  In the U.S., they were estimated to comprise 54% of municipal revenue - 21% property taxes and 33% user fees/charges.
Figures come from a variety of sources – Statistics Canada, Fraser Institute, C.D. Howe Institute, Federal and Ontario Budget Papers.