TORONTO, ONTARIO, March 22, 2007 – Ontario’s pre-election Budget, if approved, will see a number of municipalities benefit from additional funding for infrastructure projects.
However, it does not include structural improvements to current provincial-municipal cost-sharing arrangements. 

“The Province’s 2007 Budget will improve the outlook for some municipal governments in Ontario for 2007”, said AMO President Doug Reycraft. “However, by keeping current cost-sharing arrangements in place for health and social programs, many municipal property tax payers will see little by way of relief for 2007.  All eyes will now be on the Joint Fiscal Review that we are undertaking with the Province and the manner in which municipalities may benefit if Ontario receives the $2 billion increase in transfer payments for health and social services promised by the Federal Government.”   

The 2007 Budget proposes to double the recently announced one-time rural infrastructure fund from $70 million to $140 million to assist rural municipalities with infrastructure projects in rural and northern communities.  It also commits to phasing out “GTA pooling” for downloaded programs by 2013.  This will benefit GTA communities surrounding the City of Toronto.  A projected 2% increase in social assistance rates will increase municipal costs by $18 million a year beginning in 2008.

The 2007 Budget will also unlock $127 million in Federal Government housing funds and $352 million in Federal transit funds that were allocated in the 2006 Federal Budget.  

Finance Minister Greg Sorbara also introduced new measures to address volatility in the assessment system.  These included a move to a four-year assessment cycle, to be implemented province-wide in 2009, with future residential assessment increases phased-in over four years.  

The cost of assessment services was downloaded to municipalities by the previous government with the creation of the Municipal Property Assessment Corporation (MPAC).

The 2007 Budget does not indicate what the cost of changes to the assessment system will be or whether the province will absorb the additional costs or require municipal property tax payers to bear any additional burden.

“Addressing volatility in a way that does not undermine the basic principles of current value assessment may increase stability in the system without creating inequities amongst homeowners”, said Reycraft. “However, these measures do not address the fact that Ontario’s property tax base is overburdened and that we have the highest property taxes in Canada.  To change that, we need to fix the $3 billion provincial-municipal fiscal gap.” 

Approximately 50 cents of every property tax dollar in Ontario is used to fund education or downloaded provincial services such as disability benefits and prescription drugs for low income families.  As a result, Ontarians pay $235 more per person in municipal property taxes than other Canadians. The 2007 Budget does not address long-standing concerns about the $3 billion provincial-municipal fiscal gap, which is the $3 billion in property taxes that the Province draws from municipalities every year to subsidize provincial health and social service programs.

The 2007 Budget proposes to address the current variations in Business Education Tax (BET) rates by implementing a $540 million cut to BET rates phased-in over a seven year period.  While improving the competitive position of affected municipalities across the province, this proposed change does not reduce the burden on the municipal residential property tax payer. 

 “While additional infrastructure funding and flow-through of Federal Government trust funding will assist some municipalities in the immediate term, the longer-term outlook for Ontario’s communities is still uncertain,” said Reycraft. “AMO will continue to advocate for fair and sustainable fiscal arrangements that put Ontario communities back on a competitive footing.”
In August 2006, Premier McGuinty answered AMO’s call to undertake a joint review of the provincial-municipal fiscal relationship.  Now underway, this review is expected to conclude with a public report early in 2008.  

The 2007 Federal Budget includes additional federal transfers to Ontario of approximately $2 billion a year by 2008 for health and social services.  These new federal funds will ensure that Ontario is in a position to make substantial progress in taking back health and social services costs downloaded to municipalities in the 1990’s. 

The Provincial Budget also projects a provincial surplus of $1.3 billion in 2008-09; and, $1.6 billion in 2009-10.  This will assist the province in financing the upload of provincial health and social services off the municipal property tax base. 

AMO is a non-profit association of municipal governments in Ontario.  AMO’s 400 plus member municipal governments govern and provide key services to about 10 million Ontarians and one in three Canadians.