Ontario’s municipalities are facing steep property tax hikes due to the legacy of cost-sharing arrangements with the province that date back to the 1990s. They are calling for a frank dialogue with the provincial government on who pays for what and how to ensure sustainable and equitable funding for local services and infrastructure.
The ‘new deal’ for Toronto
The issue of provincial-municipal fiscal relations came to the fore in December 2023, when the province announced a “new deal” for Toronto, the largest and most populous city in Ontario. The deal included the transfer of two major highways, the Gardiner Expressway and the Don Valley Parkway, from the city to the province, along with a commitment to work together on a long-term fiscal framework.
The deal was seen as a recognition of Toronto’s unique challenges and needs, as well as a way to ease the city’s financial pressures. Toronto was facing a large budget shortfall due to the impacts of the COVID-19 pandemic, the rising costs of housing and transit, and the influx of refugee claimants. The city had proposed a 10.5 per cent property tax increase for 2024, which could balloon to 16.5 per cent if the federal government did not reimburse the costs related to refugee support.
The Association of Municipalities of Ontario (AMO), which represents 444 municipal governments across the province, welcomed the new deal for Toronto, but also urged the province to extend similar support to other communities.
The legacy of downloading
AMO executive director Brian Rosborough said that the root cause of the fiscal imbalance between the province and the municipalities was the downloading of various costs and responsibilities to local governments in the 1990s. This was done by the Progressive Conservative government of Mike Harris, who claimed to reduce the size and spending of the provincial government by shifting some of its functions to the municipal level.
The downloaded services included public health, land ambulance, social housing, social assistance, child care, and court security. The municipalities also had to take over the maintenance and operation of bridges, highways, and other infrastructure that were previously under provincial jurisdiction.
Rosborough said that these services and assets were not accompanied by adequate funding from the province, leaving the municipalities to rely on property taxes and user fees to cover the costs. He said that this was unfair and unsustainable, as property taxes were not designed to fund such services, and user fees could not keep up with the rising demand and inflation.
He said that the property tax increases being proposed by many municipalities across the province, ranging from six to 10 per cent, were partly the result of the downloading of the 1990s. He warned that without a systemic change, the municipalities would face even higher tax hikes in the future.
The need for a new deal for all
Rosborough said that AMO would be pushing for a broader rethink of the provincial-municipal relationship at the Rural Ontario Municipal Association (ROMA) conference, which started on Monday and will run until Wednesday. The conference is an annual event that brings together rural municipal leaders and provincial ministers and officials to discuss issues and opportunities for rural communities.
Rosborough said that AMO wanted the province to take back some of the services and infrastructure that were downloaded to the municipalities, or to provide adequate and predictable funding for them. He said that this would allow the municipalities to focus on their core functions, such as local roads, parks, libraries, and recreation.
He said that AMO also wanted the province to work with the municipalities on a long-term fiscal framework that would ensure fair and stable funding for local services and infrastructure, based on the principles of accountability, transparency, and equity. He said that this would require a frank and honest dialogue between the two levels of government on who pays for what and how.
Municipal Affairs and Housing Minister Paul Calandra said that he was looking forward to the talks at the ROMA conference. He said that the province had proven that it would always support the rural and northern municipalities with the resources they need to grow and prosper. He said that the province would continue to work with the municipal partners to build Ontario and make sure no part of the province was left behind.
Robin Jones, chair of ROMA and mayor of Westport, Ont., said that rural municipalities supported AMO’s push for a new deal for all. She said that rural communities faced unique challenges, such as aging infrastructure, declining population, and limited tax base. She said that rural municipalities needed more funding and flexibility from the province to address these issues and provide quality services to their residents.