Why Are Municipal Taxes Always Going Up? Blame Ontario

A couple of weeks ago, the beginning of  'Asset Management: The Sequel' was played out in Sydenham.

The keeners from Watson and Associates happily outlined how, with a mere 6.5% tax increase each and every year for 10 years, which would result in an 80% tax increase all on its own, South Frontenac would have enough money to maintain and eventually replace all of its roads, bridges, buildings and other fixed assets.

On one level, the report is useful information. It is good to know about the state of repair of assets, about the cost of replacement, and it is prudent to put money aside for foreseeable future costs. And South Frontenac, like most other municipalities, has been increasing its budget by 2% per year, in order to build up reserves as part of its asset management planning. 

Now, they are mandated to go further, look at the lifecycle costs of all assets and make a 10 year plan to work towards addressing all of the foreseeable costs they are facing.

But the tax increases that would be necessary are fundamentally unrealistic

Luckily, as South Frontenac Township's CAO pointed out at the end of the asset management meeting, it is only one element in developing the updated long term financial plan, and 2027 township budget.

Asset Management does not exist in isolation, it must be understood in terms of who is driving it, and how it fits into the overall pattern of the relationship between the Province of Ontario and Ontario municipalities.

After municipal amalgamation, costs were downloaded by the Province, which shifted the tax burden from provincial to municipal taxation. That way, the Province can spend more money in other areas without raising income taxes. Municipalities pay for roads that were previously provincially funded, as well as a portion of ambulance service, long term care, public health, and more.

The Province decides how the costs will be levied for these services, with local politicians acting as tax collectors, and we all blame local governments, when municipal taxes go up every year. 

The province provides a number of granting programs to help municipalities cover costs, as a form of compensation for all of the downloading. And they are threatening to withhold those grants for municipalities who do not take on asset management policies, like a parent withholding the allowance if a child spends the money unwisely. All of this in the context of insisting that municipalities cannot run budget deficits. They can borrow money, and take on long term debt, with limits, but the repayments each year need to be included in a balanced budget.

Of course, the Province of Ontario imposes none of these constraints on themselves. They run deficits all the time, even spending money for the political benefit of the party in power, that is designed to keep them in power, with no one constraining them.

And does the Province have an asset management program in place, ensuring that every hospital, every road, every bridge and  building that they own has money in a reserve fund set aside for when it fails?

If so, I think we would have heard about it.

Instead of raising taxes, the province lives on economic growth. Rising incomes mean more income tax comes in, and more sales tax comes in. Downloading costs to municipalities was a way to avoid bringing in provincial tax increases, while putting some check on rising deficit spending.

It was done by the Harris Conservatives, and under the Liberals of Dalton McGuinty and Kathleen Wynne, it was maintained.

What the Ford government is bent on doing, is a bit different. They are systematically eliminating local oversight by amalgamating and assuming more control over agencies such as Public Health Units, Conservation Authorities, and School Boards, bringing in Strong Mayor Powers and now appointing regional leaders in some jurisdiction. 

What this does is take local oversight away from agencies that are funded by local taxes.

But a municipality like South Frontenac does not have the authority to say, sure we will put in a robust asset management system, but we will make it less onerous on our ratepayers by cutting our payments to the province for health units, by divesting in long term care, and by uploading a few roads that we can't afford. 

The Province has always had ultimate control over what municipalities do, but in the past they kept at a distance, allowing local residents to vote directly for the politicians who oversee local services. 

This is changing, quickly, under the Doug Ford Conservatives as they settle into their third, most decisive, mandate.

And we know what is coming, higher local taxes and less local