Overview
Property taxes are an appropriate means to raise public funds needed to finance the delivery of public services related to property. However, property taxes should not be levied to finance public services for citizens, as is currently the practice.
Ontario Municipal Partnership Fund (OMPF)
The Ontario Municipal Partnership Fund (OMPF) is the main provincial transfer to municipalities. However, as the provincial government uploads some social program responsibilities, the funding through the OMPF is being scaled back. As per the agreement with municipalities, the fund will be reduced to $505 million by 2017.
Unfortunately, the municipalities that are facing provincial transfer cuts have not benefited to the same extent from the budgetary relief offered by the provincial uploading of some social programs.
Given their limited taxing authorities and ongoing reductions in the real value of transfers from the province, municipalities have had little choice but to raise property taxes to cover services they provide to citizens. This phenomenon results in burdensome and non-competitive taxation of land-based industries such as farming.
Provincial Uploading of Social Services
The provincial government has uploaded a number of social services that were previously provided at the municipal level.
The uploaded social programs include the Ontario Drug Benefit (ODB), the Ontario Disability Support Program (ODSP), Ontario Works (OW) and court security and prisoner transportation. These uploaded services were estimated to save municipalities approximately $1.9 billion throughout the province in 2017.
Many rural municipalities are now facing much more difficult financial situations due to these changes, while larger municipalities in urban areas are receiving the bulk of the benefits from provincial uploading of social program costs.
Lower tier municipalities in rural areas, are typically not responsible for the delivery of the social programs that are being uploaded to the province. These rural municipalities enjoy little to no direct financial gain from these uploads. The majority of financial gains from uploading these social services will be enjoyed by Toronto, Ottawa, Hamilton, London and other large urban municipalities.
Not only are small rural municipalities excluded from the direct financial gain of uploading social programs, they take the largest financial hit from the reductions in direct transfer payments through the OMPF.
Ontario Provincial Police Costs
Most municipalities across Ontario are responsible for paying the costs associated with Ontario Provincial Police (OPP) services. OPP costs have become increasingly burdensome for rural municipalities, who are spending a larger proportion of their total budget on OPP services every year.
Prior to the 1998 realignment of government service delivery, the majority of municipalities received OPP services paid for by the province. The downloading of OPP services has resulted in financial difficulties in many rural municipalities.
Police protection services benefit both property and people. Not only is police services a benefit to all residents in the province, the standards of the OPP are mandated by the province. It makes no sense that a service which is demanded by all residents throughout the province, whose standards are mandated by the provincial government, is financed by municipalities, whose only means to pay these costs is through property tax.
The province must play a larger role in financing police services throughout the province. Additional funding to municipalities or a complete upload of OPP costs would provide tremendous financial relief for rural municipalities, allowing them to redirect property tax funds to pay for crucial municipal services and infrastructure.
OFA Position
OFA believes the portion of the tax burden raised from property taxes is inappropriate. OFA further believes that adequate provincial funding transfers to municipalities are required to remedy the current over-reliance of property tax revenue used to finance municipal services.
More about Municipal Funding Transfers to Municipalities on the OFA website.
