January 15, 2014

Provincial tax squeeze touches a nerve in Erin

As published in The Erin Advocate

Small towns like Erin are feeling a tax squeeze as the provincial government cuts funding for local budgets and makes it harder to qualify for special grants to fix bridges and roads.

I asked Erin Finance Director Sharon Marshall about the recent denial of $2 million in funding for the Station Street Bridge, with the province saying that other areas had greater needs “as measured by property assessments and incomes”. It seems I touched a nerve for the treasurer, who has been dealing with provincial funding for 28 years.

“Is the Province saying that 7 of 8 Wellington municipalities (including the County) did not receive approval – because our ratepayers are too ‘wealthy’, using assessment and average family incomes as their statistical justification?” she asked. “If that one statistical measurement is the means for future grants, that is potentially scary to Erin.”

The Town has just finished its Asset Management Plan, which forecasts the need to raise an extra 2.5% of local tax money annually for 20 years, and to borrow an average of $824,000 annually for the next 10 years, to meet infrastructure goals (not including sewers) without any grants. 

Marshall said that plan would be a better measurement of funding need than Erin’s average property assessment ($447,783), or the average family income ($96,876). Erin homeowners pay an average of $5,222 in property taxes. That 5.4% of family income, and Marshall says it is “ominous” that the province considers this in the normal range, with room to expand.

Towns that are willing to raise taxes, draw down reserves and borrow significantly for new infrastructure are more likely to get provincial grants. As of December 31, the Town of Erin owed a relatively moderate $2.89 million, much of it for the new Hillsburgh Fire Hall, and has received no infrastructure grants since 2009 ($2.67 million). Without grants, that debt could reach $8.78 million by 2020.

“It seems that the Provincial government is saying that local municipalities have the debt servicing capacity to replace and add to our infrastructure without Provincial funding,” said Marshall. Erin’s current cost of debt servicing is 8% of local revenues, but the province suggests this could be allowed to rise.

“They imply that we do not have ‘challenging’ enough economic conditions. I think our local property tax payers, and our Asset Management Plan, would prove otherwise.

“It seems to me that the Provincial government has made the decision that local debt, and local taxes need to increase. It seems that the tax burden is being downloaded and the local municipal government is taking the blame.

“Maybe small rural Ontario politicians need more clout. After all, food and materials that benefit all Ontarians are trucked through Erin (ie water, gravel, fill, car parts, food and milk). The tax burden to supply all Ontario, including large urban centres like Toronto and Mississauga should not fall on rural Ontario landowners and small business operators.”

Erin’s high property assessments mean that residents are already paying a disproportionate share of County taxes compared to several other Wellington municipalities.

The province also recently announced the amount of money each municipality will get through the Ontario Municipal Partnership Fund, the primary program by which Ontario supports municipalities. Erin will get $585,800 this year, down slightly from $588,600 last year. 

“We were getting $654,000 in 2012,” said Marshall. “The loss of $65,400 in 2013 impacted the tax rate by approximately +1.4%, and that impact is still there.”

It’s part of an Ontario-wide reduction, which is offset by the province uploading (paying for) expensive items like social services and court security, which had been downloaded to municipalities by previous governments.

That takes a huge burden away from Wellington County ($4,487,500 this year alone), which gets 55% of local tax revenue. This does not directly help the Town of Erin, but if the County uses “uploading” to reduce their tax rate, Erin residents will get some relief.

Last year the county increase was 2.4%, while the Town had a 15% increase and education was down 4.7%, producing an overall increase of 4%. Local councillors, who only control 20% of the tax pie, find a “blended” increase is easier to justify.

County staff have suggested a 2.8% tax hike in 2014, but both Mayor Lou Maieron and Councillor Ken Chapman have urged County Council to trim it lower. “We can do better,” said Maieron.
In Halton, where there has been significant business and residential development, and more assessment growth than anticipated, regional taxes will decline .4% in 2014.