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Sep 2017 | Tax & Spend

MIND THE GAP: ONTARIO’S INFRASTRUCTURE DEFICIT
PSD’S STEFANIE FISHER IN CONVERSATION WITH LYNN DOLLIN, AMO PRESIDENT

As the infrastructure gap is becoming increasingly apparent, so too is the need for an effective solution. At the 2016 Association of Municipalities Ontario (AMO) conference, members were tasked with just this, coming up with a solution to an issue affecting every Ontario municipality. However, when they presented their proposal for a 1 percent HST increase dedicated to municipal infrastructure at the 2017 AMO conference in Ottawa, they were met with overwhelming “no’s” from provincial party leaders. PSD sat down with Lynn Dollin, President of AMO and Deputy Mayor of the Town of Innisfil, to discuss the proposed HST increase and the future of infrastructure planning in Ontario. 

 

Last year the Premier had asked AMO to come up with ideas for alternative municipal revenue tools that would help Ontario's communities with their funding gaps. What options did you explore? Was there a consensus on your board and among AMO members to focus in on the 1 percent HST increase dedicated to municipal infrastructure? 

Yes, we did have consensus on our board. However, before that we spent a lot of time – most of the year – discussing several options (there were over forty of them). All of that material – the discussion papers, background studies, etc. – are publicly available and they talk about all of the options we considered, including the status quo, which is just to do nothing. We looked at all the options based on a set of criteria. We not only had the board look at it, but also an expert group that consisted of people from municipal finance organizations, a retired TD bank analyst, and a wide range of individuals with varying expertise. We did this because we had to come up with a problem statement and figure out just how big the infrastructure gap was. Because we all now have asset management plans – because it is a requirement of the province – we were able to put a better figure on just what that gap was.

So, we have to look at closing that infrastructure gap, as well as all that work that we have on the books but have deferred because property taxes are so high. But we also have to look at our operating costs – the fact that they are increasing as well. We have heard a lot about hydro costs this year – municipalities are huge energy consumers. Our water and wastewater plants and pumping stations are a good example. These all require a lot of energy, even when we retrofit with our LED and all of those energy saving measures. So, we have that cost increase, coupled with government legislation, or what we like to call “the unfunded mandate,” which are all the costs to municipalities that come from new legislative requirements.

First, we had the problem statement. Then we looked at a set of criteria to judge every option. We then narrowed it down from there to around seven options. Following this, we did our first round of polling with Nik Nanos to look at where the public was on these issues. Once we made the decision on increasing the HST by 1 percent, we went out to each of our members and provided them with a short executive summary with the work that we had done, along with a guesstimate of what it would mean for them. We did this because one of the questions that the board had struggled with from the very beginning was “what does a 1 percent increase mean for my specific Ontario municipality?”

We sent out an individualized letter to each AMO member, so they were able to read all of the material, and fill out a survey and send it back. We had a fairly positive response. We also wrote to the three party leaders around the end of May, informing them that we are having this conversation with our members. We said we would really like it if they would resist the urge to jump into the discussion at this time, so that we can have a discussion with our own members first. During that time, we also went to about thirty or forty different areas of the province and spoke with senior staff and elected officials, both about the problem statement and what the proposal was, as well to conduct two more rounds of polling.

A lot of work went into this but I do think there is more that needs to be done. And, regardless of what the opinion is of the three leaders, we have said that this is our option going forward. If you don’t like our option, and you have a better idea, we would love to hear it.

 

“People don’t understand who does what – that education is a provincial responsibility and that fire is a local responsibility. But when they start talking about that and then start looking at the numbers and realize that municipalities are the biggest owners of infrastructure, and are only getting 9% of the tax revenue, I don’t think anyone can say that there is a balance there.”  

 

When you presented the plan for a 1 percent HST increase, were you expecting to hear “no” from each of the party leaders?

I have been in municipal politics for twenty-three years, so I didn’t expect that we were going to get a big high five this close to an election. I know that with other big asks that AMO has had (the Federal Gas Tax being a good example), it didn’t happen overnight. I think realistically everyone knows that this is not going to happen quickly, and that there has to be more discussion. Based on how the leaders answered the questions during their interviews, I don’t think they have actually read all of the material in depth. Not that I am suggesting that they will change their minds before June, but we need more than just ‘no.’

We know the gravity of where we are right now. We have done the homework, we’ve talked to our members, and we have to talk to our members more. There were a lot of members who just hadn’t seen it or read it yet, and quite frankly I get it. We are inundated with material every day, and sometimes some of it doesn’t get the attention it deserves. We hope that by having this conversation – and now that everybody is talking about it – that we can get some good feedback. We are having such a great discussion. I was speaking with one of the servers at the conference, and he had watched the discussion on the big screen while he was working. We had a twenty-minute conversation about what a regressive tax is, and he felt that wealthier people got away without paying enough income tax. I think that if you can get everybody talking about it, that is already a huge win for us.

People don’t understand who does what – that education is a provincial responsibility and that fire is a local responsibility. But when they start talking about that and then start looking at the numbers and realize that municipalities are the biggest owners of infrastructure, and are only getting 9 percent of the tax revenue, I don’t think anyone can say that there is a balance there.  

Now that you have received this feedback from party leaders, are you planning on still going ahead with the proposal as planned? Or, are you planning to try a different strategy?

We don’t have a plan B; the plan is that the ball is now in their court. You asked us to come up with an idea that we think will work. We have done that - if you don’t like that, then what is your plan? That is currently where we stand. We have a board meeting at the end of September, and that will be the first time we regroup since the conference, and it will be interesting to get everybody’s feedback. But as far as I can tell through emails, social media, phone calls, etc., the board is still steadfast in moving forward with this proposal, and laying it at the feet of the leaders, and saying if you’re going to stomp on it, you better have something good or better to offer us.

 

Municipalities in other provinces have shown interest in having something like an HST increase adopted, as they are also struggling with funding infrastructure needs. Have you been in contact with FCM or any other provincial associations to discuss a united front?

As President of AMO, I sit on a group that has all of the provincial and territorial association leaders. We meet four times a year, and the last time was in June. At that time, we did present the group with a copy of our executive summary and the work that we had done on the proposal. We have not formally requested that we do anything across Canada for several reasons. One of the main reasons is that what each province and territory is responsible for is very different. For example, we are the only province in the country that is responsible for affordable housing. In Nunavut, there is only one community that has property taxes – they work mostly on grants. Each province and territory is just so different, and I think it would be difficult to adjust [this proposal] to fit across the country, and to get everyone on board, especially because some of them already have something in place. We are happy to share information, and I think that certainly the other provinces and territories are watching us, waiting to see how we make out. But, at this point we think that it has to be a made-in-Ontario solution. Getting 444 municipalities or 3,300 elected officials to agree on something is enough of a challenge, especially when you have such diversity; some municipal governments in Ontario employ over 1,000 people and some only employ 1 person.

 

“Everyone can point to a need within their municipality and something that they have been waiting for.”

 

Would the 1 percent increase in HST alleviate some of the pressure to increase property tax at the local level or will there still be a need for an increase? 

That is definitely why the proposal was put forward in the first place. In order to close the gap, collectively we would have to double property taxes in the next ten years. And, certainly there are a number of reasons why that is not a good idea. One of them is that households are shrinking. You have the same property but less people are in it, particularly in Northern Ontario. You also have assessment growth, or in my case, seasonal properties and lakeshore making the assessment so much higher than it would be if it wasn’t on the shore. So, property tax is more of a regressive tax.

The other good thing about HST as opposed to property tax is that the HST would allow you to build in protection for low-income Ontarians, which property tax does not. We already pay some of the highest property tax in Canada. I am constantly hearing about people in my municipality who are going to have to sell their homes because it is two people in their household who are retired, and they have owned the home for 50 years and the property tax is now more than what they paid for the house. They can’t stay there anymore because they are on a fixed income. There would be protection for those people under HST. Plus, visitors pay HST, whereas currently visitors don’t pay for any municipal infrastructure. These are a number of good reasons.

The key to what we were asking, and it is how we laid it out in the polling, was we asked if people were supportive of a 1 percent increase on HST dedicated to municipal infrastructure, and that was the important question. If you did the same polling, and asked what do you think about a 1 percent increase that will go into general provincial funds, it got next to no support – something like 20 percent. But as soon as you said the words municipal infrastructure, the poll bumped up to close to 70 percent. The reason is because they read the news, they see the flooding and the pot holes in the road. They are clamouring for a new sidewalk or this or that to be fixed. Everyone can point to a need within their municipality and something that they have been waiting for. I think it resonates with people because it supports municipal infrastructure.

We even supported that property taxes would still rise to the rate of inflation – this isn’t about trying to get a zero percent property tax increase. We are trying to accelerate infrastructure work that is on the books but hasn’t been affordable, while keeping property taxes at the rate of inflation. And, even with the HST increase, we figure that it would raise about $2.5 billion, which is only half of the gap. So, it wouldn’t stop municipalities from looking for further efficiencies and making sure that they are stretching every dollar. But it would go a long way with allowing municipalities to get going on things that they have been postponing for years just because of fiscal restraints.

 

STEFANIE FISHER received her honour’s bachelor’s degree from King’s University College at Western University in Political Science and her master’s degree from the Norman Paterson School of International Affairs at Carleton University. Previously, Stefanie has worked as a research assistant, contributing to several different projects, including one on the Futures of Terrorism. In addition, as a part of her master’s research she looked at municipal critical infrastructure and the different regional infrastructure funding programs such as the Ontario Gas Tax Fund.