WELLINGTON COUNTY – Local municipalities are worried their 2019 budgets could be thrown into disarray after Ontario’s finance minister warned provincial funding is under review and is likely to be reduced.
The announcement of grants under the Ontario Municipal Partnership Fund (OMPF), which provides a significant portion of municipal revenue, has been delayed.
In a letter to council heads just before Christmas, Vic Fedeli said the province must “drive efficiencies” in order to face the “massive” financial challenge of a $15-billion deficit.
“This is simply unsustainable,” he said. “We are making every effort to restore financial balance to the province. Getting this spending under control is why we are undertaking a detailed review of all transfer payments, including those to municipalities.”
Fedeli said the government would send out details as soon as possible, after consultation with the Association of Municipalities of Ontario, but warned that “we all will be operating within a smaller funding envelope” in 2019.
Centre Wellington
In 2018, Centre Wellington received $375,900 in OMPF funding, down from $442,200 in 2017.
Financial manager and deputy treasurer Mark Bradey said the township was receiving $1.54 million in 2009 before the provincial government started to scale back the funding.
Mayor Kelly Linton said OMPF funding, which goes towards the operating budget, is “a huge part of the revenues we get in for the town.”
He explained the fund was put in place to help municipalities provide services the province downloaded in the 1990s.
“So now they’re clawing this back; it really goes against the purpose for setting up this fund in the first place,” Linton said.
He added township officials are very concerned the funding could be reduced more than it already has over the last decade.
Erin
The Town of Erin, which has already set its 2019 budget with a 1.5 per cent tax increase, has fired off a letter to Fedeli warning of dire consequences if OMPF funding were to be lost entirely.
Erin included its 2018 OMPF grant of $593,400 in the 2019 budget, even though the actual amount was not known.
Mayor Allan Alls said he doesn’t think a complete cancellation of the grant will be politically feasible for the government.
But if it were to happen, his letter says compensating for the loss would require the closure of both the town’s community centres, or an extra 8% increase in taxes, or reduction of the farm tax break from 75% to 25%.
“Seeing as these are unfeasible options, as taxpayers in rural communities already feel that they do not receive a high amount of services for the rate of taxes paid, we would need to look at alternative solutions,” he said.
“All other services are essential, and we have an increasing wave of capital projects to be funded.
“Dissolving recreation and culture in the Town of Erin would be a devastating loss and in turn leave Erin a less desirable place to live and work.”
He said Erin should qualify as a rural municipality in need of support, suggesting a lack of provincial funding could hold Erin back from a wastewater system and future growth.
Guelph-Eramosa
In 2018 Guelph-Eramosa received an OMPF grant of $490,200, down $6,800 from 2017.
The grant represents about four per cent of total revenue and to make up that amount entirely through taxation would require a property tax increase of 7.4%.
Mayor Chris White said he does not expect complete elimination of the grant, but suggested a major reduction would have to be phased in. He said it could affect roads and bridges, an area where municipalities are already unable to afford all of the required upgrades.
“We have great concerns, because it would have significant impact, and it would come directly off the property tax,” he said, noting the losses would be cumulative each year.
“We are absolutely dependent on this money – it is not discretionary.”
Mapleton
In 2018 Mapleton Township received $835,500 in OMPF funding, up from $735,000 in 2017.
“In Mapleton 11% of the operating budget is the OMPF funding. Its huge,” said Mapleton Mayor Gregg Davidson during a county budget discussion on Jan. 7.
In an email to the Advertiser he added, “That would be too much of a property tax increase for our community to absorb should that be taken away.
“If anything, because we have so many farm properties, our OMPF should be increased to assist our community with managing the 75% rebate provided to our farm businesses.”
Minto
The town received just over $1.63 million in OMPF, down from about $1.8 million the previous year.
During the Jan. 7 county council budget meeting Bridge questioned why the new government would target municipalities for this type of cutback.
“I just don’t’ understand. They’ve got a lot of rural members that are MPPs now and why they’d even think of this … It’s a nice Christmas present,” said Bridge.
Puslinch
In 2018, the Puslinch Township OMPF allocation was $413,600 – the equivalent of 11% of the township’s municipal property tax revenue.
The amount exceeded the township’s 2017 OMPF by $43,400 and payments received in 2004 by $25,600.
Puslinch’s 2017 OMPF allocation was $370,200, equivalent of 10.6% of the township’s municipal property tax revenue.
Puslinch Mayor James Seeley was not available for comment by press time.
Wellington North
Wellington North’s 2018 OMPF allocation was $1,317,000, the equivalent of 19% of the township’s municipal property tax revenue.
In 2017, the OMPF allocation was $1,379,700, equal to 20% of the township’s tax revenue. This exceeded the township’s 2016 OMPF by $203,500.
Wellington North treasurer Adam McNabb, who explained OMPF funding has historically been used as part of general revenues, stated “a loss of this funding would pose a significant challenge to the municipality.”
Wellington North Mayor Andy Lennox agreed, adding that losing the funding completely “would have a dramatic effect on our ability to deliver key services.”
He said, “It is totally impractical to raise taxes by 20% to compensate, shut down one third of our road network or eliminate our fire service, so our only choice would be to cut back drastically on repairing and replacing our infrastructure.
“This will have long-term consequences that will not be easily resolved.”
Lennox adds “I hope our provincial partners understand how devastating it would be. We will continue to let them know that we don’t see this as being helpful to making sure Ontario is open for business.”
Wellington County
In 2018 Wellington County received $1.77 million in OMPF funding, down from $2.08 million in 2017.
Warden Kelly Linton explained that the grants have been declining for some time, noting the county received $4.72 million in 2012.
He’s concerned about the provincial government’s review of the program and the potential for further decreases.
“It will mean … either we have to raise property taxes to cover the shortfall or we have to reduce the level of services or make some other kind of decisions between those two different options,” Linton said. “So it would be really nice to know. It’s difficult to plan your budgeting when a large piece of that is unknown like this. So it makes our job kind of hard.”
With the county currently in the middle of budget discussions, the treasurer and senior staff “have to work out some contingency planning to find out where we can get the money in the short term because we don’t want to wait until we hear the news,” Linton said.
“So we might have to dip into reserves, we might have to do a number of different things and at the end of the day council will be making those decisions when we pass the budget.”
Linton said he will be sending a letter to the minister of finance prior to the Rural Ontario Municipalities Association conference, which begins Jan. 27.
“We are going to try a lobbying effort to … see if we can keep this in place … knowing at the end of the day they may or may not listen to us,” he said.
He added the government will be hearing the same message from across the province, and possibly from Wellington County municipalities.
“Hopefully that does the trick, but we have contingencies in place – (they’re) just not pretty options,” Linton said.
Background
The OMPF was introduced in 2005 to replace the Community Reinvestment Fund (CRF) as the province’s main funding model for municipalities.
Some grants are tied to specific costs such as police and social services, but the current issue is with unconditional grants, which go into general revenue and can be used for any municipal purpose.
A scale-down of the program, starting in 2014, was strongly criticized by AMO. Cuts were to be limited to 10 per cent in the north, and 15% in other areas, a commitment that was maintained through 2018.
Unconditional grants totaled $650 million in 2010, $598 million in 2012, $550 million in 2014 and $500 million in 2016. By 2018 the total was up slightly to $510 million, mainly to assist Northern Ontario municipalities.
Funding is based on a formula that considers the municipality’s financial circumstances, with the intent to provide more aid where it is needed most. Adjustments to the grants have been partially affected by the province uploading (taking back) some costs that had been paid by municipalities.
One element of the fund was to offset the cost to municipalities after the province downloaded to them the responsibility for providing property tax breaks to the owners of farm and conservation-protected lands.
