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The Provincial Downloading – How Ontario Became a Have Not Province Pt 3

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Part 2 of this series gave a quick preliminary introduction to the Harris revolution and a list of the significant reforms that Harris carried out in order to balance the provincial deficit. In the years since, Harris has received a significant amount of flack, due to enforcing policies that hurt the long term prosperity of the province.

The Mike Harris led Progressive Conservatives campaigned on a neoconservative agenda and enacted their reforms from the Common Sense Revolution “manifesto”.

And Part 2 – Mike Harris: The Common Sense Beginnings looked at the extent to which the Harris PC’s would go in order to pass through their legislation, no matter the opposition, or the costs.

The government assessed various strategies to counter the deficit.

One of them was to download previous provincial responsibilities onto the backs of municipal governments, and to consolidate cities in order to combat inefficiencies and save costs.

Although various different jurisdictions experienced amalgamation (i.e. City of Hamilton, Ottawa), we present the case of Toronto and the effects of which turned the metropolitan city into a megacity.

The merger of the various wards into a giant city had drastic implications at the time, many of which continue to be felt by city residents to this day.

 

Downloading to Municipalities

During Harris’s term, the PC’s had “downloaded” (otherwise known as transferred) countless provincial services and programs onto regional municipalities. These services included the Ontario Disability Support Program (ODSP), land ambulance services (formerly under the Ministry of Health), public transit funding for major cities (TTC-Toronto, OC Transpo – Ottawa, etc and others.)

In fact, Harris PC’s had downloaded $3 billion of costs onto municipalities — including child care, transit, housing, and public health — which then led to higher property taxes and an infrastructure deficit.

This had a tremendous impact. The larger cities could barely handle the shift, and the smaller regional municipalities were forced to either privatize or slash the service altogether. Many opted for the latter option

Indeed, in 2011 Bill McDonald a former mayor and candidate for MPP for Lanark-Frontenac-Lennox had even stated that the Harris plan, “stuck our towns and residents with the bill for programs that were the province’s responsibility – like senior’s drug costs, policing, and ambulance service. In order to make ends meet, municipalities had to make cuts to services.

He added,

They also had to increase property taxes to pay for the services that had been heaped onto them. The Harris-Hudak PC’s patted themselves on the back for their fiscal management, but in reality, they just passed the buck to mayors, reeves, and local councils. I know this firsthand because I was the mayor of Central Frontenac Township when Harris was Premier.

 

Organizational Perspective

Pat Vanini, Executive Director of the Association of Municipal of Ontario (AMO) [nonprofit organization that has more than 400 of Ontario’s 445 municipal governments as members] also had much to say about the provincial downloading to the municipalities.

She sat down with the Globe and Mail to address questions by their readers.

Vanini stated that the downloading of programs and services in the late 1990s transferred a significant portion of the provincial government’s operating deficit to municipalities.

Vanini claimed this helped allow the Harris PC government to balance their own books, but the situation was not sustainable for municipalities.

She said,

If you think about what services you get from each order of government, you will probably be surprised to learn that only about seven or eight cents of each tax dollar paid by a person in Ontario goes toward municipal services. The rest goes to the provincial and federal governments….Ontarians pay property taxes that are $237 per person higher than the average of all other provinces. At the same time, the province pays $258 less per person on health and social services. We see that as the fundamental problem.

 

A reader asked: I would like to see the more-senior levels of government leaning on lower levels to require proper management as a condition of any funding. For example, if it is true that Toronto has one manager for every six employees, as compared with one manager for every 18 in the private sector, then Queens Park should require the City of Toronto to get its financial house in order before agreeing to take back any social service costs or permitting Toronto to consider levying any new taxes.

The federal government should similarly supervise the provinces and territories. Perhaps it is time we had ongoing independent outside business reviews of government waste.

Is municipal mismanagement an issue here?

 

Vanini responded: The public is able to scrutinize municipal spending to a far greater degree than it can the provincial and federal governments.

For example, municipal governments are the only order of government that tables their budgets for public input and feedback before adopting them. The provincial and federal governments may consult. But they go behind closed doors to prepare budgets. The first time the public sees them is when they are tabled as a piece of legislation for passage.

In addition, municipalities are required to complete annual public reports on their performance against established measures. This management tool is not only helpful as an internal evaluation of efficiency and effectiveness, it allows municipalities to compare themselves to others and identify best practices that can be adopted.

The issue is further complicated by the fact that many municipal costs are governed by provincial rules, regulations and standards. Some provincial legislation goes as far as to dictate staffing levels and qualifications for the delivery of municipal services, not to mention standards for equipment.

For example, the wages, benefits and shift schedules for police and fire services are often established by arbitration, without regard to the taxpayers’ ability to pay or what other services need to be cut to meet related cost increases.

If the suggestion is that municipalities can take lessons in how to stretch a dollar from the provincial and federal government, I would argue it is the other way around. Most Ontario municipalities, and particularly small municipalities, are forced to make do with extremely limited resources.

It is a lot easier to see where the 7-cent municipal portion of your tax dollar goes than it is to account for or explain the other 93 cents that go to provincial and federal governments.

 

And lastly, in a response to another reader Vanini explained:

Whether you own your home or pay rent in Ontario, you are paying property taxes. In Ontario, a significant portion of those property taxes is used to pay for income redistribution programs such as Ontario Works and social housing. Ontario is the only province in Canada where property tax payers are required to fund the province’s income redistribution programs. Economists and conventional wisdom both say that this doesn’t make any sense. My colleagues in other provinces shudder when they see that 50 cents of every property tax dollar diverted to pay for provincial programs when you factor in education costs. Under current arrangements established by provincial policy, low-income seniors, working-poor families and people on social assistance are actually required to help fund provincial social assistance programs with their property taxes. There is a reason that no other province has adopted Ontario’s disastrous provincial-municipal cost-sharing policy. Property taxes are not calculated based on the ability of the taxpayer to pay. They are what is known as a “regressive” form of taxation. Ontario is the only jurisdiction in Canada that uses property taxes to fund income redistribution programs such as welfare. All other jurisdictions use income taxes and/or consumption taxes. These more “progressive” taxes are linked to the ability of the taxpayer to pay. Ontario’s policy is, quite simply, an example of bad public policy and bad fiscal policy, and those who can least afford it are often the hardest hit.

 

City Amalgamations

The Harris PC’s passed legislation titled Bill 103 – City of Toronto Act and their respective acts, which saw the forced amalgamation of the City of Toronto, Hamilton, Ottawa, and several other municipalities across the province.

A separate referendum in each of the municipalities of North York, East York, York, Etobicoke, Scarborough and the former city of Toronto sent a strong message of disapproval, more than two to one.

Councillors from Toronto, York, Etobicoke, Scarborough, and North York had all brought over 11,000 petition cards to Queens Park from individuals that were against the amalgamation, however these cries were ignored and the cities were amalgamated against the will of its citizens.

This would be corroborated on September 14, 2000 by Roda McInnis, Director with the Amalgamation Office at the City of Toronto when she delivered a speech titled: Toronto Amalgamation: Looking Back, Moving Ahead.

Right in the beginning paragraph, under the introductions, McInnis said, “The decision of the provincial government to amalgamate seven municipalities was highly controversial and opposed, by a large majority of residents.

McInnis also listed out several reasons why the Harris PC’s sought for a city amalgamation centralizing seven municipalities into one big city, with up to 2.4 million people

Main Reasons given:

  • Reducing the number of elected officials
  • Eliminating duplication (i.e.7 different fire chiefs of the fire department, 7 different parks commissioners, etc) to reduce costs
  • Streamlining and enhancing efficiency
  • Province also driven by political and ideological vision of lesser bureaucracy

Polarized Divisons

The amalgamation created an unintended consequence, by pitting two very different constituencies together, those living in the suburbs vs those living in the city. And this polarization occurred (and still occurs) in various different realms.

For example:

  •  With rising transit fees; those in the downtown area complained that area rating unfairly loads more of the transit tax burden on them, then on the suburbs. Those in the suburbs countered with saying they pay less because they get less service.
  •  With property taxes; those in the suburbs complained their taxes were much lower before they had been amalgamated. Those in the downtown bloc countered saying that they still pay more than people in the suburbs
  •  With representation of constituents on City Hall; those living downtown complained that with twice as many residents as the suburbs, the downtown bloc should have twice as many Councillors. Those in the suburbs countered, saying that their communities are distinct and should deserve individual representation regardless of population. They also argued that they did not request to be amalgamated in the first place.

Thus those in the suburbs have hated amalgamation because their taxes keep rising without seeing the tangible service improvements. Those in the downtown bloc have hated amalgamation because the political representation has more weight toward the geographic periphery.

In this scenario everyone dislikes amalgamation because everyone recognizes they are receiving the short end of the stick. The usual debate over who has suffered more under amalgamation always misses the following  issue: it has always been a lose/lose proposition for all citizens and taxpayers.

 

Writer and Consultant, Ryan McGreal brought forward interesting questions that should be examined out of the amalgamation issue which are indicated below:

The billion dollar question is: what do we do about it now? Do we continue to apply patches, bring in more business consultants, wage world-rending political battles over straightforward issues and host more get-along retreats and workshops, and continue finger pointing across the municipal divide?

Do we re-jig Council so it reflects the relative populations of the city and suburbs?

Do we end area rating?

Do we lobby the province to upload social services again to relieve some of the pressure?

Or do we simply start by examining whether amalgamation is a failed idea in municipal government?

 

Toronto City Summit Alliance

By 2003, the Toronto City Summit Alliance (representing a coalition of over 40 civic leaders from the private, labour, voluntary, and public sectors in the Toronto region) reported that a growing gap had been widening between the public investments required in the region and the financial capacity of local governments to fund those investments.

The report was titled: Enough Talk: An Action Plan for the Toronto Region

In this light, they acknowledged that regional municipalities faced escalating costs, yet held limited abilities to raise revenues and this forced tough choices on the city-region – choices between building roads or paying the police, supporting public health programs or digging sewers, reducing homelessness or supporting the arts.

The report stated, “We recognize that trade-offs are a necessary part of any budgeting process; however, the GTA generates enough wealth to support a healthy range of basic services. The real problem is with how responsibilities and taxing powers are distributed amoung our different levels of government.

 

And on the city amalgamation the report said,

The amalgamation of the City of Toronto has not produced the overall cost savings that were projected.

 

The Alliance went on to blame “harmonization of wages and service levels” and noted that “we will all continue to feel higher costs in the future.”

Throughout Toronto’s history, the governments of Ontario and Canada have both provided the core funding for social welfare, social housing, and other programs that involve income redistribution.

But in recent years, due to city amalgamation, many of those social programs were downloaded to municipalities.

Some figures cited in the TCSA report:

In 1988…we [Toronto] spent 18% of our municipal operating expenditures on health and social assistance. By 2000, that figure had soared to 33% as a direct result of the province’s 1998 decision to transfer responsibility for affordable housing and 20% of the Family Benefits and the Ontario Disability Support Programs to municipal governments, and to increase the municipal share of social assistance administrative costs to 50%. Administrative costs have grown the fastest, tripling since 1990.

 

The TCS alliance also recommended the Ontario and federal governments to create a “new fiscal deal” for Toronto and other major city regions. This would mean:

1)      Relieving municipalities from taxes imposed by senior levels of government such as the Ontario sales tax and federal GST and from paying for the downloaded costs of affordable housing and social assistance.

2)      Allow municipalities in Ontario the freedom to levy new taxes and fees or services they consider important

 

 

 Criticisms

Wendell Cox wrote an article in 2007 for the Frontier Centre for Public Policy 10 years after “The New Toronto” city was amalgamated with the union of 7 different municipalities. He went at great lengths to criticize the Harris PC government’s reasons for amalgamating the city of Toronto.

He noted a case in May 2004, when the province of Quebec permitted former Montreal area municipalities a referendum on demerger. Despite what he titled as a world record short petition period and a super-majority voting requirement, 15 cities voted to leave.

The amalgamations were done because the Harris PC’s claimed they wanted government to become more efficient. This was supported by study by an accounting firm that predicted annual savings of $300 million.

University of Western Ontario urban policy expert Dr. Andrew Sancton quickly raised questions about the analysis, pointing out that the harmonization of collective agreements and services among the six jurisdictions could only lead to higher costs and higher taxes.

Cox wrote, “In 2006, city of Toronto operating costs were $1.25 billion above what would have been spent if the $300 million in savings had been achieved and simply risen at the rate of population growth and inflation. Residents of “905” can only be thankful that the Harris government would not have dared to include them in the amalgamation, without suffering disastrous electoral losses.

Cox argued that the claims made by the Harris PC’s of an amalgamated Toronto as more competitive were false.

He said,

Despite the impressive residential development in the core, Toronto’s growth rate has become anemic — and between 2001 and 2006, the first full census period after amalgamation, the city accounted for only 5% of the metropolitan area’s population growth. In the period immediately preceding amalgamation (1991-1996), the city-to-be accounted for 30 percent of the growth — six times that of the more recent period.

And the final argument he made is the most noteworthy,

The city faces a projected budget deficit for the current fiscal year [2007] that is almost twice the Harris government’s phony $300 million savings. None of this is to deny that municipal amalgamations can produce economies of scale. They do — though they are limited to the impact upon special interests. As city hall is moved farther away, voters have less control over what goes on. Moneyed interests find larger governments more accessible and thus more susceptible to their influence. This is not just Toronto; it is anywhere that human nature operates.

 

 

Conclusions

The take home message out of everything mentioned above, has been that the downloading of provincial responsibilities onto municipalities has been a disaster for not only those of lower incomes, but all taxpayers.

And senior levels of government during the Harris PC’s era had succeeded in protecting their budgets and reducing deficits by downloading significant social costs onto the municipal level. This created a significant burden on municipal taxpayers, led to greater cost pressures for those in the poorest income categories and was implemented by the government in an un-democratic way even with the majority opposed to the amalgamation in the first place.

And a downturn in the Toronto economy would then result in rapid escalation of social assistance costs for the level of government least able to respond.

The amalgamation of Toronto into a supercity also had a significant amount of implications and repercussions. This led to a polarization of city residents, between those in the core (downtown bloc) and those in the periphery (suburban area).

And as city hall moved farther away due to the amalgamation, voters received less control over what goes on in their communities. This meant that there was not only a loss of income for taxpayers, but also a loss of community.

Thus the effects of the amalgamation (in Ontario’s case) created a consolidation and centralization of the city structure that would alienate taxpayers and voters, and would directly contribute to Ontario’s fiscal woes.

Finally, when the McGuinty Liberals came to power in Ontario back in 2003, there was a shift in municipal-provincial relations and agreements were created, where some of the municipal costs were “uploaded” back onto provincial responsibility.

As of 2013, no specific processes nor legislations have occurred in correcting the amalgamation of Metropolitan Toronto.

Contents:

Part 1 – Bob Rae: Rainy Rae Days

Part 2 – Mike Harris: The Common Sense Beginnings

Part 4 – Ontario Taxcuts: On Borrowed Time and Money

Part 5 – Dismantling Infrastructure

Part 6 – Firesale: The Highway 407 Hijack

Part 7 – Ontario Hydro Privatization

Part 8 – Value for Money Auditors Reforms

Part 9 – The End of the Common Sense Revolution

Comments (2)

  1. Pingback: Prudent Press | The Debate over Free Trade Agreements

  2. Pingback: Tax Cuts: On Borrowed Money and Time – How Ontario Became a Have Not Province Pt 4Prudent Press

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