CUPE – SCFP Memorandum
The 2017 Ontario Budget and Municipalities
On Thursday April 30th, the provincial government released their 2017 budget. This budget is a step towards framing the government in a more positive light prior to the election next year. There is some new spending in it and the introduction of programs that could be easily campaigned on in the next election cycle, such as the proposal for a pharmacare program. In addition to new media friendly programs, the government, as promised, has returned the budget to balance, underscoring their alleged competency in fiscal management.
News and analysis continues to trickle out of the document. This is a snapshot of some of the most significant measures which effect or intersect with municipalities in Ontario. There are many key issues present in the sector currently, including new revenue tools, infrastructure funding, and potential restructuring.
Overall Provincial Financial Health
As noted, the most recent Ontario budget returned to balance. This was a long-standing promise of the government and despite some new spending commitments, it is currently expected the province will remain in balance until 2019/20. This is a move that is likely to be looked upon positively by credit rating agencies and should contribute to an improved financial position. The Ontario Financing Authority noted that the province
remains one of the strongest economies nationally over the last three years and this is expected to continue into next year. For example, Ontario’s real GDP growth has outpaced the G7 nations.1
It is worthwhile to review some of the key planks which support the provincial economy:
- A diversified economy, which is situated next to the United States, one of the largest consumer markets in the world.
- A population of 14 million with a nominal GDP of almost 800 billion ($798B in 2016) which represents almost 40% of the nation’s nominal GDP.
- Economic growth is expected to continue as well as outpace Canadian growth projections – from 2017 through 2020, the Ontario economy is expected to have growth 2.1% versus Canada’s 1.9%.
- In 2016, Ontario was the top export market for twenty U.S. states and ranked second in eight other states.
- Provincial income is diversified and interest on debt expenses account for less than 10% of total spending (8.2%).
All major credit rating agencies – Moody’s, Fitch, DBRS, Standard & Poor’s – have stable outlooks on the province and maintain AA or A+ ratings.2
Another major indicator of financial health is the job market. This indicator has also recovered since the 2008 financial collapse. The government reports that most jobs added are in the “above average wages” category. The unemployment rate has also stabilized from a high of 9.6% following the last financial collapse to a current rate of about 6.4%. It is further reported that of the almost 700,000 jobs that have been added post collapse, 73% were in the private sector, 14% in the public sector, and 13% self- employed.3
New & Adjusted Revenue Tools
For several years, new municipal revenue tools have been discussed as a possibility. In the 2017 Toronto budget, their council approved a host of new tools which the province will have to rule on – this approval began with this budget. The following are some measures which are likely to be approved in this budget, which allow municipalities to open new revenue streams:
- Non-resident speculation tax: this 15% tax was announced just prior to the budget. It can be added to home sales by non-residents/citizens or foreign corporations in the Greater Toronto Hamilton Area (GTHA) or the Greater Golden Horseshoe Area. Recently, British Columbia made a similar move to cool their housing market. The government is also moving to reduce tax avoidance on the land transfer tax by tightening rules around sale closings.4
- Vacant homes/land taxes: This is another measure to try and tackle real estate speculation. The budget proposes amendments that would allow Toronto to design a new levy on vacant properties. The government commits to working
with other municipalities on the issue as well, however, this authority will only be granted to Toronto and was requested by them. It is also proposed that other vacant properties could be taxed by municipalities zoned for housing in an attempt to bolster new development.5
- Short term accommodation levy: Authority has been given to municipalities to tax “transient accommodation” (short term rentals such as Airbnb) and levy a fee on hotel bills. A portion of the income must be shared with tourism promotion agencies. For example, Toronto, Ottawa, and Niagara Falls already levy a promotional fee to boost tourism, but this has not gone to general municipal revenue before. This budget proposes to mandate funding to both.6
- Railway Right of Way Taxation: as a result of a review of railway corridor property taxes, they will be raised starting this year.7Municipal/Provincial Transfer FundingThe province remains a significant funder for all sorts of municipal services. The following are key points on these transfers:
- The provincial upload funding is continuing through the Memorandum of Understanding with Association of Municipalities of Ontario (AMO).8 This includes costs associated with court security and income support programs. However, major transfers such as the Ontario Municipal Transfer Fund (OMPF) remain frozen.
- After snubbing Toronto’s plan for road tolls on their highways, the province re-announced an increase in provincial gas tax funding. Starting in 2019, the municipal share will double to four cents a litre by 2021. By completion (if it comes to fruition post-election) the amount to municipalities is reported to rise to $642 million.9
- There are also a number of smaller singular investments being made through the Ontario 150 Community Capital program, which is tied to the celebrations associated with Confederation. The fund is worth $25 million and provides grants between $5,000-500,000.10
- While the infrastructure fund section is silent on water funding, the budget highlights the Clean Water and Wastewater Fund; this fund is in partnership with the federal government and is reviewing funding for more than 1,300 projects. This $1.1 billion fund was announced in 2016 and the proposed budget does not announce any new money.11
This budget includes nothing new from the previous announcement to increase spending from last year’s budget by $30 billion. The following are key points on infrastructure investment:
- The government is continuing with its $190 billion plan that started in 2014 and carries through to 2026/27. The focus remains on transit ($56 billion), highways ($26 billion), capital hospital funding ($20 billion) and schools ($16 billion). Many of these programs or transfers are oriented to fixing the infrastructure gap, which was estimated to be $60 billion in 2008 and growing.12 This means, the available funding still falls short in supporting municipal infrastructure needs. Also, confounding the issues is any new capital (or infrastructure funding) comes with future operating costs. Because municipal budgets must reach annual balance, this creates a year over year pressure to municipalities. This pressure can have the consequence of motivating tough bargaining, contracting-out and other privatization.
- The major new announcement in the infrastructure category is the government promising to release a Long-Term Infrastructure plan by this years’ end.13 There is not a lot of detail on the content of this plan.
- The budget plan also highlighted the Ontario Community Infrastructure Fund (OCIF), which is open to small, rural and northern communities. The last budget tripled this fund to reach $300 per year, which will continue through 2018/19.14
- The budget announced the first spending from the Trillium Trust. This Trust was created for the proceeds of government assets (GM shares, Hydro One, LCBO and OPG head office sales). Approximately, $250 million will be spent in the 2016/17 cycle and a further $400 million in 2017/18 on infrastructure projects; the specific spending named in the budget is GO Transit Regional Express Rail, the Hurontario LRT and OCIF.15
- The budget document is silent on any specific water infrastructure except for the partnership fund noted in the previous section.
There is little commentary in the document on some of the past restructuring initiatives in the sector, chiefly among them the sale of Hydro One (the province remains a 70% owner) and consolidation in the (largely municipally owned) local distribution network. The major narrative in this sector was highlighting previous announcements of low- income household support and the cost reduction of 25% on hydro bills.
There are a number of housing authorities which are still connected to municipalities in the province, including the Toronto Community Housing Corporation (TCHC) which is one of the largest housing agencies in North America. The following are key points in this area:
- The government made moderate moves to try and improve aspects of the housing market effecting renters and low-income families/individuals. For example, they are proposing a development charge rebate program to encourage new rental units. This will give municipalities the opportunity to have a more formal say in what developments happen.
- A glaring absence in the budget was support for rent geared to income social housing, particularly in Toronto.17 There was no new money and the same week the provincial budget was introduced Toronto council made the decision to shutter TCHC units, while the active waiting list remains at 87,774.18
- The following announcements were also made in the budget, which could have a positive knock-on effect to municipal housing and homelessness programming:
o Helping with the building of up to 1,500 supportive housing units;
no time period was noted.19 As a frame of reference the 2013 Toronto Street Needs Assessment, which included a one-night count of the homeless population, reported 5,253 homeless people.20
o Funding the Community Homelessness Prevention Initiatives (CHPI) $90 million over the next three-years.21
o In conjunction with the community hub program, the province will
pilot a program in the GTHA to leverage provincial land for affordable housing development. Between $70 to 100 million worth of provincially owned land to develop 2,000 new affordable housing units. In the spring season the province will begin working with municipalities and other partners to identify sites.22
Universal Basic Income Pilot & Additional Reforms
CUPE’s social services sector has largely been working on this matter. However, it is worth noting that job classifications associated with income support programs, such
as Ontario Works (OW) are administered by municipalities and represent a very large number of CUPE members. The budget is clear that a new report is coming in 2017 from the Income Security Reform Working Group detailing a “road-map” forward on programming.23 Although it will need to be verified what is expected in this report, items such as a single benefit access card for clients have already been successfully piloted in Toronto. Although not specific, programs such as the benefits cards are alluded to in the budget section covering government transformation.24 It is these endeavours which could have an impact on CUPE members. Research will continue to confer with colleagues on this matter.
Elder and child care as well as the further development of community hubs are noted prominently in the budget. Regarding child and elder care, municipal services in these sectors represent a minority of the program mix. Further verification and collaboration with colleagues will be completed to determine any impact. The community hub program could impact on municipal parks and recreation services, but again, collaboration and verification will be completed with colleagues on this matter to determine potential impact.
As noted, this appears to be a budget, which goes a long way to lay the ground work
to an election platform. The government is trying to massage mistakes that were made, such as in the energy sector while introducing new programs like pharmacare which are sure to be popular. The post-budget breakfast in York Region hosted by Ministers Jaczek and Chan was buoyant with partisan support. The Ministers were clear and amplified that the return to balanced budget meant further investments in the province could be made.
There is a contrast here though; the government continues major restructuring initiatives which will have the outcome of shrinking government services and could mean more privatization. Moreover, they boast in their own budget document that the program expense-to-GDP-ratio is back to pre-2008 levels, which is an admission of program spending restraint.25
This budget provides only minor enhancements, and is full of re-announcements of previous funding commitments. It will no doubt serve as an opportunity for the government to campaign well ahead of the election. The budget falls very short of policy announcements the NDP has already made on items such as energy and pharmacare, but utilizes the old Liberal trick of borrowing from them heavily. The PC’s took the position of accusing the government of remaining out of budget balance, although this accusation has yet to be verified by the provincial accountability officers.
This is submitted for reference and review.
1 Government of Ontario; Ontario Financing Authority. Investor Relations Presentation. April 27, 2017.
2 Government of Ontario; Ontario Financing Authority. Investor Relations Presentation. April 27, 2017.
3 Government of Ontario 2017 Ontario Budget. A Stronger, Healthier Ontario. Chapter I; pg. 10.
4 Government of Ontario 2017 Ontario Budget. A Stronger, Healthier Ontario. Chapter II; pg. 42.
5 Government of Ontario 2017 Ontario Budget. A Stronger, Healthier Ontario. Chapter II; pg. 45.
6 Government of Ontario 2017 Ontario Budget. A Stronger, Healthier Ontario. Chapter VII; pg. 281.
7 Government of Ontario 2017 Ontario Budget. A Stronger, Healthier Ontario. Chapter VII; pg. 288.
8 Available here: http://www.mah.gov.on.ca/Page9208.aspx and here: http://www.amo.on.ca/YourAssociation/MemorandumofUnderstanding
9 Government of Ontario 2017 Ontario Budget. A Stronger, Healthier Ontario. Chapter V; pg. 188.
10 Government of Ontario 2017 Ontario Budget. A Stronger, Healthier Ontario. Chapter V; pg. 186.
11 Government of Ontario 2017 Ontario Budget. A Stronger, Healthier Ontario. Chapter V; pg. 188.
12 AMO Backgrounder. August 2016. http://www.amo.on.ca/AMO-Content/Backgrounders/2016/MunicipalInfrastructre 13 Government of Ontario 2017 Ontario Budget. A Stronger, Healthier Ontario. Chapter III; pg. 72/73.
14 Government of Ontario 2017 Ontario Budget. A Stronger, Healthier Ontario. Chapter IV; pg. 158.
15 Government of Ontario 2017 Ontario Budget. A Stronger, Healthier Ontario. Chapter IV; pg. 160.
16 Government of Ontario 2017 Ontario Budget. A Stronger, Healthier Ontario. Chapter II; pg. 20/21.
17 Government of Ontario 2017 Ontario Budget. A Stronger, Healthier Ontario. Chapter II; pg. 43.
18 TCHC Quarterly Activity Report for Q1 2016. https://www.housingconnections.ca/PDF/QuarterlyReports/2016/Quarterly%20Activity%20Report%20- %20Q1%202016.pdf
19 Government of Ontario 2017 Ontario Budget. A Stronger, Healthier Ontario. Chapter IV; pg. 167.
20 City of Toronto. 2013 Street Needs Assessment Results. http://www.toronto.ca/legdocs/mmis/2013/cd/bgrd/backgroundfile-61365.pdf
21 Government of Ontario 2017 Ontario Budget. A Stronger, Healthier Ontario. Chapter IV; pg. 167.
22 Government of Ontario 2017 Ontario Budget. A Stronger, Healthier Ontario. Chapter IV; pg. 168.
23 Government of Ontario 2017 Ontario Budget. A Stronger, Healthier Ontario. Chapter IV; pg. 164.
24 Government of Ontario 2017 Ontario Budget. A Stronger, Healthier Ontario. Chapter VI; pg. 207.
25 Government of Ontario 2017 Ontario Budget. A Stronger, Healthier Ontario. Chapter I; pg. 6.