Ontario Municipalities Step Forward

by Gord Hume

Let's take a moment to applaud Association of Municipalities of Ontario (AMO) President Lynn Dollin and her board for stepping forward with a dramatic and important proposal to change how Ontario municipal infrastructure projects are financed.

At their Ottawa conference this week, AMO proposed a 1 cent increase in the Provincial Sales Tax--with all of the proceeds going towards the many badly-needed municipal infrastructure projects that towns and cities are facing and for which they don't have the financial resources.

Sadly, just hours later, Ontario Premier Kathleen Wynne and Finance Minister Charles Sousa soundly rejected the idea. This from a provincial government that has routinely bungled its finances, seen the provincial debt sky-rocket and electricity prices soar.

For those of you who have read my books or heard one of my speeches across the country in the past several years, you know that this is a move that I have been urging for a long time. It simply makes sense to diversify the municipal financial base, and to me consumption taxes are the best way.

Municipalities need new and reliable sources of funding for both their operating needs and their capital investments. The old property tax system is inefficient and insufficient for modern civic requirements.

Other progressive provinces have moved in that direction. Since 2011, Saskatchewan has shared one cent of its PST with its towns and cities millions and millions of dollars have been distributed for local use. A few years ago the Association of Manitoba Municipalities (AMM) worked assiduously to persuade its provincial government to go in the same direction. After years of effort, the province did increase the Manitoba sales tax but then scooped most of the money for itself, leaving Manitoba cities and towns with a paltry percentage.

The reality is, if municipalities don't get a stronger financial base then their outlook is bleak most likely it means raising local property taxes, sometimes significantly, or seeing services decline. Municipalities certainly don't have the resources to match the traditional 1/3, 1/3, 1/3 payment scheme for infrastructure. A more sensible 40-40-20 seems more in order, but that will take work by municipalities as well.

Talk by some Ontario provincial officials about offering municipalities greater revenue opportunities is fine but is it realistic that a small town could put in a toll road or something? Um, no. 

Not everybody in local government is in favour of an increase in a provincial sales tax, and that's fine. It is a healthy discussion for municipal leaders to have. The larger point is, the system is broken and needs to be fixed. If not a piece of a provincial sales tax, then what? If not consumption taxes, then what better alternatives are there? Greater sharing of Gas tax money is good, and having provinces assume full responsibility for many of the down-loaded obligations that municipalities were unwilling forced to assume are also good plans.

But, let's give AMO its due. It was a courageous and thoughtful proposal to impact significant change for how Ontario's municipalities are financed. The fact the province so casually dismissed the idea doesn't mean the battle is over.

Gord Hume


Gord Hume is recognized as one of Canada's leading voices on municipal government and is an articulate and thoughtful commentator on civic government and community issues. He is a very popular public speaker, an advisor to municipal governments, and a respected and provocative author.

Gord was elected to London City Council four times. He has had a distinguished career in Canadian business, managing radio stations and as Publisher of a newspaper. Gord received two “Broadcaster of the Year' awards. He is now President of Hume Communications Inc., a professional independent advisor to municipalities.

Most consulted news