AMCTO President Chris Wray Presents at Ontario Government Pre-Budget Consultation

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On January 20th, Wawa’s CAO Chris Wray was in Thunder Bay. He was there on behalf of Association of Municipal Clerks and Treasurers of Ontario (AMCTO) as President. The points brought up in the Pre-Budget Submission include concerns that face not only most Ontario small communities, but Wawa, and Wray mentioned the community of Wawa several times during this presentation.   Once again AMCTO recognized the Power Dam Compensatory Payments – and that the Province of Ontario should “fully abandon plans for any future claw backs and to restore inflationary indexing”. Wawa is the community most severely hit by this issue. The need for continued and increased infrastructure funding was also recognized, particularly in communities like Wawa who have a declining industrial tax base.   This presentation gives a very good look at what smaller communities in Ontario are facing, and the recommendations that AMCTO would like to see the Province design into the 2016 Budget.

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Good afternoon. My name is Chris Wray and I am the President of AMCTO. With me today is Rick Johal, our Director of Member and Sector Relations. I would like to start by taking a minute to thank the committee for allowing us to appear today. In addition to being the President of AMCTO, I am also the Chief Administrative Officer and Clerk-Treasurer of the Municipality of Wawa, so I am especially pleased to be able to make this presentation here in the north. AMCTO is Ontario’s largest voluntary association of local government professionals, with over two thousand members working in almost every municipality in Ontario. As one of the province’s largest municipal associations, we view it has our mission to work with AMO and other municipal associations to promote leadership, professionalism and good governance in local communities. Although our name may say Clerks and Treasurers, we have a diverse membership made up of senior municipal professionals working across a range of service areas. Approximately half of our members are CAOs and senior managers. I’d like to talk to you today about some of the challenges facing Ontario’s municipal sector. As you can see in our submission, we are proposing a number of recommendations that we believe will improve the operating environment for municipalities in Ontario. However, before I get into specifics, I’d like to start with three principles that we believe are key to an effective provincial-municipal relationship.

PRINCIPLES FOR AN EFFECTIVE PROVINCIAL-MUNICIPAL RELATIONSHIP

  1. The first is the importance of respecting the diversity that exists within the municipal sector. We live in a big province, and the opportunities and challenges that face each community are unique, especially in rural vs. urban, small vs. large, and north vs. south. I know this from my own experience of working in the north. What makes sense for Toronto, Ottawa or London, doesn’t always make sense for Wawa. Yet far too often the province designs policies and programs without considering these differences.
  2. The second key to a healthy relationship is treating municipalities as responsible orders of government. Local governments in Ontario operate within a restrictive legislative and regulatory environment. Yet the province has repeatedly told municipalities that they are responsible orders of government that should be given autonomy to handle local issues. We believe that if the province views municipalities as responsible governments, it should treat them as such. To do so is the best opportunity for promoting effective local governance.
  3. Third, provincial policy should focus more on outcomes and less on behaviours. The province has a role to play in guiding policy and practice within the sector, but not in imposing overly proscriptive legislation or regulatory requirements. While municipalities benefit from broad guidance and direction, they do not require specific instructions about how to word council resolutions, or detailed requirements for sending documents via official mail. Local governments are in the best position to access local information, understand the local factors that might impact a policy’s implementation, and respond to those local needs.

RECOMMENDATIONS

1. Take the lead on a regulatory approach for the sharing economy. Moving on to our formal recommendations, I’d like to start with the sharing economy. As you are all aware, over the past five years new services like Uber and AirBnB have grown to become dominant forces in our economy. As you can see from the presentation that we circulated, research conducted by a number of organizations, including Forum, PwC and the Ontario Chamber of Commerce, all indicate that a substantial number of Ontarians are using these services. However, the growth of the sharing economy has posed unique problems for many municipalities in this province. While the regulatory reach of municipalities is geographically limited, many sharing economy companies operate across the globe. Uber for instance now exists in 67 countries and over 371 cities. Similarly AirBnB has more than 2 million listings in over 34,000 cities, in 190 countries. The growth of these companies makes it next to impossible for individual municipalities to control them. That’s why we are encouraging the government of Ontario to take the lead on a regulatory approach for the sharing economy. The province has the ability to take a more holistic approach, instead of leaving it to the province’s 444 municipalities to develop 444 separate by-laws to what is a provincial problem. Regulators across the world have been slow to respond to the sharing economy, but now is the time for action. 2. Continue to invest in infrastructure. Moving on to our second recommendation, we would also encourage the province to continue its investments in infrastructure. The infrastructure deficit is perhaps the most significant fiscal pressure facing municipalities in Ontario. Local governments in this province own more infrastructure than any other level of government, including more than 140,000 kilometres of roads, and 15,000 bridges and large culverts. As you all know, much of this infrastructure is nearing the end of its life-cycle. Just this week, the 2016 Canadian Infrastructure Report Card found that 1/3 of municipally-owned infrastructure in Canada is at risk of rapid deterioration.

In 2008 the infrastructure deficit was estimated to be approximately $60 billion, not including parks and recreation facilities or social housing units, which were valued at an additional $40 billion. I think it’s safe to say that this gap has grown significantly since then. AMO predicts that municipalities would have to substantially raise property taxes over the next ten years to meet their infrastructure commitments. However, this is not an option for many communities, like my own municipality of Wawa, which has been hard-hit by industrial decline. Not all municipalities have a large and growing tax base, and in fact many like my own are declining. This is not a problem that can be solved by municipalities on their own. 3. Modernize and streamline regulation and provincial reporting. Our third recommendation is for the province to modernize and streamline its regulations and reporting requirements for the municipal sector. Local governments in Ontario are drowning in regulation and unnecessary reporting. Currently, the has a role in almost every area of municipal business, and there are more than 70 pieces of provincial legislation that affect the municipal sector, not to mention an unknown number of related regulations. Municipalities are also responsible for a variety of cumbersome reporting requirements, like financial reporting, performance measurement, compliance reporting for fiscal transfers and conditional grants, and audits and evaluations of provincially mandated programs. All of these reporting and regulatory requirements are a substantial drain on resources and result in unnecessary duplication and inefficiency. Returning to one of my earlier points about the provincial- municipal relationship, this is not the best way to treat a responsible order of government. We do not question that reporting and monitoring are important, but between the expansion of digital technology and open data, there is without a doubt a better way for it to be done. Our time is better spent looking for new ways to provide better services to our citizens. Over the next year AMCTO is going to be working with its members and the government to identify ways that we can leverage technology, while moving towards smart regulation, and lessening this burden for municipalities. 4. Invest in capacity building and succession planning in rural, remote and northern municipalities. For our next recommendation, I would like to talk about an issue that’s very important to me: the challenges faced by Ontario’s rural, remote and northern municipalities. Many of the challenges faced by the municipal sector, are even more challenging in the north. However, northern municipalities also face the additional challenge of attracting and maintaining talented, knowledgeable and experienced municipal staff. All sectors of the Canadian economy are preparing for substantial turnover as the baby boom generation prepares to retire, but the public sector generally has an older work force and is more vulnerable to the effects of demographic change. For instance, a recent survey of AMCTO’s members showed that within the next five years one third plan to retire. That number jumps to almost half within ten years. In Northern communities the level of expected retirements is even higher than the provincial average. As these experienced municipal professionals leave, they will take significant accumulated knowledge, expertise and experience with them. While this provides exciting opportunities for new professionals and new ideas to enter the sector, it also presents those same individuals with a steep learning curve. The challenge of succession planning and capacity building in rural, remote, and northern municipalities is a systemic concern. It’s an issue that AMCTO, and other associations have prioritized through the Municipal Management Internship Program, and the ONWARD initiative. However, we believe that there is a seat at the table reserved for the province, and would encourage the government to invest in capacity building in these communities.

5. Give municipalities access to new revenue tools. Finally, our last recommendation is for the province to give municipalities access to new revenue tools. It will come as no surprise to anyone on this committee that local governments in Ontario are facing fiscal squeeze. Many municipalities are concerned about their ability to continue providing high-level services to their citizens, especially as most projections expect operational costs to grow significantly over the next decade. Yet despite these pressures, municipalities have relatively limited sources of revenue, and are left to rely heavily on property taxes. The fiscal challenges facing the municipal sector are complex, and there is no single solution. Every community faces its own unique challenges, and has its own unique needs. Rather than having the province look for a one-size-fits all solution, we would encourage the government to consider giving municipalities access to new revenue tools, and allowing them to decide what’s right for them. Over the past year, AMCTO has been working closely with the government on a number of issues, from Ontario’s disaster assistance program, to fixing the systemic issues with Ontario’s voters’ list, and we look forward to continuing this open and constructive relationship. Thank you very much for your time, and we are happy to take questions.

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2016 AMO Pre-Budget Submission

The Association of Municipalities of Ontario (AMO) presents its 2016 pre-budget submission. Municipal governments are mindful of current economic challenges. We live, eat, and breathe this reality every day. We offer a modest list of changes that would have proportionately greater outcomes for communities – some with little or no cost to the Ontario government.

1. The Upload

The ongoing upload that began in 2008 of some previously downloaded provincial programs, must continue to full maturity in 2018. Why? Because the funds that are no longer sent to the Province are being invested in municipal infrastructure and services. From 2003-2008, before the upload, infrastructure spending averaged almost $4 billion annually. From 2008-2012 it averaged above $6 billion annually with $8 billion in 2010, the stimulus year. For 2013, municipal investments exceeded $7 billion annually. Both orders of government have been upholding their sides of the Agreement and there should be no cause for change. It has been suggested that municipal governments have done much better than other sectors, such as health and education. Let me remind all that municipal governments were saddled with over $3 billion in provincial costs to fund, a gift that others did not receive, so our starting point was very much behind others. We urge the continued honouring of this landmark agreement to 2018 and, again, caution against the assumption that the upload offers space for new spending to pay for provincial statutory changes across government. Every dollar to support a new regulation will detract from the needed infrastructure investment and related economic spin offs.

2. The Ontario Municipal Partnership Fund (OMPF)

While the upload Agreement continues to be valued, not all municipal governments have the same economic basis. Many only have a very limited assessment base and no non- residential assessment, plus residents with low disposable household incomes. They have seen the Ontario Municipal Partnership Fund (OMPF) reduced by $91 million from 2012 to 2016, forcing many rural and northern communities to raise property taxes or reduce services. For almost half of Ontario’s municipal governments, a 1% property tax increase raises just $50,000. These governments fully understand the constraints their citizens have to absorb with property tax increases. OMPF is essential – it is their major source of revenue.

The upload Agreement included funding commitments for the OMPF to 2016. The going forward envelope has yet to be established. We urge an increase to the OMPF of at least $11 million in 2017 to reflect inflationary adjustment and stronger recognition of those where there is no or little population growth. In particular, these dollars should be directed to municipalities with the most pressing fiscal circumstances and particularly those communities with high percentages of farmland and managed forests which are taxed at a heavily discounted rate as well as large areas with Crown Land which is non-taxable land and cannot contribute to the assessment base. This change would bring the OMPF to $516 million, just slightly more than was allocated in 2015. They don’t make calculators with enough zeros to say how small a portion of Ontario’s total revenues this $11 million represents. It is desperately needed to meet pressing economic realities in small communities.

3. Interest Arbitration

Emergency service costs broadly have been increasing at three times the rate of inflation annually since 2002. For example, annual policing costs are likely to exceed $5 billion this year – which is two and half times the value of the upload. Fire service is similarly growing. Salaries are a major driver to these cost increases. EMS salary bands already reflect the risk of their work, so the public are struggling to understand why the cost of living adjustments are higher for this group of employees than others. New research has revealed that had police and fire personnel received the same economic adjustment as other municipal employees from 2010 to 2014, the cumulative savings would have been $485 million. This includes $72 million in fire service savings and $111.6 million in police service savings for 2014 alone. These extraordinary sums of money are the true cost of the failure to address interest arbitration reform. Will 2016 be the year we finally get to a better place – where salary adjustments have a better association to capacity to pay and how other employee groups are treated?

4. Infrastructure and Social Housing

Municipal governments own 67% of the infrastructure in this province. As noted previously, we are making some inroads but we have a long way to go. For example, it is estimated that the capital repair backlog for the social housing sector stands at $1.5 billion. The deferred maintenance for roads and bridges, water, wastewater, stormwater, transit, conservation authorities, and solid waste is $5.9 billion in 2006 dollars (PMFSDR Report 2008, page 43). Then there are the new capital needs such as transit, social housing and roads.

Where we have to go involves more investment in deferred maintenance for all assets so that the existing infrastructure can meet its life expectancy before it needs replacement. This is important to the smaller and larger municipal governments. While large strategic projects can invigorate the economy, so can small projects help local economies across all Ontario.

Program design that treats all municipal governments (and service delivery managers (Housing is provided by designated service managers)) fairly and equitably is how we will advance progress. No community should be left behind. Every municipal government should have a better sense of what it can count on so that it can do the best possible infrastructure finance planning. Can we figure out how to achieve this? Yes – the time is now for a made-in-Ontario tri-lateral approach that fits our needs, our circumstances. We need to be at the table, together.

5. Toronto Tax Tools

The Toronto Act deliberately gave the City the authority to use or not the authority. AMO and many others requested that the same permissive authority be transferred to all. Toronto and its citizens looked at different approaches and figured out what worked for its circumstances. Why do you think other cities should not have the same ability? Are they any less capable of doing the research and analysis? AMO supported the transfer of authority, acknowledging that for Ontario’s other 443 municipal governments it may not be used or achieve fiscal sustainability, but they should be able to decide. We restate the request that all municipal governments should have the discretionary authority.

6. Joint and Several Liability Reform

Municipal governments are increasingly the targets of litigation when other defendants do not have the means to pay high damage awards. This exposure has contributed to higher risks which, in turn, drive up insurance costs and settlements. The legislature passed a resolution with all-party support to seek solutions. We had arrived at several options that provided some limitation when others cannot pay their court determined share. We need to get back to work on these.

7. Photo Radar

Municipalities should be given permissive regulatory authority to use photo radar. Such an authority would be consistent with existing enforcement responsibilities and could provide an alternate means for police services to uphold speed limits on Ontario roads while redirecting the efforts of police officers to other public safety priorities.

8. Prudent Investor Status

We are asking that municipalities be allowed to invest in a broader range of investments using ‘prudent investor’ principles, via the One Investment Program in our roles as the municipality’s agent. Conservative estimates of this long-held municipal request are that it could yield an addition $10-20 million for the municipal sector. Stretching the municipal tax dollar makes so much sense and at no expense to the Province. We are also asking that the eligible list of investors recognized in the Municipal Act regulation be expanded to include municipal associations such as LAS, AMO, MFOA, AMCTO, and also indigenous groups such as the First Nations.

9. Heads and Beds

Heads and beds is the levy that the Province pays instead of property taxes on such facilities as colleges, universities, hospitals, and correctional facilities. Instead they pay a levy to the local municipalities known as “heads and beds”. This levy ($75 per head/bed) has remained unchanged for 29 years. If it had kept up with inflation it would be $138 today. Municipalities that host such facilities bear the burden of added wear and tear on local infrastructure, increased demand for public transit, policing, and EMS services to name a few. AMO calls on the provincial government to begin to adjust the fee in accordance with inflation after nearly three decades at the same fixed rate.

10. Power Dams

110 municipal governments host power dams and have had provincial revenue to offset the tax exemption on the dams. In its 2014 Budget, the Province proposed cutting these payments by $4.4 million over four years. It has deferred this cut as it looks at options to restore municipal taxation. Given the related challenges, we request the government to fully abandon plans for any future claw backs and to restore inflationary indexing. Municipal governments should not have this held over their heads.

11. Simplify Municipal Reporting Requirements to the Province

In 2012 The Drummond Commission looked at the amount of reporting to the Province and wrote, “… the information reported is often not used at the other end to influence changes in policy or service delivery”. Drummond went on, “we believe there are simply too many layers of watchers at the expense of the people who actually get thing done. The government must find a new middle ground”.

One municipality reviewed its reporting and sends 270 reports annually, plus an additional 16 audited statements, plus the annual Municipal Financial Information Return. That’s more than one for every single workday in the year. AMO has highlighted this issue for the last three years. AMO wants to find the middle ground – between investing in frontline work while being accountable in the most efficient manner.

Conclusion

In Ontario, we collect approximately $19 billion in own source property taxes. An additional $7 billion a year is sent to the Province for education via property taxes. Some $4 billion of municipal property taxes are spend funding the mandatory municipal cost sharing of provincial health and social services programs such as public health, land ambulance, long- term care for seniors, and social assistance administrative costs. Property tax dollars in Ontario deliver more services than in any other Canadian province. They are also the highest – a factor when industry and commerce scout locations for future development. Our ask is simple – let’s solve these outstanding issues and prepare for the future.

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