In Ontario, the municipal level of government delivers some of our most prized public services. It is important we all understand the process for setting municipal budgets, and how we can get involved to help shape the future of our communities.
Every year, municipal councils call public meetings early in the calendar year to get input and to review drafts of their revenue and spending plans. These meetings are a chance for residents to meet the Council, learn about the budgets and have a say in setting the municipalities priorities for the year (s) ahead.
There are often two main components to the municipalities' budget:
Some parts of Ontario have two sets (lower- and upper-tier) municipal government, with separate budgets and separate budget processes. The upper-tier has responsibility for a different set of services which may include policing, water and wastewater services, regional roads, ambulance services, waste management, public health, Ontario Works, children’s and seniors’ services, and social housing.
Examples of this are the District of Muskoka, or the Counties of Haliburton, or Peterborough.
Public participation in the budget-setting process is important because a municipal budget is a policy and planning document that outlines the city’s priorities, and is always a balancing act between cost saving, and delivering a high level of services.
Get involved - have a say.
To learn more about municipal budgets, read on...
Your Municipal Budget
The following is adapted from notes by Rachel Tyczinski, Corporate Affairs Officer for the Corporation of the City of Sault Ste. Marie
Every time your street is plowed, your garbage or recyclables picked up, or you visit the park, catch a bus, borrow a book from the library, you are witnessing your tax dollars at work. Municipal budget decisions set the funding for the programs and services we depend on to maintain our quality of life.
“Developing the City budget involves making difficult choices between what the City would like to do and what it can afford — the same decisions we as individuals face every day,” says Scott McLellan, Manager of Budgets & Revenue. “In addition, the City must take into account the challenges and pressures of infrastructure demands, limited revenue sources, inflation, and downloading.”
The municipal budget is a policy and planning document that sets the City’s priorities and level of service. Reserves, surpluses, deficits, operating budgets, capital budgets, debentures – the terminology may seem confusing; however, once simplified, it becomes evident that we face the same challenges in creating our household budgets as municipal councils face in setting their annual budgets.
Reserves can be equated to personal savings. We know that we will need to find money for the kids’ education in a few years, save for retirement, or make home improvements. Ideally, we set money aside into savings so that funds are available to achieve these goals when the time comes. Municipal reserves are the same thing — setting aside money for future use for specific purposes. Unlike provincial or federal governments, legislation requires that Ontario municipalities have balanced budgets.
A surplus occurs when the City either spends less and/or raises more revenue than predicted in the annual budget. Conversely, a deficit arises when expenses have exceeded the budget, or anticipated revenues have not been realized. Just like at home, a surplus situation is always preferred. Many municipalities have a policy to direct current budget surpluses to known one-time capital requirements. Deficits are not permitted to accumulate and must be recovered in the following year’s budget.
Capital requirements or acquisitions are tangible items or projects of a long-term nature. Operating requirements are day-to-day expenses. To compare this to
personal budgeting, groceries, electricity, and insurance premiums are operating costs. Buying a new car or furniture, building a garage or an addition to the house are capital projects.
Drawing money out of savings (or reserves) to finance operating (or current) expenses is as undesirable as withdrawing money from a savings account to pay for groceries.
Municipalities often borrow money to, at least in part, finance major capital projects such as sewer systems, roads or buildings. While individuals might negotiate a mortgage or loan to finance major purchases, a municipality may issue a debenture to obtain the necessary funds.
Funds to finance municipal operations come from property taxes and user fees (bus fares, tipping fees, fees for swimming lessons, etc). The City also receives funding from other levels of government. These grants may be unconditional or targeted to specific projects.
Downloaded costs put even more pressure on the City budget. Downloading refers to costs previously borne by higher levels of government that are now the responsibility of municipalities. Over the last decade, federal and provincial levels of government have continued to download responsibilities to municipalities. (See FOCA note at left)
In setting the annual budget, and thereby arriving at the municipal tax rate, the City determines all anticipated expenses, deducts the revenue it expects to receive, and arrives at an amount to be raised from property taxation. This amount is divided by total property assessment to arrive at a property tax rate.
Three factors influence the amount of property taxes you pay, only one of which the City has control over:
• The City property tax rate
• The assessed value of your property – determined by the Municipal Property Assessment Corporation
• The education tax rate – set by the Province
More than one third of your property tax bill is effectively set or mandated by the Province. Education taxes are set by the Province and collected by the City. As well, the City is required to administer provincially mandated social services over which it has limited or no control.
According to the Fraser Institute, the average Ontario family pays about 93 per cent of its tax dollars to the provincial and federal government, while the remaining seven per cent is paid to municipal governments. Given the range of services we enjoy each day and their significance to the quality of life in most municipalities in Ontario — that's not a bad deal.
FOCA believes that much of the burden on property taxpayers (higher than anywhere in the OECD) could largely be addressed by removing some budget obligations of local government and paying for it on a progressive income-based system. The uploading considered in the recommendations of the 2008 Provincial Municipal Fiscal and Service Delivery Review have lengthy timelines that unnecessarily burden municipal governments, and property taxpayers.
In the face of significant federal and provincial government budget shortfalls that started in 2011 and continue through 2012, Ontario's municipal governments will be facing increased financial pressure.