At this week’s Ontario Association of Municipalities meeting in Windsor, Ontario, Premier Kathleen Wynne appeared to accede to municipal pleas for new “revenue tools” though she cautioned that they needed to consult their constituents before asking the province for what types of “revenue tools” they would want to introduce.

Of course, requesting new “revenue tools” is simply a more erudite way of levying new taxes.

Ontario municipalities have been complaining that they are having difficulty in making ends meet given the costs of infrastructure as well as paying for the rising cost of protection services and the cost of downloaded services such as welfare. While rising police and fire service costs are indeed a legitimate concern, the refrain regarding provincial downloading is somewhat stale given that in Ontario it’s now a part of fiscal history and has been countered with rising government grant revenues.  Moreover, since 2008 the provincial government has been gradually reclaiming funding responsibility for Ontario Works and the Ontario Disability Support Program.

At present, Toronto is the only municipality in the province that via the City of Toronto Act has been granted special taxing powers by being given the authority to impose levies such as a land transfer tax though the privilege has not been extended to municipal sales or income taxes. Along with a land transfer tax, Ontario municipalities have also been musing about vehicle registration or hotel taxes.

At present, Ontario’s municipalities fund their expenditures via a combination of property tax revenues, federal and provincial transfers, and user fees. About 42 per cent of Ontario municipal revenues come from property taxation with federal and provincial government transfers accounting for another 21 per cent and the remainder coming from an assortment including user fees, fines, and licenses and permits. The City of Toronto is unique in that along with these sources, it has been levying a municipal land transfer tax that raised $184 million in 2009 and then grew to reach nearly $450 million in 2014.

However, Ontario’s municipal lament must be treated with some caution. Data from the Financial Information Returns of Ontario municipalities maintained by the Ontario Ministry of Municipal Affairs suggests that since 2000, Ontario municipalities have seen their revenues grow quite robustly. Between 2000 and 2014, total revenues doubled growing from $22.7 billion to $45 billion though growth has understandably slowed in the wake of the recession in 2008-09. The annual average growth rate of total municipal revenues between 2000 and 2014 was 5.1 per cent. Tax revenues grew at an average of 4.6 per cent, government transfer revenue at 6.6 per cent and the remaining revenues at 5.2 per cent. 

To put this revenue growth in perspective, over the same period, Ontario’s population grew at an average annual rate of 1.1 per cent while nominal GDP only grew at about 3.4 per cent. In other words, municipal revenue over the long-term revenue is growing faster than both GDP and population combined. As a share of GDP, municipal government revenue in Ontario grew from 4.8 per cent in 2001 to reach 6.2 per cent by 2014. And despite this robust revenue growth, municipalities have still managed to acquire more debt with total liabilities growing from $13 billion to nearly $48 billion.

As measured by the total revenue share of GDP, municipal government in Ontario has grown over the last 15 years. It would appear that municipal governments in Ontario have been spending everything they can get—and more. Municipal constituents in Ontario should indeed be wary of municipal politicians lamenting they need more money.