Municipal Fiscal Autonomy Key to Unlocking Ontario’s Competitiveness

(Toronto – July 21, 2021) – While COVID-19 has created a uniquely difficult situation for Ontario’s municipalities, it has also exposed areas to improve municipal fiscal governance. Local governments do not have the fiscal autonomy they need to make them competitive and maintaining the status quo could be devastating for communities in a post-COVID economic recovery.  The impact of the virus and the resultant public health measures have meant that most municipalities are seeing a decline in revenue and increase in expenditures.

Today, as all levels of government look to balance debt and deficits while protecting the well-being of our communities, the Ontario Chamber of Commerce (OCC) released its latest report, Better Budgets: Bolstering the Fiscal Resilience of Ontario’s Municipalities. This policy brief identifies 14 recommendations for both the Province and municipalities which can bring immediate and long-term relief to communities across Ontario.

“Municipalities in Ontario are facing a triple threat this year: an ongoing pandemic that has been devastating to local economies, reduced revenue from closed or limited services, and increased spending on public health and human services. The Financial Accountability Office estimates the pandemic will collectively cost municipalities $2.7 billion in 2021, on top of the expected $4.1 billion impact of 2020,^[i]” said Rocco Rossi, President and CEO of the OCC. “In Budget 2021, the Government of Ontario committed to a long‐term economic growth plan. It is imperative public policymakers do everything they can do to ensure our communities do not get left behind in recovery.”

“Ontario’s post-pandemic recovery and long-term success will depend heavily on unleashing the economic potential of our municipalities,” said Claudia Dessanti, Senior Manager, Policy of the OCC. “Given that local governments in Ontario cannot run budget deficits, their current options for fiscal sustainability are limited to tax increases, service cuts, and the use of reserves. Now is the time for municipalities and the Province to explore alternative means of achieving fiscal sustainability.”

“Ontario’s municipalities are engines of economic growth, driving entrepreneurship, innovation, and job creation,” said Stephen Beatty, Chairman, Global Cities Centre of Excellence, KPMG in Canada, which developed the KPMG City Competitiveness Index that analyzes 62 cities in 12 countries on over 300 metrics. “Municipal fiscal sustainability was a concern for Ontario businesses before the pandemic. Now, the situation is dire. Both municipalities and business are struggling to cover costs. Municipalities require much more diverse tax bases and revenue sources to provide the kind of services and infrastructure that’s needed to make communities places where people can and want to live and play.”

Key recommendations outlined in the report include:

• Undertake a comprehensive and forward-looking review of Ontario’s property tax system to ensure the system is more equitable, efficient, and predictable for businesses.
• Adhere to the ‘pay-for-say principle’ to ensure that all responsibilities are accompanied by adequate funding.
• Enhance and incentivize regional collaboration across municipalities.

Enormous thanks to our partner KPMG Canada and the report’s authors for their collaboration on this important report. Read the report.

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About the Ontario Chamber of Commerce
For more than a century, the Ontario Chamber of Commerce (OCC) has been the independent, non-partisan, indispensable partner of Ontario business. The OCC’s mission is to support economic growth in Ontario by defending business priorities at Queen’s Park on behalf of its network’s diverse 60,000 members.

For more information, please contact:
Ceara Copps – Edwards
Manager, Public Affairs
cearacoppsedwards@occ.ca | Mobile: (647) 936-6734

[i] FAO, 2020.