Municipal Amalgamation in Ontario, Fraser Institute, May 2015
In 1995, the Province of Ontario passed the Savings and Restructuring Act to reduce the number of municipalities. Between 1996 and 2001 municipalities were reduced from 850 to 444. In many cases amalgamations were forced in a very short time frame and with little planning or opportunity for public input. The Province provided no significant transition funding. In addition, following the consolidation of the municipal governance, major responsibilities were downloaded to the new municipalities, such as social housing and the Provincial highway system.
In May 2015, the Fraser Institute published the report Municipal Amalgamation in Ontario that examined the resultant property taxes in the municipalities. The authors concluded that none of the anticipated cost savings had occurred. In fact, municipal taxes have significantly increased.
As the Province of BC moves toward a study of municipal governance in the Capital Region, it is important to look at the Ontario experience in municipal amalgamation. A review of the Fraser Institute report identified the following factors that warrant attention in the upcoming governance study in the Capital Region:
- Full public input and approval through a binding referendum. The greatest mistake of the Ontario municipal restructuring process during the 1996 to 2001 period was the failure to involve the public in the discussion and evaluation of options. Following a study and full public discussion of the options, the public must have an opportunity to vote on the matter.
- No forced amalgamations. The Ontario experience shows that forced amalgamations generated a negative political and public climate in which to establish a new viable structure. Often the newly elected mayors and council members were opposed to amalgamation, and when in office set about to prove that they were right. The public became annoyed and frustrated with delays as the new administration attempted to become operational.
- Fully study and discussion of governance options. The failure to carefully examine the pluses and minuses of amalgamation in Ontario resulted in a failure to take advantage of opportunities for efficiencies and to consider alternate structures and systems to reduce costs. In addition, the exclusion of the public from the discussion resulted in significant distrust and resentment by taxpayers.
- Realistic timeframes for implementation. In Ontario the timelines for implementation where very short and sometimes occurred in the middle of the fiscal year. As a result there were gross inefficiencies in implementation and opportunities for streamlining administrative processes were lost.
- Provision of transition funding. There are significant start-up costs associated with municipal amalgamation. In Ontario, little or no funding was provided and therefore the fledging municipalities were required to significantly increase borrowing to cover these costs. The burden of this increased borrowing encumbered new municipalities and added to municipal taxes.
- Resist service creep. The significant increase in municipal taxes in some of the new municipalities in Ontario resulted from the extension of urban services into rural areas. It is important that a new municipality identifies urban, residential and rural areas and then aligns taxes and services accordingly in each area.
- Resist downloading. Another cause of municipal property tax increases in Ontario was the downloading of costly services such as social housing and the Provincial highway system to the newly formed municipalities. Care must be taken to ensure any downloaded services are accompanied by provincial funding.
- Strive for effective and accountable governance. The Ontario initiative on municipal restructuring assumed savings and a reduction in municipal taxes. In the Capital Region there is some indication that municipal costs could be reduced through restructuring. The Municipality of Surrey, similar in many ways to the Capital Region, had operating costs of $520 per capita in 2013. In the Capital Region in 2013 the average municipal operating cost of the 13 municipalities was $880 per capita. However, the real motivation for a change in governance should be based on the achievement of effective (including efficient) decision-making and of accountability.
The Fraser Institute report Municipal Amalgamation in Ontario is a document that identifies a number of structural errors made when communities are forced to amalgamate without a full analysis of the costs and benefits and a clearly defined mandate from the electorate.