The province and its municipalities have been locked in a three-year discussion over a provincial funding formula.
Many municipalities, such as Summerside, Stratford and Charlottetown, are claiming to have lost millions of dollars in tax credits from the province since the funding formula was changed in 2008.
Municipalities had a deal with the Liberal government of Catherine Callbeck in 1995, called the Comprehensive Urban Services Agreement (CUSA), which provided tax credits to municipalities based on development. Basically, the more development a municipality had the larger the tax credit from the province. Under the agreement, the arrangement could not be changed without being mutually agreed upon.
In 2008, the province opted, on its own, to replace CUSA with a grant system to municipalities. This has resulted in fewer tax dollars coming back to local government coffers. This year, municipalities have a one per cent increase, which is half of the Consumer Price Index.
The reason for the funding change six years ago? The province needed the money.
The province claims to have a real fiscal hardship and the municipalities feel they should have a greater share of the tax coming from their jurisdiction.
That’s what the whole question comes down to.
Provincial Finance Minister Sheridan raises some interesting points that may have some validity to having municipalities share more of the financial burden for services.
The province pays all of the costs for health care and education. Should municipalities take some financial responsibility for these services? Sheridan seems to think so.
One area that needs to be considered in drafting a new equitable funding formula is the services different municipalities supply. Some do their own policing and roadwork, others don’t. Those that do should get credit for taking on these services.
Whatever the outcome of the funding formula discussions, municipalities can be certain that they will not be receiving the same amount of money from the province that they did before 2008. What the difference will be will come out of the ongoing discussions.
Sheridan said if the municipalities need more money they have the ability to raise commercial and non-commercial property taxes.
No politician wants to raise taxes but Sheridan said the province, through increased property assessments, has been the one who has had raised taxes to meet programming needs.
What looms on the horizon is a very uncomfortable situation for taxpayers. If this deal is not worked out soon, and the province continues to raise property assessments and municipalities are faced with financial shortfalls and decide to raise property taxes, it’s a double whammy for the taxpayer.
It has already been three years but Sheridan says he is optimistic that a deal will be reached. From a taxpayers’ point of view it had better be sooner rather than later.