Municipal dollars are being stretched to the limit when it comes to infrastructure projects and capital budget purchases. Now municipalities across Prince Edward Island are looking to the provincial government for a larger rebate of the Harmonized Sales Tax collected by the province.
Communities throughout the province are already involved in negotiations with the provincial government on a new municipal/provincial funding formula based on development.
The province changed that deal in 2008 when it scrapped the Comprehensive Urban Services Agreement, which provided a tax credit to municipalities for development, to a one per cent grant system. The change has cost Summerside, Charlottetown and Stratford millions of dollars that could have been used for additional projects, and that figure will continue to rise until a new funding formula is developed.
Now, municipalities are facing another rebate issue with the province - this one dealing with the HST.
This week, Summerside Deputy Mayor Bruce MacDougall raised the issue of fairness when it comes to the HST rebate, after city voted to fund several million dollars worth of infrastructure projects and capital purchases.
MacDougall said the city could easily pay out between $600,000 and $700,000 in HST to the province in 2014.
The province collects the 14 per cent HST and returns five per cent of that to municipalities.
The problem the city is facing is under the province’s infrastructure fund, where municipalities apply for an HST rebate, Summerside’s maximum limit is $300,000.
This is money lost to the municipalities that they could use to do additional work.
The lack of a more equitable HST rebate and a provincial/municipal funding formula are handicapping municipalities in meeting the services and programs their residents need.
The province will argue they have financial issues as well and, Provincial Treasurer Wes Sheridan has said the province is providing services to municipalities that should be cost-shared.
Municipalities have only one main source of revenue – property taxes. With the change in the tax credit system that source has been diminished, unless councillors raise local tax rates putting a bigger burden on the taxpayer. To date that hasn’t happen in Summerside.
Now, with the HST rebate limitations, communities have even less money.
MacDougall was right when he said, “It has been an issue right from the beginning … and we’ll continue to ask for that back because it’s not only fair, it’s something that should be. It’s a big chunk of change and it would make a difference.”