Ontario municipalities say they’re at ‘critical’ point, call on province to fill $4B funding gap

Municipalities across Ontario say they can no longer foot the bill for provincial programming like social services and health care, saying they face an “unsustainable” funding shortfall of billions of dollars annually. 

The Association of Municipalities of Ontario (AMO), which represents all of Ontario’s 444 municipalities, first suggested a review was needed in 2024. But the situation has reached a “critical” point, the AMO said in its pre-budget submission, with municipalities forced to put off major infrastructure projects as a result. 

Last month, the Region of Durham called for a review of the current provincial-municipal fiscal framework to address what it says is a $4-billion shortfall for provincial responsibilities passed onto municipalities. 

That motion was brought forward by Whitby Mayor Elizabeth Roy, one day before the province released its new budget. In an interview with CBC News following its release, Roy said the budget missed the mark addressing those funding gaps, which she says have persisted for years. 

“We have gone backwards,” Roy said. 

In Whitby’s case, Roy said the town has delayed the development of new parks and repairing roadways and sidewalks, sometimes for years at a time, in order to address the community’s needs in areas she says are the Ford government’s responsibility.

It’s not uncommon for municipal governments to co-fund social services and health-related programming, but it is primarily up to the province to legislate health care in Ontario.

Roy said local health networks are also required to pay 10 per cent of the cost to build new hospitals, which often means contributions from municipal governments.

She wants that requirement to be lowered and said it diverts funding away from roads and infrastructure projects. 

“The taxpayer is paying for the shortfalls of where funding should be coming from,” Roy added. 

Roy said Whitby saw a $2.5-million reduction in all of its departments this year to offset some of its rising costs and is currently completing a core services review to identify further efficiencies. 

In a statement to CBC News, Ontario’s Ministry of Finance said the province has increased municipal supports by more than 45 per cent over the last five years.

“We will continue to provide historic investments to protect and build Ontario,” said Sarah Chapin, ministry spokesperson.

The statement also said the province has cut red tape to help communities build faster, pointing to the recent $8.8 billion agreement with federal government to help build homes and increasing the Ontario Municipal Partnership Fund by $100 million over two years, as two examples.

Oshawa Mayor Dan Carter said the region wants the federal government to take part in those discussions with the province, as Canada increasingly looks to provide muncipalities with funding for projects, like housing.

In a recent interview with the CBC Radio’s Here and Now, Carter said he didn’t have all the answers on how to do that, but said he felt it’s clear the current municipal funding model isn’t working. 

“We just don’t have the financial tools that are necessary,” Carter said.

Carter pointed to the cities of Toronto and Ottawa as potential models to follow. Both are distinct in Ontario, relying more heavily on property assessments and upper government funding, with significantly lower property taxes overall.

“We continue to go back to homeowners to increase their taxes to be able to pay for the resources and services,” Carter added. “It’s just not sustainable.” 

While big urban centres like Oshawa and Whitby can stave off some of those financial difficulties, the burden is heavier to bear for more rural areas, according to AMO executive director Lindsay Jones. 

Jones characterized the current funding shortfall as one of the most “significant” challenges plaguing municipalities right now, particularly small ones in rural and northern Ontario.

 “They’re being asked to do more with less,” Jones said. 

Jones said many of those communities are often opting not to fund major infrastructure projects due to their smaller tax base, despite the need to do so to accomodate for rapid growth.

Jones said AMO is encouraged by new provincial-federal partnerships, such as the federal and provincial government’s announcement to help cut development charges for new housing last week, but added they’ve only presented band-aid solutions so far.

“When municipalities don’t have to pay as much for these provincial services, they do put the money into infrastructure,” She said. 

Whitby’s mayor says she and the rest of Ontario’s big city mayor’s caucus will be meeting with Ontario’s finance minister in the coming weeks.