This post follows up Part 1 which laid down much of the financial information required to understand what amalgamation might mean for the municipalities of West Parry Sound. Here is a link to the first post. The intent of this second post is to add a little more colour to the numbers along with some general observations and commentary.
In response to a few comments to the first post I want to categorically state that it is not my intention to make a case for, or against, amalgamation. What I am hoping to do is provide a framework for better understanding the implications of amalgamation. It’s bit like a pre-Brexit analysis. In the case of what was to become called Brexit I believe too many people voted without the benefit of any real analysis or understanding of the implications for and against. Their vote was mostly based on whether they held a ‘screw the EU’ or an ‘EU is our future’ mindset based on their personal experience, advertising and ‘gut feelings’.
I am in a situation where I understand the Town of Parry Sound budget reasonably well and the underlying expenses. I am hard pressed to find fault in the budget decisions that Council has made that underlie the current Parry Sound tax rates. The cost is what it is, and I am able to afford my property taxes. Any reduction in taxes through amalgamation would not have an impact on my quality of life. I do understand that this is not the case for many others in Parry Sound or one of the other communities.
Okay, let’s look at the numbers and perhaps tease out some meaning.
In the previous post I laid out the more important tax rates for the municipalities. I won’t go into details about the relative tax levels of the municipalities. The Town of Parry Sound has the highest overall tax rates by far, with Seguin and Archipelago having the lowest. Perhaps more relevant is understanding the property class tax rates set by individual municipalities.
Table 1 below is an expanded version of Table 1 from the first post (Part 1). It provides a summary of the various municipal property and educational tax rates and the premium charged to the Commercial and Industrial classes relative to the Residential Rate. For example, in the case of Carling the Industrial Property Tax Rate is 2.6 times that of the Residential Property Tax Rate.
Table 2 – Residential, Commercial and Industrial Tax Rates Factors (Selected West Parry Sound District Municipalities 2017)
Note: Residential Tax Rate is assigned a value of 1 for each of the municipalities. Comparisons are only valid within a single municipality and tax rate class.
I am not familiar with the details of what limitations municipalities have in assigning taxation rates by class. I recall discussions at Parry Sound Council where it was mentioned that there were provincial guidelines on how much the various property class rates could be adjusted. Nonetheless, it seems that all the municipalities consistently place higher tax rates, Property and Education, on Commercial (i.e., Walmart, Fireplace & Leisure Centre…) and Industrial (i.e., Connor industries, Shaw-Almex …) properties in comparison with Residential properties.
Commercial Property Tax Rates
The premiums for Commercial Property Tax Rates vary from a low of 1.1x in Seguin and Archipelago to a high of 1.9x in McKellar versus the Residential Rate in that municipality. An even larger premium is seen with Education Rates which range from a low of 1.4x in McDougall to a high of 4.8x in Parry Sound. Combined, the Property and Education Rate premiums for the Commercial Property tax rates vary from a low of 1.9x in Carling, Seguin and Archipelago to a high of 3.1x in McKellar.
Industrial Property Tax Rates
The premiums for Industrial tax rates relative to the Residential Rates vary from a low of 1.1x in Archipelago to a high of 2.6x in Carling and McDougall. The Education Tax Rates premiums for Industrial Properties range from a low of 3.7x in Parry Sound to a high of 7.8x in Seguin. The combined rate premiums range from a low of 1.8x in Parry Sound to a high of 4.1x in Seguin.
What these differences mean is hard to understand without some sense of intent. Here are some thoughts:
Carling and McDougall – tax rates seem to be much more favourable for Commercial rather than Industrial properties. Is this an intentional attempt to encourage Industrial businesses to look to other area municipalities to establish their businesses? It’s not clear to me how properties in the industrial park in Carling are taxed. They may well enjoy some tax benefits or reduced costs for land and or services.
McKellar – the tax rates for Industrial and Commercial properties are essentially the same. The overall McKellar Industrial Tax Rate is the lowest in the area with the exception of Archipelago, which isn’t part of the amalgamation scenario and obviously offers many fewer amenities.
Parry Sound – the tax rates for Commercial is among the lowest in relation to the Residential Property Tax Rates at 2.0x. The Industrial Tax Rate is the lowest at 1.8 times the Residential Property Tax Rate. Given that the Parry Sound tax rates are so much higher than all the other municipalities this lower premium is of no real competitive significance. The Commercial Rate for Parry Sound is almost three times that of Carling and Seguin and twice that of McDougall. This may help explain the apparent interest of businesses to establish a commercial presence in Seguin on the outskirts of Parry Sound. A $1 million property would pay on average about $10,000 less in property and education taxes annually and still be within walking distance of the south end big box centres. With respect to Industrial Tax Rates, Parry Sound actually has a tax rate comparable to that of McDougall and an overall property and education tax rate about 25% higher than the other municipalities, with the exception of Archipelago. This may explain some of the attraction of industrial businesses to locate in Parry Sound if they require certain services. A $1 million assessment would only cost $5,000 per year more in Property and Education Taxes in Parry Sound relative to other municipalities.
Seguin – with the lowest Residential Tax Rates in the area, excepting Archipelago, it either is seemingly discouraging industrial development with its much higher taxes on industrial properties (4x Residential Tax Rates), or attempting to have these businesses take some of the tax load off of residential property owners.
Property Tax and Municipality Population
So, how much Property Tax do the various municipalities collect as a function of the population they serve; their residents? In the case of Parry Sound the town actually ‘serves’ more people than the official population but that is a point not everyone would agree with, so I will raise it and let it rest in the same sentence.
Note: Numbers in this table are taken from Table 1 in Part 1 of this series. Sources and explanations can be found there.
1. “Population and Dwelling Count Highlight Tables, 2016 Census”. Statistics Canada. February 8, 2017. From Wikipedia (https://en.wikipedia.org/wiki/List_of_municipalities_in_Ontario) sourced 2019-03-04.
2. Calculated by dividing Property Tax Collected by Population.
There are some major differences in the tax collected by the various municipalities. On the low-end Parry Sound and McDougall collect about $1,500 in Property Taxes per resident to provide the necessary services. That figure increases by 70% when you get to McKellar’s and Seguin’s $2,700 per resident. There is then a large jump up to Carling’s $5,500 followed by a hop, skip and jump to reach Archipelago’s almost $21,000.
In some cases the differences can be accounted for the size of these municipalities and the relative lack of efficiency related to size. You still need one mayor, one CAO and so on to service a population of 1,100 or 6,000. You may pay these folks a bit less, but not one-sixth of the amount in Seguin or Parry Sound. That type of basic service cost does impact the smaller municipalities budgets. Another reason may be related to seasonal residents, the cottagers. These people still require services that aren’t accounted for in the official population count and obviously skew the per capita cost figures.
Attention though should be paid to where a municipality with a considerable seasonal population under invests in a particular budget area as calculated using the permanent resident basis (Table 3). Assigning seasonal residents a one half or one quarter equivalent weighting would certainly change the results. I may do that type of analysis in a separate post. I can imagine the results but have not yet run the numbers.
What is obvious is the efficiency with which Parry Sound and McDougall are operated and the benefits of urbanization. For all of the grief that Parry Sound receives for its higher taxes it seems to put its tax revenues to good work whether by keeping expenses low or capturing revenue other than through property taxes. I regularly shake my head when people outside the Town of Parry Sound suggest that the Town is not properly managing its budget and that this is the cause of its higher taxes.
Enough of these numbers, let’s take a look at how the municipalities spend their money.
Expenditures by Line Item
It’s possible to look at the financial statements for the municipalities and get an idea of how their spending compares on some common line expenses. It’s not possible to compare their total budgets because in a number of cases Parry Sound collects and books revenues and expenses for the municipalities. This is the case of EMS and POA court costs. There are other line item expenses that are more directly comparable and are presented below.
- Estimated values for McDougall. 2017 Financial Statements not posted as of 2019-03-04. It’s possible that the McDougall figures are low on the Protection to Persons / Property expense line.
Let’s start with some general similarities:
- Transportation Services sees the municipalities spending similarly high amounts on a per resident basis to keep the roads patched and cleared in the winter. Parry Sound and McDougall being more urbanized see some savings in this area.
- Planning and Development expenses are pretty similar except for McDougall. Perhaps there is some overlap in responsibilities in McDougall, or there is no particular investment in this area.
- Protection to Persons / Property is mostly similar on a per resident basis. This is a little surprising as the McKellar and Seguin have significant seasonal populations and high-end properties that require both police and fire protection. McDougall may be unreasonably low in this category because OPP rates were revised in the last couple of years and McDougall’s financial statements are not available online as of this posting.
There are some differences:
- General Government sees Carling and McKellar on the high side on a per resident basis. This may well be a function of a relatively smaller resident population and the need to provide a full suite of services.
- Social and Family Services finds Parry Sound on the very low end of this expense on a per resident basis. This is largely due to the fact that these services are charged on a weighted assessment basis, not on population. Combined with Parry Sound’s larger population the per resident expense is low. This is offset is to a large extent by the many religious, cultural and social services located in Parry Sound that use Town services but are not subject to property taxes.
- Recreational and Cultural Services are the opposite with respect to Parry Sound where it spends almost five times what McDougall does on a per resident basis. Why spend the money if Parry Sound is a five minute drive away? McKellar and Carling spend more in this area but still only half of what Parry Sound does. Seguin with its many community hubs and public facilities falls only a little short of Parry Sound on a per resident basis.
Here are some additional thoughts on the actual expenditure amounts:
- General Government: in the case of Parry Sound the expenses include a number of unique services including POA Court that make the figures hard to compare at a top line level. In many cases these figures are offset by cost sharing or revenues.
- Protection to Persons / Property: this is largely a combination of OPP and Fire Department costs. Because Parry Sound is home to the area hospital, a number of government buildings and high-rise residences it is obliged to have more substantial fire management equipment. The last ladder truck was more than $1 million. OPP services are also higher because of the out of towners that come into Parry Sound and shoot the place up (kidding!). But if a Carling resident comes to Parry Sound and robs a local store or is caught buying or selling drugs that cost is borne by Parry Sound. I am not familiar with the Seguin budget and can only suggest the reasons for the higher costs are similar with the exception of the need to protect high rise developments, hospital and government and social service facilities.
- Social and Family Services: here we see Seguin carrying the larger load. This is the result of the cruel requirement, at least in the opinion of some in Seguin, that the Belvedere Heights expenses are apportioned on the basis of Weighted Assessment. That also explains the higher expenses paid by Carling. Here is one case where the seasonal residents are shouldering more of the load for the larger area and not just their slice of heaven.
- Recreational and Cultural Services: this is one area where the municipalities have some ability to make decisions on what is important. In the case of Parry Sound, the Bobby Orr Community Centre, the Waterfront, numerous parks, and the Stockey Centre represent a major portion of the expense. In the case of Seguin, the community maintains a number of community centres spread over the township. I believe that Parry Sound has done its part in this area and would be looking to the other municipalities to shoulder a larger portion of any costs for an aquatic centre. Even when apportioned for population Parry Sound is far ahead of area municipalities in providing community recreation and cultural services.
- Planning and Development; the only outlier here seems to be McDougall. I’m not sure if they don’t believe in active planning or the expense is budgeted under another line item. Looking a little closer it’s half of Carling’s and McKellar’s expenditures so perhaps it reflects the longer-range investment in their futures.
That’s more than enough for now. I was hoping to discuss the Muskoka tax rates as a model for how an urban, rural and seasonal residence community handles the obvious differences in service levels. You wouldn’t expect to have access water and sewer services on a lake in the backwoods of Muskoka. That’s where I will head with the next post.