Taking Responsibility – Locally and Regionally (Revised)
12 Thursday Dec 2019
Written by parry034 in Parry Sound, Reflections, Suggestions
Oops! There were simple arithmetic errors in the original version. The imputed St. Peter’s tax figure should have been be $16,600 not $166,000. For the United Church in Nobel the figure should have been $1,255, not $12,555. I have removed the original post and replaced it with this one. The revised section is identified in bold and italics. I apologize for the confusion.
MI have noted that in the past year more and more folks from the area municipalities are suggesting the possibility of amalgamation as a positive way to provide for necessary and enhanced services. This is despite their realization that it will cost them more in taxes. While the suggestion is gaining momentum locally it really doesn’t matter, amalgamation won’t happen unless the Province forces it with either a stick or a carrot. I spent quite a bit of time analyzing the consequences of amalgamation that were captured in a series of posts. Here are links to these articles if you are interested in diving in a little deeper.
West Parry Sound Amalgamation – Part 1 (The Numbers)
West Parry Sound Amalgamation – Part 2 (Analysis)
West Parry Sound Amalgamation – Part 3 (Muskoka Model)
West Parry Sound Amalgamation – Part 4 (Crude Models)
In the meantime, there is a problem with the current situation that extends beyond the high tax rates in the Town of Parry Sound (TOPS). It is a matter of services for organizations that are exempt from taxation. This includes most notably houses of worship and social services. This was highlighted by deputations last week when the Bayside Family Church asked the Town for considerations related to a grinder pump and the Parry Sound Friendship Centre requested support with a Warming Centre. They are in a difficult situation. They pay no taxes to support the necessary services the Town provides, but they hope for improved services. What is their argument? It probably relies on the Town doing the generous thing and helping out these not-for-profit organizations that make a difference in the larger area community.
My Perspective
For some time now I have written about the inequity of asking Town of Parry Sound taxpayers to indirectly subsidize the services provided by these many non-for-profit organizations with higher taxes. Not only do these organizations require Town services they also occupy valuable real estate that is not available for business or residential uses that would not consume any additional services but would pay property taxes to support these services. I have received consistent pushback on this point from at least one reader but have received general acknowledgement on the merit of the point from most. This acknowledgement is generally accompanied with a shrug of ‘what can you do about it’.
Perhaps there is a way the situation can be fairly handled, and it doesn’t require the financial shock for the low tax municipalities that would be associated with amalgamation.
Some Background
- The various not-for-profit organizations serve the much larger area community. Perhaps the largest population served by these organizations resides in TOPS, but certainly many live in the surrounding municipalities.
- The current not-for-profit organizations in the Town account for more than $20 million in assessment value according to MPAC figures. This does not include schools, the West Parry Sound Health Centre, or public housing. In total then the Town foregoes about $250,000 in revenue annually if taxed at the residential rate and more like $400,000 at commercial rates. Add in schools, hospital and public housing and it would be more than $1 million per year.
- TOPS has experienced significant cutbacks in support from the Province that has caused the Town tax rates to increase significantly.
- The Province and Canada also occupy high value property that is not subject to property taxes. However, both the Province and Canada provide funding in lieu of property taxes. It may not be full compensation, but it is a reasonable level of funding all things considered.
- There is some acknowledgement that the not-for-profit services provided in the Town of Parry Sound serves the larger area. Both DSAAB and Belvedere Retirement Home receive funding from the municipalities in proportion to their assessment base. Just because it is in the Town doesn’t mean it only serves the Town. As an aside, I believe that neither of these not-for-profit organizations pays property taxes.
The Proposal
- Not-for-profit organizations, excluding schools and the hospital, determine where their members or clients reside. In the case of religious organizations that would be their members. In the case of social service providers, it would be their clients.
- The various organizations then estimate what proportion or percentage of their services are provided to people residing in each of the municipalities.
- This type of service audit would be supervised by each of the municipalities for all qualifying not-for-profit organizations in their municipality. While it is likely that people from Seguin and Carling attend church in the Town of Parry Sound, it is also possible that people from the Town of Parry Sound or McDougall attend church in Seguin or Carling. It would be the same process for social services although most services are provided out of the Town of Parry Sound because only the Town provides the necessary infrastructure to support these organizations.
- A calculation is made of a ‘fair’ tax rate to be charged on the MPAC assessed value of the not-for-profit organizations’ land and buildings. A ‘fair’ tax rate might be the residential rate.
- The credits and debits are toted up for each municipality, netted out, with each municipality paying their bill annually.
Example:
- Peter’s Catholic Church has an assessed value of $1.23 million. At the Town of Parry Sound residential tax rate of $1.35 per $1,000 of assessment, its annual property taxes would be $16,600 if it were subject to taxation. If 55% of the parishioners live in the Town of Parry Sound, 15% in Seguin, 10% in McDougall, 10% in Carling, and 10% in McKellar, then the municipalities would be assume costs of $9,130, $2,500, $1,660, $1,660, and $$1,660 respectively.
- If we then take the United Church in Nobel with an assessed value of $215,000 and a tax rate of $0.57 per $1,000 ($1,255 total) and reverse the apportionment for the Town of Parry Sound (10%) and McDougall (55%) and the rest are the same we arrive at costs of $122, $184, $670, $122, and $122 for each municipality.
Tote up the numbers for all of the not-for-profits and offset the costs and revenues for each municipality and you have the amount to be remitted to each municipality. (Note: I have not forgotten about The Archipelago and Whitestone, I have just ignored then to make it a bit simpler.)
The net/net is pretty obvious. The Town of Parry Sound basically subsidizes the services of the other municipalities. The impact on each for the municipalities would be relatively small, certainly much less than amalgamation would imply. If we estimate that the Town of Parry Sound foregoes as much as $500,000 per year in tax revenues related to the not-for-profit organizations it hosts, and it actually ‘consumes’ 50% of the services, then the other municipalities would be on the hook for $250,000 after adjustments. The municipalities, excepting TOPS, in total collect taxes of about $40 million from residents and businesses annually. Adding in another $250,000 would raise their taxes by about 0.6%, that is less than 1%. The Town of Parry Sound rates could go down by 3%, or the rates could stay the same and additional services could be provided.
This type of sharing of the service burden for not-for-profits might make it much easier for TOPS to be a little more sympathetic and supportive when not-for-profits request a little bit of help related to standard services. It would be a ‘shared’ help.
The Arguments Against
- It would take some toting up and accounting to start the process and require each municipality and not-for-profit to do the work. (It wouldn’t really be that hard though. All of these institutions have lists of members and clients and they typically don’t change all that much year-to-year.)
- It doesn’t acknowledge the burden that the Town of Parry Sound bears with respect to the hospital and the schools. (Okay, but something is better than nothing.)
- The Town of Parry Sound benefits from all of the traffic so it is compensated indirectly with merchant related property taxes. (Yes, but these merchants also benefit the area residents by providing local services. I’m not sure the Town has ever recaptured the investments made in infrastructure for the south end centre. And recently the Town lost about $200,000 annually in property tax revenues when MPAC reduced the assessments for these big box stores.)
- We have been doing this for decades and it works, why change? (This the argument favoured by segregationists. Yeah – it worked pretty well for them while it lasted.)
Alternatives
- If you think this hits your property taxes, amalgamation will make you scream if you are in one of the low tax rate municipalities. I’m looking at you Seguin and the Archipelago.
- Consider the 1% solution. (More on this is a future post.)
- Do nothing and hope that the Town of Parry Sound continues to be generous and raises taxes without cutting services.
I have been following the Town of Parry Sound budgeting process for about eight years now. I really can’t find anything in the budget that screams unreasonable or an indulgence at the expense of taxpayers. (Except perhaps for the downtown flower baskets that consistently suck. And there is of course the decision to provide free parking. How is that working out Parry Sound? People still bitch don’t they?)
The Town faces continuous pressure to provide better service for tourists, not-for-profits, schools, and area visitors that directly impact our taxes. (Why can’t we look like Huntsville, or Gravenhurst or Port Carling?) A simple sharing of the load related to not-for-profits could go a long way to making things better for everyone.
3 Comments
December 12, 2019 at 10:15 am
Thank you for keeping us informed Jo. One other item should be mentioned on this subject.
When I was a Child, in the 1940’s, every Parking lot you now see ( for the most part) had a building on it that paid taxes. There was only on street Parking and no Parking Meters.
So now we have a Parking lot for Seguin residents to access the LCBO, and another one to allow Carling residents to spend time at the Strand Theater.
Amalgamation would cure the existing inequities in the system but no doubt add numerous other head aches with bigger government.
Even in the best case scenario, taxes would keep outpacing the cost-of-living increase.
I can see the day coming when the ownership of a single home unit in Parry Sound would be too expensive to maintain, especially for single seniors who never worked in a Government job.
Thanks again for your free consultation efforts Jo.
December 14, 2019 at 10:35 am
Sounds like a kind of intra-regional transfer or equalization payment system.
That’s not at all a crazy idea, having precedent of course in the provincial equalization system, and though I’m no expert, I believe there is a lot of regional precedent for that too. I think Durham region is arguing about that right now, as Mississauga wants to exit the region and stop sending transfer payments to Brampton, or some such deal. Do you know anything, Jo, about their arrangement?
So it’s not a crazy idea, but I would have three objections to how you’ve outlined it here.
First, I think basing it on the social organisations as you have would necessitate a lot of ultimately arbitrary line drawing. This is especially true in regards to organizations like churches. For many churches today “membership” is not nearly so formal or static. Some have large “occasional” populations. For example, I am loosely affiliated with a church in Parry sound. So how many times would I have to attend in order to qualify as a “Seguin interloper” and trigger an equalization credit? Once a month? Once a week? If someone is a really devout member who goes in on Sunday and then multiple other times through out the week for midweek activities, should there be more of an equalization payment made for them than for an occasional Seguin resident? As a Seguin resident, how many times per year could I go to church in Parry sound for free? And who would track that anyway? I’ve only ever been to one church that took attendance, so who is going to be in charge of tracking the comings and goings of the interlopers? They would have to be tracked, of course, because if these numbers are going to be the basis for payments, then they would have to be documented and demonstrably accurate, no?
And I’m not saying questions like that couldn’t be figured out, I’m just saying it would involve a lot of arbitrariness since the organisations involved are so irregular.
Take St. James United church. They’ve switched up their organizational structure so that, technically and on paper, they are no longer the church building that everyone in town is used to thinking of them as. Rather, they have created a separate organization called the “Mary st. Centre” , ostensibly an organization that owns that (former?) Church building and uses it to serve the community, renting it out to other community groups. The congregation of st. James is, technically, simply one of the many community groups that rent out the Mary st. Centre for their activities. That’s how it is supposed to look on paper anyway, and so you might notice now that any event which st.James puts on, they advertise it as “presented by st. James church, meeting at the Mary st. Centre.”. It’s not clear to me how many people are buying the distinction, though there’s plenty of other bona fide cases around the country where older churches that couldn’t afford to go it alone anymore have re-structured in such a way.
So the point of all that, though, is if I attended a st. James event at the Mary st. Centre, how many ” equalization points” would Seguin incur? Just one, or would it be a double hit – one cause I patronized the church “st. James” , and another because I utilised the community organisation “Mary st. Centre” ? Or would we have to bring the church tally into play – Seguin would pay for me to use the Mary st. Centre, but they’d only be pinged for the church attendance if I had already used up my quota of “free” TOPS church appearances?
And if Seguin would get hit twice for that, the philosophical question would be why? Five years ago, prior to their re-structuring, that same event would have been staged solely by st. James, and Seguin would therefore only pay once. But because an organization in Parry sound decides to restructure, now Seguin would have to pay more? That raises, think, a larger problem than just the messiness of the implementation. It’s almost comparable to the idea of no taxation without representation. Under your system, it looks to me like Seguin would be on the hook for the expenses of social agencies in Parry sound, despite us having little to no say in the governance of those expenses. So, for example, a social agency could choose on its own accord to increase its service mandate, thereby increasing its costs and thus increasing the amount Seguin has to pay. Yet Seguin would not have any say in that decision to increase that mandate – it’s like we would be forcibly sold social services by Parry sound that we did not order nor consent to!
That’s my first concern. That was too much typing, I might come back later and post the other two.
December 14, 2019 at 5:22 pm
Sigh! Your comments are a good example of why nothing changes.
It’s like parsing the actions that are required to address the climate change issue. People who are against any type of remediation start by denying there is climate change. They then move to explaining why the sacrifices are too great. It is so easy to slow down a process and grind it to a complete stop. Nothing is easy but often it isn’t nearly as hard as folks imagine once they decide it’s worth doing.
Some create and some find fault. One role is much easier than the other and it also doesn’t expose one to criticism.