It’s time to take a look at how the amalgamation numbers shake out. Step One – take a deep breath. Step Two – be patient as you review the numbers. There are two scenarios, each of which are presented with two different sets of assumptions. These are not the final figures but are the easiest to model and understand. There will be additional scenarios presented in the next post that hopefully better model what amalgamation might mean for the individual municipalities. But, let’s start simple and work from there.

Key Assumptions and Descriptors:

1. There are two basic scenarios, Scenario 1A with the five core municipalities – Carling, McDougall, McKellar, Parry Sound and Seguin. Scenario 2A has the core five municipalities plus Archipelago. This second scenario is a change in direction from an earlier post where I said I would not include the Archipelago. My decision to include a scenario with Archipelago results from my look at the Muskoka model. In Muskoka there are very urban and very non-urban centres, not unlike West Parry Sound. During the amalgamation process it was obviously felt that Muskoka Lakes was not that different and would benefit from, and contribute to, the district.
2. Each of Scenario 1 and 2 are a simple summing of the tax revenues for all of the municipalities divided by the total assessment for the 5 and 6 municipality scenarios. This is a very crude first estimate and sure to raise complaints in a couple of the municipalities. Additional scenarios, 1B and 2B, are presented showing the impact of an overall 10% savings with amalgamation. I suspect that this is too optimistic but is worth sharing.
3. The numbers presented include both the dollar and percentage increases and decreases for each scenario. There are enough figures provided to permit the interested person to work out their own numbers or simply check mine.
4. The scenarios present the Residential tax rate figures, but the percentages can generally be applied to the Commercial and Industrial tax rates. To simplify the tables, a single $250,000 assessment is used for calculation purchases. For a $500,000 assessment just multiply by 2. For those lucky folks in Seguin, Carling and Archipelago multiply by 5, 10, 20 or 50 as appropriate.
5. The scenarios also include Education taxes which have the same rate for all municipalities. Education taxes are a much higher proportion of total taxes in Seguin, Carling and Archipelago than the other municipalities.

Scenario 1A

This scenario is a simple add and divide exercise. All of the property tax revenues for Carling, McDougall, McKellar, Parry Sound and Seguin were added up and divided by the sum of the assessments for these municipalities. Here are the numbers.

Quick Comments:

1. I can imagine the howls coming from Seguin and they are deafening. On the other hand, the people in Carling are saying – okay, that’s much better than I imagined. In Parry Sound the response is “YES”. The folks in McKellar are voicing complaints, but what’s new?
2. This is the crudest of the calculations and does not properly reflect what would be seen with a well thought out amalgamation process. Future scenarios will try and model something more sophisticated that takes account of service levels.

Scenario 1B

This scenario is the same simple add and divide exercise. All of the property tax revenues for Carling, McDougall, McKellar, Parry Sound and Seguin were added up and the total was reduced by 10% to reflect some sort of amalgamation savings. As was the case for the previous scenario this figure was divided by the sum of the assessments for these municipalities.

Quick Comments:

1. Okay, these numbers are a bit better for Seguin, but doubtless still unacceptable to a municipality that is addicted to low tax rates. McKellar ends up pretty much neutral and there are savings in Carling, McDougall, and Parry Sound.
2. Scenario 1B sees that $250,000 property in Seguin paying an additional $342 per year. That’s a 26% increase over the current property tax rate. The same assessed Parry Sound property owner is seeing a $1,900 decrease.

Scenario 2A

This scenario uses the same approach as 1A and adds up the property tax revenues for Carling, McDougall, McKellar, Parry Sound, and Seguin plus Archipelago which is then divided by the sum of the assessments for these municipalities.

Quick Comments:

1. Now the folks in Archipelago are howling and the Seguin folks are not any happier with only $100 shaved off the scenario without Archipelago. The folks in Carling, McDougall and Parry Sound all have smiles, some bigger than others. The folks in McKellar are sulking.

Scenario 2B

This scenario is the same as Scenario 2A with a 10% savings in the total amalgamated expenses as discussed earlier.

Quick Comments:

1. The Seguin tax increase under Scenario 2B is $250 for a $250,000 property, about a 0.1% increase on the basis of the property value and 19% more than the pre amalgamation taxes. Archipelago goes up $200 or 15% for the same property. Carling and McDougall see not insignificant decreases and Parry Sound can’t believe their luck. McKellar is seeing a savings for the first time under an amalgamation scenario.

The Fine Print

Did I mention that these are crude estimates and will benefit from some tinkering? One of the obvious areas of tinkering has to do with garbage service. I’ll try to adjust for that in the next set of scenarios. There are also other adjustments that would seem to be reasonable to include. Overall, I’m not sure that these adjustments will make the people in Archipelago and Seguin much happier, but I think there is another way to make the increased cost of amalgamation worth considering for all municipalities. I’ll get to that two posts from now, #6 in this series.

McKellar, I am teasing you for your general demeanor when it comes to cooperation with area municipalities. Much of that attitude was seen in the behaviour of the two previous councils. How can we forget the entertaining coverage of council meetings and ‘Business Cardgate’ by the North Star? I am hopeful that the new council will take a more outward looking approach to regional cooperation. Reputation rests not on what you are now, or what you hope to be. It rests on what you have done. That can be changed for the better.

Supplemental Reading

So why does Parry Sound have such a large property tax burden in proportion to its assessment? There are some reasons worth understanding or considering.

Parry Sound Shot Itself in the Foot

1. One of the biggest costs for Parry Sound is associated with the losses arising from the operations of the Bobby Orr Community Centre and the Stockey Centre. Together they account for about $600,000 or 5% of the annual tax bill. The Stockey Centre underwent renovations, roof and siding, last year that amounted to about $1.2 million. The Bobby Orr Community Centre had roof repairs that exceeded $100,000 and an expansion will cost close to $1 million. (I’m plugging in these numbers from memory. Feel free to send me a note with corrections.) Personally, I only get into the Bobby Orr Community Centre once a year for the Mayor’s Levee. I don’t think that I have been inside the Stockey Centre, or on the deck, in two years. But it costs me $250 annually in taxes to support these facilities. The Town would be better off selling both facilities for $1 and taking the savings. What would that do for the local and larger community? I suspect that West Parry Sound would be poorer without these facilities. There wouldn’t be the Festival which appeals to many of the seasonal residents in the surrounding municipalities. Do we need really another Pink Floyd or Eagles ‘note for note’ album performance? People must like it because they keep coming back, again and again. What about the community events hosted at the Stockey Centre? Parry Sound effectively subsidizes people who will be attending the upcoming Gordon Lightfoot concert. It promises to be a remarkable show in an intimate setting and without the added cost and time to travel to a Sudbury, Barrie or Toronto performance? Could locals even get decent tickets to these events in another urban centre? Do events like the visiting bonspiels, the Hockey Canada event or even local minor hockey cover their true costs? Of course not, it’s the right thing to do for the town and the larger community.
2. The big box stores were effectively subsidized by Parry Sound. It seemed like a better deal at the time than it was. When push came to shove the town was obliged to take on considerable unbudgeted infrastructure expenses for services that support the much larger West Parry Sound community. And in the last couple of years these big box stores won a court case provincially that reduced their assessments by about a third. The difference in tax revenue directly hit the Parry Sound tax rates. Our neighbours? They just tell us how lucky we are to have them patronizing these stores.

For the Greater Good

Remember that sign as you head south on 400 and head into Simcoe County? “For the Greater Good” It should be Parry Sound’s motto.

1. As I have noted earlier Parry Sound hosts many if not all of the local social service facilities. These institutions do not pay any local property taxes yet expect a full suite of services. More importantly, they occupy high value land that could be generating tax revenue to support services.
2. Hosting schools is not without local Town of Parry Sound cost. In addition to occupying what is often prime real estate and not paying property taxes, these facilities use town resources and incur town supported expenses. The town is obliged to do extensive review to approve the building permits for these public facilities. The costs are not covered by any fees that might be charged. More importantly, these facilities often require infrastructure upgrades that are the responsibility of the town. The recently built William Beatty School presented the town with many infrastructure costs that were not budgeted or covered by the school board. And the conversion of the old school to affordable housing and a community hub has come with surprises in addition to the taxpayer infrastructure costs that came with the conversion. Now the organization behind the property renovation is petitioning to be exempted from property taxes. Their logic follows the thread that the property was not previously taxed as a school so it shouldn’t be now. With that type of logic I would be against any further efforts to provide public low income housing in Parry Sound. Low income housing like many other social issues is not a Parry Sound issue, it is a district issue, but as usual Parry Sound bears the brunt of the administration and infrastructure costs. And it trickles down to the taxpayer.
3. Parry Sound is also home to the District Court House. That honour comes with a $50,000 or so annual bill for OPP protection. This is a district resource but a Parry Sound cost.
4. Parry Sound also provides management oversight at the staff and council levels for district wide services such as EMS.
5. And then there is the West Parry Sound District Hospital. They don’t pay property taxes yet require town resources. I would imagine that Parry Sound provided considerable infrastructure support at no cost to the hospital when it was built. Another rub for me at least is that most of the high-end folks working at the hospital, let’s say more than 90%, do not live and pay taxes in Parry Sound but rather support the tax base of the neighbouring municipalities. I don’t blame them. Why pay higher taxes and have to deal with the noise and the stink of a railway close by?

Possibilities

Four ideas that come to mind that can help address the imbalance of support for services that impact the whole West Parry Sound community.

1. Go forward with amalgamation. It not only seems a reasonable way to address current imbalances, but it provides the basis to make the whole district better by providing for a shared vision of a larger community.
2. Tack on a 1% salary levy to folks who work in Parry Sound that would be remitted to Parry Sound. If you pay property taxes in Parry Sound that amount would be deducted from your property taxes. If you live in one of the area municipalities you would not have the deduction, unless your municipality wanted to subsidize it. That’s the situation I faced when I lived in one township and worked in another in Pennsylvania. The tax was used by the township I worked in to pay for the required infrastructure to support the businesses. The 1% tax was deducted at source.
3. Add 1% to the local sales tax for purchases in Parry Sound. This would be a relatively minor cost and would be remitted to Parry Sound. Heck, just 1% of the purchases at the LCBO and the Beer Store would probably go a long way to helping cover the many infrastructure costs assumed by Parry Sound.
4. Add 1% to the bill for local services. That might range from tax preparation to massages to dental services. Would people start driving to Bracebridge to save 1% for a massage or an eye check up?

It’s always fun to ride for free or at a discount. But someone has to pay the bill. Right now that’s Parry Sound residents and businesses. If the community at large is to prosper we need to have everyone paying their fair share.

In the next post I look at the impact of adjusting the numbers presented earlier to account for differing service levels.

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.

Tax Rates

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 1 – Residential, Commercial and Industrial Tax Rates (Selected West Parry Sound District Municipalities 2017)

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.

Table 3 – Weighted Assessments, Property Tax Revenues and Population Figures (Selected West Parry Sound District Municipalities 2017)

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.

Table 4 – Expense Lines (Selected West Parry Sound District Municipalities 2017)

1. 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.

Table 5 – Expense Lines Normalized for Permanent Residents (Selected West Parry Sound District Municipalities 2017)

Let’s start with some general similarities:

1. 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.
2. 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.
3. 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:

1. 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.
2. 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.
3. 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:

1. 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.
2. 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.
3. 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.
4. 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.
5. 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.