Ontario municipalities’ ability to handle provincial funding cuts varies greatly: Moody’s

The front entrance of Ontario's Legislative Building at Queen's Park. Nick Westoll / File / Global News

A new report from Moody’s, the credit rating service, says municipalities in Ontario will have to find ways to make up for a loss of $2-billion in funding from the province over the next ten years.

The report says municipalities should be able to weather the financial storm by using reserves or raising taxes, but some will handle it better than others.

READ MORE: Moody’s Ontario credit rating downgrade hits health, education sectors

The agency ranks Halton as the region best positioned to absorb shocks, followed by Durham, York, Peel, Muskoka, London, North Bay, Ottawa, Toronto, and Waterloo.

“I think London estimated the overall cuts to be about, initially estimated at $4-million for 2019. Much of that was reversed when the province decided to postpone some of the funding changes to 2020,” Adam Hardi, Moody’s assistant vice-president, told Global News Radio 980 CFPL.

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“If we look at 2020 and beyond, based on our estimate, it would only be, let’s say, the annual impact would be half a per cent of revenue. So I think, overall, London would be in a good position to weather these changes either through reserves or tax increases or some combination.”

READ MORE: London lawyer reacts to Legal Aid Ontario funding cuts

Premier Doug Ford’s government announced in April municipalities would have to cover more of the cost for services as a result of a number of cuts, then later postponed some of those cuts until next year. One of the biggest changes will be the cancellation of the increase in municipalities’ share of gas taxes from two to four cents a litre.

Moody’s also says Ontario’s plan to consolidate public health units and paramedic services has created uncertainty. Specifics on how the new health units will operate and work with municipalities could result in local governments providing funding for services where they see little return.

“Policy and timing uncertainty in terms of how the announcements are made and also impact on visibility over funding decisions where municipalities may not know how these amalgamated entities would look like, what they serve. So until that visibility is clarified I think the risk is there,” said Hardi.

The credit rating agency says cuts to municipalities will total about $300 million in added costs in 2020 and $2-billion over the next ten years.

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with files from Global News Radio 980 CFPL’s Devon Peacock. 

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