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Property taxation is a levy based on the assessed value of property. Property taxes have two components: a municipal portion and an education portion. The rates for the municipal portion of the tax are established by each municipality. The rates for the education portion of the tax are established by the Minister of Finance and help to fund the public elementary and secondary education system in Ontario. Property taxes are calculated using the Current Value Assessment of a property, as determined by the Municipal Property Assessment Corporation (MPAC) and multiplying it by the combined municipal and education tax rates for the applicable class of property.
A component of property taxation is penalties and interest on taxes, which are charged at a rate of 1.25 per cent per month for overdue taxes. Payments on accounts are applied first toward the outstanding interest and penalty, then to the oldest outstanding taxes. This revenue source is minor compared to other revenue sources that the City of Guelph receives.
Property taxes are the largest source of revenue for the City, followed by user fees and government transfers.
Due to the limitations posed on municipalities through provincial legislation and the Municipal Act, alternate sources of revenue are needed to fund all of the services that the City provides to the public. With the goal of minimizing the amount that falls to property owners through a property tax levy, the City must maximize other revenue streams.
Revenues beyond property taxes
User fee, rates and charges
User fees, rates and charges are charged to individuals or groups for the use of a program or service which provides a direct benefit to the user. City services provide varying degree of user fees support.
Full tax supported, minor user fees are used for services such as fire, police, roads, and parks. These are services that are available and used by all residents and visitors.
Partially tax supported user fees are used for services such as recreation programming and public transit, which benefit individuals and society at large. User fees alone are not sufficient to recover the full cost of providing the service and they are funded through a combination of user fees and taxes. In some cases, Council has approved a subsidization rate and these subsidization rates should guide investment decisions and service levels.
Non-tax supported user fees are used for City services such as water, wastewater, stormwater and court services and benefit the individual using the service. Parking has been identified as another service that should be fully user-fee recovered, however, there remains a taxation subsidy for now. The full cost of service, including both operating and capital, are recovered through the user fee. We refer to these departmental budgets as non-tax or rate supported.
Licenses, permits and fines – full user fee
Licenses and permits are used to regulate the use of, or changes to private property such as building permits, business and taxi licences, sign permit fees, and liquor licences. Users who are non-compliant can be fined. Provincial Offences Act revenues include fines paid for speeding tickets, fail to surrender permit, and fail to have insurance, all covered under the Highway traffic Act legislation. Other fines include monies received by Courts for the payment of parking tickets issued in the City. These funds are then transferred to the Bylaw department to help offset the cost of parking enforcement.
User fees are reviewed annually and set to maintain the correct user fee/property tax ratio. A change in delivery of service may drive an annual fee increase beyond the standard two to five per cent for inflation. The 2022 and 2023 user fees, rates and charges guide is a comprehensive listing of user fees for City services. For 2022 and 2023 most fee changes are within an inflationary range. As costs increase user fees should also increase to maintain the appropriate user fee/property tax ratios. There are a few fees increasing at greater than five per cent including:
- Solid Waste, Water Services and Planning and Building user fees increasing at the same pace as underlying cost of goods.
- Stormwater user fee increase as per the sustainable funding strategy to address infrastructure backlog; an update to this plan will occur in 2022/23 with the Stormwater Master Plan.
- Parks Class B facility hourly rental rate increase due to increased service level, which now includes field painting.
- Culture and Recreation Sleeman Centre clean up user fee increased to closer reflect the actual cost of providing the service and to align with cleaning fees in other City recreation facilities.
- Guelph Farmers’ Market fee increase due to fees due to the increase in costs associated with regular market operations.
- Fire safety plans user fee increased to include additional time spent for research.
- Committee of adjustment fees to maintain appropriate cost recovery of the service provided.
Some new fees are being introduced in 2022 for Fire Services to improve safety of on scene response, new rental fees to meet citizen expectations to size of facilities to include mini and micro soccer fields, business hours and after hour call out fees for water, wastewater and stormwater, and two new membership options at the museum.
Grants are transfers from other levels of government and include funding from the federal and provincial government, along with municipal contributions received from the County of Wellington.
Municipal contributions are shared service revenues with the County of Wellington, whereby the County makes payments to the City for land ambulance and Provincial Offences Act court services.
Provincial grant funding includes the blue box program plan from Stewardship Ontario, the Land ambulance services grant (LASG) funding from the Ministry of Health and Long-term Care and the provincial dedicated gas tax for public transportation, whereby the province of Ontario flows gas tax funding to municipalities.
Federal grants received by the City include program funding such as the smart cities challenge funding, or the Canada Community-Building Fund (CCBF), formerly known as the gas tax fund.
Other contributions include funds transferred from partners such as the Local Health Integration Network (LHIN) for the Community Paramedicine Program and the Safe Beds Program. These local health networks are crown agencies established by the Government of Ontario to plan, coordinate, integrate and fund health services at a local level.
Development related revenues
Various fees are charged to developers and include development charges, building permit fees, and cash-in-lieu of parkland dedication.
Development charges are collected from developers for residential, commercial, and industrial development, at the date of building permit issue and are used to fund growth-related infrastructure, such as the South End Community Centre and new roads and pipes needed to service growing subdivisions.
When considering planning and development applications under The Ontario Planning Act, the City may require applicants to transfer land for parks or pay cash-in-lieu of parkland. Funds collected typically are held to help the City acquire new parkland but has been used in the past for improvement to recreational buildings. These funds are held in obligatory reserve funds, as they are mandated under legislation to be held separate from the balance of City funds.
Contributed subdivision assets are built by developers for water, wastewater stormwater, roads and sidewalks and are then turned over to the City to manage. At that time, revenue is recorded on the financial statements. For example, when a subdivision is turned over to the municipality by a developer this would be recorded as contributed asset revenue.
- Interest and penalties on property taxes, as described above.
- Investment income is the interest income earned on bank accounts, short term and long-term investments, along with dividends from Alectra through to Guelph Municipal Holdings Inc. and dividends from Guelph Junction Railway.
- Donations and fundraising revenues occur primarily for the Library, River Run Centre, and Museums in order to support specific programs or projects. The City also accepts monetary or in-kind donations to support Guelph’s annual tree planting fund.
- Product sales are comprised of food and beverage sales at Sleeman Centre, River Run Centre, museums and recreation facilities, and the sale of waste or recycling carts and composters at Solid Waste.
- External recoveries include cash inflows such as corporate sponsorships, partner contributions, along with capital labour recoveries from City capital projects.
- Gain/loss on sale of assets or property occurs in the form of land sales in the Hanlon Creek business park along with the sale of aged fleet assets.
- Government business enterprises earnings involves the net worth of Guelph Junction Railway (GJR) and Guelph Municipal Holdings Inc. (GMHI). It is the change in the shareholder’s equity of the two corporations.
To summarize, there are various sources of revenue other than property taxes. Municipalities have limited powers to generate revenue, which has us relying primarily on user fees to generate additional revenue. Unlike the federal and provincial governments, municipalities are unable to levy income or sales taxes and cannot budget a deficit.