New funding agreement for municipalities announced
The provincial government has announced an historic new way to fund the Island’s municipalities.
Finance Minister Allen Roach today (November 6) outlined the funding changes in the Legislative Assembly. The new agreement will provide municipalities with more predictable funding and stronger growth potential.
“This agreement will fundamentally transform the relationship between the provincial government and municipalities,” Minister Roach said. “Municipal governments have been telling us that changes were needed, and this - along with the new Municipal Governance Act - will lead to stronger and more sustainable local governments across the province.”
This is the single biggest change since municipal amalgamation in 1995. Under the agreement:
- the current system of grants will be converted to tax credits;
- the equalization program will be updated;
- the planning credit will also be extended to municipalities with an official plan;
- municipalities will receive a grant of 10 per cent on all their eligible capital expenditures; and
- under the top-up provision of the agreement, no municipality will receive less funding than it does now.
Total funding to municipalities of $23.6 million has been increased by $2 million in 2017-18 and will increase by $1 million in each of the next three years. By 2022-23, the funding will increase to $30 million, along with an increase of $100,000 in funding for equalization for small municipalities.
“Improving the municipal framework has been a longstanding priority of the Federation of PEI Municipalities and I’m pleased to see this agreement moving forward,’ said federation President Bruce MacDougall. “Taking steps to strengthen municipalities supports the local services and amenities that improve the quality of life and create conditions for economic growth. The announcement today is the result of collaboration over the past year between the provincial government and municipalities and represents a tremendous amount of work. I want to thank everyone involved.”
The agreement will be reviewed after five years.
"We have been working closely with municipalities to put in place a predictable funding arrangement that recognizes the level of services they provide," Communities, Land and Environment Minister Robert Mitchell said. "The provincial government is committed to supporting municipalities and we are pleased that this is another step to improve the structure for local government."
The provincial government provides financial support to municipalities across Prince Edward Island in recognition of the services they provide to their residents. This has been in the form of
- equalization payments; and
- funding for capital projects.
The new funding agreement includes four components.
- Municipal Real Property Tax Credit – compensates municipalities for services that the Province provides in other areas.
- Equalization – funds on the basis that municipalities should be able to provide similar services at a similar level of taxation
- Municipal Capital Expenditure Grant – effectively returns municipalities to the pre-HST status where they did not pay tax.
- Top Up – no municipality would receive less funding over the next five years of the agreement.
This is a five-year agreement that would be reviewed in another five years, since the makeup of municipalities is anticipated to change with growth and the new Municipal Government Act standards.
The change from the old program in 2016-17 to the new program in 2017-18 is as follows:
2016-17 2017-18 Change
Grant/Credit $18.8 million $18.2 million ($0.4)
Equalization 3.0 4.7 1.7
Municipal Capital Expenditure Grant 1.8 2.7 0.9
No Losers - <0.1 <0.1
$23.6 $25.6 $2.0
The funding will increase to $30.0 million by 2022-23 based on 3% escalation. In addition, there will be an estimated increase of $100,000 in funding for equalization in small municipalities.