1999 Credit Rating for Essex County

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Property Value Re-Assessment A complication to the challenges associated with service downloading occurring in 1998 has been the province-wide Property re-assessment (Bill 106) to June 1996 market values effective January 1, 1998. The motivation 'to establish current value assessment (CVA) for municipal properties was to give municipalities more control over raising taxes among property classes and remove any tax burden inequities among those classes. The establishment of CVA and Council's ability to set tax rates among property classes may address structural inequities and more fairly re-distribute the total tax burden among classes. Although there were some shifts among property classes as a result of CVA, Essex's assessment related changes were not as severe as other municipalities since the County's former assessment was based on 1992 values. While assessment related changes in isolation did not cause major shifts in tax burden among classes, revisions to the farm tax rebate program resulted in some increases in farmland property taxes. That issue is discussed in the "Local Services Re-Alignment" section below. The Province had initially given municipalities the flexibility and latitude to implement tax policy solutions, if any, to assist those taxpayers facing significant increases as a result of CVA. However, on October 23, 1998 the Provincial Government announced that it would pass legislation (Bill 79) requiring municipalities to limit tax increments on commercial/industrial property classes resulting from property tax reform related increases. That announcement is consistent with the Government's pledge to assist small business and provides a period of adjustment to affected properties; however, the legislation limiting increments is only a temporary solution since the new tax obligations resulting from CVA will only be deferred. Nevertheless, the challenge for municipalities in late 1998 is to identify tax policy solutions to meet this provincial legislation after budgets have been established and tax bills issued to local property owners. Local Services Re-Alignment In January 1997, the provincial government announced sweeping changes to municipal government that would transfer services previously provided by the province to the municipal sector. In exchange, for the responsibility of funding those programs the province indicated that it would allow municipalities to retain, rather than remit to school boards, 50% of residential education taxes. The intention was that the reduced remittance of residential education taxes, combined with minimum levels of programs savings or tax/user fee increases and support from the Community Re-Investment Fund, would purport to ensure a revenue neutral exchange. Some of the major services that municipalities are expected to take on, and finance, include social housing, social assistance, public health, land ambulance, policing and property assessment. Most of the services downloaded to municipalities from the Province will be delivered at the upper-tier (County) level. Accordingly, Essex County's upper-tier expenditure base has risen significantly such that upper-tier tax requisitions from the lower tier municipalities will also rise significantly to pay for the higher costs. It should be noted; however, that the education tax room to off-set much of the downloaded cost burden resides at the lower-tier level which will result in a notable shift in the proportion of the lower-tier tax levy that is allocated among the upper-tier government, lower-tier government and school boards. According to the provincial model, Essex County in aggregate (including the City of Windsor) was tasked to identify $14.213 M in savings or revenue enhancements during its 1998 budget to effect a neutral service swap. In fact, the County need not identify all the savings since it a net beneficiary in the service exchange (given the excess of funding sources to funding obligations.) .... Local Services Re-Aligameati Essex County .. Social Assistance & Social- HOusing .............. : ........ ~.... $40.705 M Public Health & Land Ambulance ............' .................... $ ! 4.688 M Policing ..i ............ ~ .................................. ............ ~ ......... $1.045 M Farm Tax Rebate ........................... : ................................. $2.096 M Transit ............ .......... : ............ i ................................. ~.: ...... $3.297 M Other (net) ....................................................................... $2.403 M Total Local Services Costs ............................................ $64.234 M Loss of Municipal Support Grant ................................. $18.164 M rotal Funding Shortfall .............................................. $82.398 M Residential Education Tax Room .................................. $69.952 M Community Reinvestment Fund ...................................... $4.969 M Special Transition Assistance .......................................... $0.619 M Municipal Savings Required/Rev. Enhanc .................... $14.213 M Total Funding Sources ................................................ $89.753 M Two costs that impacted the County more so than some other municipalities are policing and the farm tax rebate. O.P.P. costs that had previously been incurred on behalf of some rural areas by the provincial government are now the responsibility of individual municipalities. Prior to the Local Service Re-Alignment, eligible farm properties paid full tax levies per assessment values but received $0.75 re-imbursement from the Province for every tax dollar paid. That subsidy meant farmers effectively paid $0.25 per every tax levy dollar; however, the Province has now eliminated that program with the municipality bearing the cost of maintaining farmers' tax burdens resulting from elimination of the farm tax rebate. That cost download, combined with modest CVA shifting, resulted in some tax increases, particularly on some farmland properties which had to pay higher levies to mitigate the full revenue impact of the lost farm tax rebate. Specific Risk Exposures a) Road and Bridge Maintenance The Province as part of its downloading exercise has transferred significant roadway responsibilities to municipalities which is particularly challenging to Essex since the County has one of the more extensive road and bridge networks in Ontario. Although the Province provided one-time transitional funding when it transferred those infrastructure demands, the County may face budget pressures to maintain those roads and bridges since senior government capital grant monies are no longer available. There is the potential that road and bridge projects may be deferred or prioritized and quality standards respecting maintenance revised downwards (from a relatively high current level) given limited resources. b) Windsor-Essex County Boundary Adjustment Boundary adjustment intentions between the City of Windsor and Essex County have been difficult and resolution of issues related to tax re-distribution risk towards smaller Essex County municipalities has stalled. The City of Windsor has argued that as the main urban area in Essex County, residents of outlying municipalities benefited from the wider services provided by Windsor proper but did not pay for its commensurate share of that service delivery via tax requisitioning. For the City of Windsor, an amalgamation with portions of Essex County would provide the new City with additional taxable assessment to support growing service and infrastructure demands in the core as well as providing additional development capabilities through wider reaching boundaries. From our perspective, residents of Essex County may be generally opposed to the amalgamation because of the adverse tax re-distribution that would likely occur, although that shift in tax burden may be implemented slowly with phase- in provisions. c) Welfare Cost Sharing Since no voluntary agreement could be reached, Essex County and the City of Windsor are involved in an arbitration process respecting-~ provincial, estimates that allocate Page 2 Canadian Bond Rating Service