Department of Municipal and Provincial Affairs

The Municipal Operating Grant
BACKGROUNDER

• Government will be reducing funding under the Municipal Operating Grant (MOG) by 10 percent for 1997 with the savings to be achieved in the first quarter of 1997. For municipalities, it will mean a reduction in the amount of $3,410,000.
• The reduction would then leave the MOG at $30,690,000 for the 1997-98 fiscal year.
• In recognition of the impacts that this measure will have on municipalities, especially some of the smaller ones, Government's position is that it will continually assess the consequences and, when required, provide assistance and support to municipalities to allow them to continue to provide basic municipal services to their residents. And, in structuring the reduction, Government has placed a larger burden on the bigger municipalities.
• The MOG, which is made available to municipalities to help them meet general operating expenses, is comprised of four main components:
  1. An Equalization Component determined as follows:
     • (a) For municipalities which impose property tax, this component will be paid to councils which have lower than average property value. For example, if the average property value in a municipality is $30,000 and the average for the province is $50,000, this means that property values in that municipality are 60% of the provincial average. It is therefore short of the provincial average by 40%, The council will thus be given a grant of 40% of its previous year's property tax revenue to help compensate for its lower taxing capacity; and,

       (b) For municipalities which do not impose property tax, this component will be paid in the amount of $40 for each household in the community.

       Property value is defined as the total value of residential and commercial property in the preceding year as assessed for property tax purposes.

  2. A Local Revenue Incentive Component:

     A Local Revenue Incentive Component is payable as a certain amount for each household, based on local revenues per household in the community. Local revenues are defined as the total amount of revenues derived from property tax, water and sewer tax, poll tax, business tax, grants-in-lieu of taxes and tax agreement grants.

  3. A Household Component:

     The Household Component is calculated at $85 for each household in the municipality. A household means a separate set of living quarters with a private entrance and the household numbers are determined annually by the municipality.

  4. A Roads Component:

     This component is set at $500 per kilometer of roads in the municipality.

• The excess of these four components over the total original funding cap of $41,500,000 is reduced to the cap by means of a straight percentage reduction in the Local Revenue Incentive Component.