The Role of User Fees in Ontario Municipalities

Abstract

<p>An examination of the fiscal structure of municipal governments, particularly in the Province of Ontario, reveals a pattern of development contrary to the perceived norm. The role of senior governmental transfers in reducing the dominance of property taxation as a total municipal revenue source has long been recognized. However, the belief exists, even among governmental officials, that property taxation remains the predominant source of total municipal own source revenue.</p> <p>Analysis of municipal revenue sources shows that property taxation, even as a municipal own source revenue, has declined significantly. This decline is partially a result of increases in municipal own source revenues derived from user fees. This development has been largely unrecognized in the Province of Ontario, partly as a response to a previous study that was based on a questionable interpretation of municipal government in the structure of local government.</p> <p>This study has examined user fees based on their theoretical development and their current and future importance. Particular attention is centered on a selected group of Ontario municipalities and on sewerage and certain recreational services in these municipalities. It is shown, that while the utilization of user fees has become fairly extensive, this has often occurred inconsistently among, and even within, municipalities.</p> <p>In Ontario, user fees represent an opportunity for municipalities to attain real local autonomy in addressing particular issues of their communities. User fees have become a vital source of revenue to Ontario municipalities. However, while user fees· are generally applied in keeping with the principles of average cost pricing, there remain issues, regarding the types of costs targeted for recovery, which need to be addressed.</p>