Serving More People Than You Can Tax: The Fiscal Impact of “Fringe Populations” on Northern Ontario Municipalities

This analysis finds several relationships between the relative size of municipalities’ fringe populations and their per capita spending. When all Northern Ontario communities with available financial data are considered, an increase in the relative size of a municipality’s fringe population is associated with greater spending on four types of services: environmental services, protection services, recreation and cultural services, and social and family services. An increase in the relative size of a municipality’s fringe population is also associated with less spending on health services. Overall, municipalities with larger fringe populations tend to spend more in total. I repeat the analysis with two other sets of municipalities: the 25 most populous municipalities in Northern Ontario, and 31 municipalities that represent population centres as defined by Statistics Canada. Among these larger communities, there is no association between the relative size of a municipality’s fringe populations and overall per capita spending. Nevertheless, larger fringe populations are associated with greater spending per capita on protection services and less spending on transportation services. It is unclear why a larger fringe population would be associated with less spending on certain services. The most plausible explanation is that municipalities seek to offset the fiscal impact of the demands that fringe populations place on certain services by reducing spending on others. These results do not show for certain that fringe populations cause municipalities to spend more. At least part of this spending is likely caused by fringe populations. Fringe populations can logically be expected to place demands on certain municipal services, and some municipalities have arrangements in place to serve fringe populations. However, it is also possible that greater municipal spending leads to larger fringe populations. A municipality that offers better services could attract more people to its unorganized fringe. Furthermore, the higher taxes that accompany greater spending could push more people to live in unorganized areas instead of within the municipality. Nevertheless, whatever causes the relationship between relatively large fringe populations and greater municipal spending, the result is the same: some people living in unorganized areas benefit from services provided by municipalities without paying taxes to these municipalities. In light of these findings, addressing issues relating to service delivery and funding in both incorporated municipalities and unorganized areas should be a greater priority in Northern Ontario. Reforms are needed to ensure that people in all parts of Northern Ontario have access to adequate services, pay their fair share for these services, and have a voice in decision-making. In developing solutions, dialogue and cooperation between municipalities, residents of unorganized areas, and the Government of Ontario will be essential. Possible options for reform include municipal annexations of certain unorganized areas or, more ambitiously, adopting a system of regional government in Northern Ontario modelled on British Columbia’s system of regional districts. Whatever solutions are adopted, the goal should be to benefit people in both incorporated municipalities and unorganized areas.

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