Nova Scotians for Equalization Fairness

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February 6th, 2013

2012 Letter to Auditor General of Nova Scotia

Sir,

Nova Scotians for Equalization Fairness, N.S.E.F., has twice requested you to investigate where over 99% of federal equalization transfers to the Province of Nova Scotia was and is being spent. No action has so far been initiated by you.

There has been no evidence of requests from Nova Scotia MLAs, excepting an op-ed from Mla Geoff MacLellan suggesting an audit, but this isn’t surprising because the political parties in power prior to the present one were complicit in redirecting this funding and capping the amount directed to municipalities and towns.

In 2009/2010 the government’s own figures show that from the $1,571,000,000 transferred by the federal government for equalization a total of $32,050,000 was distributed to eligible towns and municipalities. The actual amount from the federal transfer was $13,500,000, the remaining $18,550,000 (total Foundation Grants of $1,550,000 and $17,000,000 of the total Grants of Entitlement) being wholly supplemented from Nova Scotia Power Inc. Grant-In-Lieu-Of- Taxes.

The use of N.S.P.I. Grant-In-Lieu-Of-Taxes is a separate issue of contention. In 2010 the GILT paid to the Nova Scotia Government was $40,100,000. Since all revenue received is placed in the consolidated fund (General Revenue), it can be argued that the government can comprise its provincial equalization program of $32,050,000 entirely from the NS Power Inc. GILT.  And because the Cape Breton Regional Municipality has 28 percent of the NSPI commercial assets in its municipality, which should mean $11,228,000 represents municipal property taxes, if treated like other commercial assessments.  This would also mean the CBRM actually receives only about $5 million from the the provincial equalization program and not the approximately $16 million the provincial government states.

In 2010/2011 the actual amount distributed from the $1,337,000,000 federal transfer was again only $13,500,000 and In 2011/2012 the same amount was distributed from the federal transfer of $1,344,000.000

From a total $4,250,000,000 federal equalization transfers for these three years only $40,500,000 has been distributed by provincial governments from the federal government transfers. The loss of $4,209,500,000 that creates financial hardship and inequalities in taxation and services for towns, municipalities and citizens demand correction in practice of directing funds.

Regarding the rulings on the CBRM’s constitutional challenge, the courts have not ruled on the merits of the constitutional case but only ruled that the CBRM did not have standing before the court to raise these matters.  A procedural dismissal by the courts merely allows this injustice to fester because only some Nova Scotians are beneficiaries under the terms of section 36 of the Constitution Act, 1982.  That is not what the constitution intended!  Therefore, our committee feels it is incumbent upon you as the accountability gatekeeper for the citizens to account for on what and where these equalization payments were spent after being received by the provincial government.

 

We ask once again that you initiate an audit to determine where this amount has been spent and we would suggest a meeting between you and our representative where we can provide greater details of the basis for our remarks.

Yours truly,

Rene Halden, Correspondence Secretary, Nova Scotians for Equalization Fairness.

Enclosures:

(1)   Equalization Calculations based on Service Nova Scotia and Municipal Relations 2009/2010, 2010/2011, and 2011/2012 figures.

(2)   Service Nova Scotia and Municipal Relations “Helping Municipalities Cope with NSPI Reassessment”.

Cc. Premier and all Mlas

Read reply from the Auditor General here.

Federal Finance Department Allocates 26% of Equalization.

                Recently it was learned that the federal Finance Department allocates approximately 26% of the Nova Scotia payment in 2012-2013 due to the province’s relative weakness in property tax fiscal capacity.

The province does not collect property taxes. The Municipal Act, 1998, c 18, s.72 authorizes municipal councils to estimate, levy and collect commercial, residential, and resource property taxes. It follows that the 26% allotment is therefore for municipalities according to the provincial formulars that are in force, and that the remaining 74 % is distributed by the province at its discretion, but nevertheless for the purpose stated in the Constitution Act, 1982.

The 2005 Offshore Accord payments from the federal government to Nova Scotia is for a limited period and provides 100% protection from Equalization reductions resulting from the inclusion of offshore resource revenues in the equalization program. Therefore the 2005 Accord payments must be included in equalization and should also be used at the discretion of the provincial government for the same purpose.

The provincial is distributing about 4.09% of the allocated amount from equalization and increasing its total distribution from other sources that it legislated earlier in the program. The 2005 Offshore Accord payment is not included or distributed. The point being made is that about 95.9% of the equalization payment plus the Accord amount goes into general revenues. The details and amounts are described in “Facts on Equalization in Nova Scotia Revised January 25, 2013”, and the “2012-2013 Equalization Grant Revised January 18, 2013”.

 

There are questions concerning actions that have been taken by NSEF and the government, the ruling of the Supreme Court of Nova Scotia regarding CBRM’s suit against the government of Nova Scotia and the effect of the federal 26% allocation to Nova Scotia and many others. The answers to these and others that may be forthcoming will be answered on the FAQ (Frequently Answered Questions) in the tool bar at the right top of the Home Page.

Facts on Equalization in Nova Scotia January 25, 2013

                Confirmation has been received from the Finance Department Canada that approximately 26% of the federal Equalization transfer for 2012-2013 to Nova Scotia is allocated due to the province’s relative weakness in property tax fiscal capacity. Since the Municipal Government Act, SNS, 1998 c18 states that councils are authorized to collect residential and commercial taxes for municipalities, and because the provincial government doesn’t collect municipal taxes it is evident that the relative weakness in property tax fiscal capacity applies to transfers to municipalities, and that 26% of the federal transfer is allocated toward municipalities.

At this time we are informed that this applies to the 2012-2013 Equalization transfer of $1,268 million and excludes the 2005 Accord amount of $443 million. We have therefore replaced the FAQ 0f September 29, 2012 with this revision.

The Nova Scotia Offshore Accord is an arrangement reached between the government of Canada and Nova Scotia on February 14, 2005 that, for a time-limited period, provides 100% protection from Equalization reductions resulting from the inclusion of offshore revenues as source revenues. It is therefore a part of federal equalization transfers to the province. Federal Support for Nova Scotia 2005 to 2014 is listed below for the periods from 2009 to 2013. (In millions)

                            2009/2010      2010/2011                   2011/2012       2012/2013                                                                                                                                                                                                                                         

Fed. Amts.         1,391                     1,110                                    1,167                     1,268

2005 Accord       180                       227                                        250                         443

Totals                   1,571                   1,337                                     1,417                      1,711

The 2012-2013 Equalization Grant Revised January 18, 2013 is a compilation from Services Nova Scotia and Municipal Relations published Municipal Indicators with an added column by N.S.E.F comparing provincial government’s distributions with the Federal Allocation of 26%.

The provincial government distributed $32.05 million for each period under the Grant of 50.22% column.

The total of the Foundation Grant of $1.55 million, and $17 million of the total Grant 50.22 % of Entitlement is funded from Nova Scotia Power Inc. Grant-In-Lieu-Of-Taxes  (NSPI-Q&A) so that only $13.5 million is from the .federal transfer for each period. The remainder of the federal equalization is transferred to General Revenues.

N.S.E.F. previously used a factor (derived from annual operating expenditures of municipalities of approximately 14% of combined provincial and municipal expenditures for providing public services) to calculate a Fairness Grant for each eligible municipality and town based on the total of the Equalization and the Offshore Accord transfers.

With the federal allocation of 26% of $1,268 million, the factor by which the present provincial Grant of 50.22% of $30.5 million must be multiplied is about 10.81; therefore the federal allocation of 26% would require that the total Grant of 50.22% should be about $329.7 million.The factor of 10.81 is derived by dividing 26% of the federal equalization by the Grant of 50.22% ($30.5 million), and the Federal Allocation of 26% is the government’s Grant of 50.22% for each municipality multiplied by 10.81.

The government is currently placing $1,254. 50 million from federal equalization plus $443 million from the 2005 Accord transfer into general revenues. If it distributed the full allocated total it would still have $1,381 million to distribute at its discretion.

The caps (percentage) on the Grants that were legislated very early in the provincial equalization program , we believe violate the explicit purpose of the Constitution Act, 1982 and need to be rescinded allowing those funds to be distributed to municipalities and towns that host NSPC facilities. The federal allocation of 26% for municipalities is also being violated and transferring federal equalization transfers into General Revenues where they can be used for political purposes also violates the Constitution Act, 1982.

RESIDENTS OF 42 NOVA SCOTIA MUNICIPALITIES CONTINUE TO BE SERIOUSLY SHORTCHANGED BY THE PROVINCIAL GOVERNMENT’S UNFAIR DISTRIBUTION OF FEDERAL EQUALIZATION MONEY.

Read our Letter to the Premier’s Economic Advisory Panel byclicking here.

Maldistribution of Federal Funds is costing homeowners hundreds of dollars in extra property taxes every year, while also reducing municipal services.  Read on to learn about what this may be costing you in extra taxes and what you can do about it!

WHAT IS THE PROBLEM?

The Federal Government provides provinces, such as Nova Scotia, with Equalization Payments.  Our Canadian Constitution Act states in section 36.2 that :

Parliament and the government of Canada are committed to the principle of making equalization payments to ensure that provincial governments have sufficient revenues to provide reasonably comparable levels of public services at reasonably comparable levels of taxation

Most municipalities are entitled to these payments, and the province is bound by the constitution to distribute these payments fairly amongst the entitled municipalities…but they do not!

The Nova Scotia government only distributes a very small percentage of these funds to the municipalities who are entitled to receive them, and the majority of these funds, almost 98%, goes to general revenues, which is then accessed by areas of the province which are not entitled to receive equalization payments, such as Halifax Regional Municipality.

The unfair and unjust distribution of Federal Money by the Province of Nova Scotia greatly affects the ability of the affected Municipalities to offer basic services to their Citizens such as Engineering and Public Works, Transportation and Environmental Services, Water, Waste Water, Policing, Fire Services, Planning, Building Bylaws, Recreational Services, Administrative and Legislative, Fiscal Debt, Technology, *Education, *Corrections, *Social Services, *Libraries. (*CBRM pays a provincial contribution for these select services of $16,800,000)

In reducing the level of services available in the affected municipalities it significantly reduces the quality of life in affected communities, encourages outmigration of the young, and makes it harder to attract new population, particularly to attract and hold needed professionals.

IS THE EQUALIZATION ISSUE ONLY A PROBLEM FOR THE CBRM?  HOW ARE OTHER AREAS AFFECTED?

No, this issue is not isolated to CBRM.  Every municipality in Nova Scotia who is entitled to receive equalization funds are being shortchanged by the same percentage.

Find your region on the list below to discover how much of the $1.571 billion dollars the Nova Scotia government sent to your municipality this year and compare that with how much you would be entitled to under fair distribution.

Mainland Nova Scotia

Received

Entitlement

Annapolis

1,046,354

7,545,415

Antigonish

55,365

399,243

CBRM

16,413,564

118,360,630

Colchester

1,498,754

10,807,734

Cumberland

2,810,804

20,269,121

Digby

844,912

6,092,782

Guysborough

453,346

3,269,147

Hants

436,631

3,148,612

Inverness

730,623

5,268,633

Kings

195,068

1,406,662

Lunenburg

270,478

1,950,459

Pictou

3,446,830

24,855,600

Queens

824,018

5,942,117

Shelburne

745,642

5,376,932

Victoria

56,543

407,738

Yarmouth

671,069

4,839,174

WHAT’S AT STAKE FOR THE RESIDENTS IN THE ENTITLED AND UNDERFUNDED MUNICIPALITIES?

Perhaps the most stunning consequence is the hundreds — in some cases thousands of dollars — extra which some residents are required to pay in property taxes, all the while receiving lower levels of service.

FOR EXAMPLE

If the equalization problem were to be corrected, citizens of the entitled municipalities could see the following reductions in their property taxes annually: (based on property tax rates in respective areas per $100 assessment of $100,000 property value). Based on 2008-2009 figures.

Location

ANNUAL PROPERTY TAX SAVINGS

Sydney

$882

Glace Bay

$711

North Sydney

$721

New Waterford

$698

Sydney Mines

$608

Louisbourg

$737

Dominion

$787

CBRM rural

$221

Protest Sign - Nova Scotians for Equalization Fairness - Cape Breton Post - Carl MacIntyre

Consider this: Residents of Sydney on average pay 69% more in property taxes than residents in the urban Halifax Regional Municipality, while the average household income in HRM is 33.58% higher.  This higher average household income in HRM is in part caused by the concentration of provincial government jobs in HRM rather than being distributed fairly across the Province.

Residents of the town of Dominion pay on average 67% more in property taxes than those in suburban Halifax Regional Municipality, while the average household income in dominion is significantly lower.

The average delivery of services per household is 65.5% higher in HRM than it is in CBRM.

WHAT IS THE CAUSE OF THIS UNFAIRNESS?

The Provincial government is not distributing these Federal dollars to the entitled municipalities across the province, as it should.

This means that many municipalities are only receiving a tiny portion of the Federal dollars they would receive under a fair equalization scheme.

To illustrate, for the period 2009-2010 the provincial government of Nova Scotia received over one and a half billion  (1,571,000,000) dollars in Equalization Money from the Federal Government for the purpose of providing all citizens with reasonably comparable public services at reasonably comparable levels of taxation as outlined in clause 36 of the Canadian Constitution.

But at present this is not happening.  In the case of the Cape Breton Regional Municipality a fair distribution of these equalization monies would have delivered approximately 118,360,630 dollars to the CBRM community.  Instead, the CBRM has received only 16,413,564 dollars.

What this translates into for residents of shortchanged municipalities is hundreds of dollars of extra property taxes paid by residents in communities already disadvantaged by lower average incomes and higher unemployment levels.  Again, some of this extra unemployment is the direct result of the Province’s failure to share provincial government jobs fairly across the province.

This injustice is widespread and seriously affecting municipalities across Nova Scotia.  For example, the Municipality of Inverness under a fair distribution would receive $ 3,428,861 for 2009-2010.  Instead, it received only $475,495, a fraction of a fair distribution of these Federal dollars intended to assure quality of life and equality of services and taxation.

The Municipality of New Glasgow should have received $6,686,204 for 2009-2010.  Instead, it received only $1,044,292.

The Municipality of Truro should have received 7,169,984.  Instead, it received only 1,096,000.

This leaves municipalities severely strapped to fix their roads, provide sidewalks, provide policing and fire protection, maintain water and sewage systems, provide public transit and recreation, and other services which local residents need and expect.

To disguise this serious under funding of municipalities across the province, past Provincial governments have placed this Federal money in accounts where it is difficult for even accountants to trace and almost impossible for most citizens.  As a result of this lack of transparency in how the Province distributes these Federal dollars, your local councilors may be completely unaware of the absence of these monies diverted from your municipality.

It is the purpose of our non-partisan, public interest group of concerned citizens to bring these facts to light so residents across Nova Scotia can take action in their own communities to lower their taxes and receive better services by getting their fair share of Federal Equalization Funds.

We hope you will join our efforts to right this serious injustice that is stealing the lifeblood from smaller communities across Nova Scotia.

WHAT YOU CAN DO?

If you would like to lower your residential property taxes AND improve the level of municipal services and the quality of life in your community, here are some concrete simple steps you can take:

1.  Join Nova Scotians for Equalization Fairness by contacting us at nsef.ca@gmail.com

2.  Start a chapter of NSEF in your hometown

3.  Volunteer time, ideas, and resources. NSEF is a 100% citizens volunteer organization. We run on the fuel of your energy, ideas and volunteer contributions of time and effort!

4.  Distribute NSEF information on the present unfairness of the tax and equalizations schemes to fellow citizens, especially your friends and neighbours.  No material here is copyright.  Please feel free to duplicate forward or distribute NSEF educational materials by print, electronic and social media.  Letters to the editor in your local newspaper may be especially effective.

Thank you for your interest and support.

WORKING TOGETHER AS CONCERNCED CITIZENS ACROSS NOVA SCOTIA WE CAN MAKE A GREAT DIFFERENCE IN THE QUALITY OF LIFE FOR ALL NOVA SCOTIANS!

Respectfully yours

The NSEF Pro-tem Executive Team

Contact us at nsef.ca@gmail.com

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