Fact-checking the MPP on Peterborough’s budget

As Peterborough residents brace for another higher-than-average property tax increase, Peterborough-Kawartha MPP Dave Smith is blaming the City of Peterborough for not reining in its spending.

To make his point, Smith has been comparing Peterborough to other Ontario municipalities and claiming other cities offer similar services for less money. Speaking in the legislature on November 18, the Progressive Conservative MPP claimed incorrectly that Kingston and Peterborough are both proposing operating budgets of about $265 million next year, despite Kingston’s larger size.

“You have on one hand a city that is 45 percent larger than the City of Peterborough, who is able to operate with exactly the same operating budget,” Smith said.

Smith’s numbers were off by tens of millions of dollars. Last month, Peterborough city staff put forward a recommended 2025 operating budget of $411 million. 

Kingston’s budget process for 2025 doesn’t kick off in earnest until January, so it’s not clear how Smith reached his number for Kingston. The MPP did not respond to Currents’ request for clarification. In 2024, Kingston’s proposed operating budget was $477 million.

So, Kingston’s operating budget is larger than Peterborough’s, which is what you might expect for a larger city. However, gross operating budgets are not a particularly useful metric for comparing cities’ relative spending levels and tax rates.

Here’s one example of why. Peterborough’s proposed 2025 budget includes $21 million for water services, a result of city council’s recent decision to bring the local water utility in-house. That is a new expense that the municipality didn’t incur in previous years. But it will also come with $21 million of new revenue, so there is no impact on the municipal taxpayer, even though the operating budget has increased by $21 million.

In Kingston, water services are not directly delivered by the municipality, so those expenses don’t show up in that city’s operating budget, even though citizens still have to pay for them. 

That’s the kind of nuance you’d need to account for if you wanted to compare two municipalities’ gross operating budgets.

Here’s a number that might prove more useful than gross expenditures: the net tax levy. This is how much money a city needs to raise through property taxes to balance its budget after accounting for other revenues.

According to the 2025 draft budget, the City of Peterborough levied $169 million in property taxes to fund its $357 million operating budget in 2024; the rest was covered by other revenues. Meanwhile, Kingston collected $272 million in property taxes to pay for its $477 million operating budget in the same year. So Kingston, the bigger city, raised more tax revenue than Peterborough in 2024.

Who has higher property taxes: Peterborough or Kingston?

Speaking to the Peterborough Examiner, MPP Smith also stated that tax rates themselves are lower in Kingston. He points out that the owner of a $500,000 house in Kingston would pay $461 less in property tax than the owner of an equally-priced home in Peterborough.

Smith is right on this point: residential property tax rates are lower in Kingston. Nonetheless, Kingston draws in significantly more tax revenue than Peterborough because it’s a bigger city and its property values are also higher. In our recent budget podcast, we discussed how municipal tax revenues are tied to land. The higher the value of a piece of land, the more tax revenue it will generate, even if the tax rate stays consistent.

In Kingston, the total assessment base (that is, the total value of all the taxable land in the city) is $19 billion. In Peterborough, it’s $10 billion. That’s why Kingston’s lower tax rate yields higher revenues than Peterborough’s.

Also relevant are Kingston’s commercial and industrial tax ratios, which dictate the proportion of the tax burden that business property owners have to pay relative to residential property owners. Kingston’s business tax ratios are higher than Peterborough’s, which means that residential property owners shoulder a larger share of the tax burden in Peterborough compared to Kingston. 

Kingston’s decision to apply a larger share of the tax burden to businesses compared to residential property owners partly explains the $461 difference in residential property tax bills that Smith alludes to.

Last year, Peterborough councillors voted to shift some of the tax burden away from residential property owners onto business property owners — essentially an effort to become more like Kingston — but the provincial government rejected the proposal. Smith told the Examiner Peterborough needed to get its spending under control before his government would consider the tax ratio adjustment. Currents asked Smith if he had any ideas for how to rein in spending, but we did not receive a response.

What about Brantford?

Smith also compared Peterborough to Brantford during his comments in the legislature last month. He stated that Brantford’s operating budget is $90 million less than Peterborough’s, despite Brantford being larger than Peterborough.

Again, Currents could not confirm where Smith got this figure from, and the MPP did not respond to our call to request clarification. (We reached out by email, text, and phone call.)

But we note that Brantford’s proposed 2025 net operating budget is $138 million. This figure does not include funding for local boards such as the Brantford Police and the Brantford Public Library, all of which together cost Brantford taxpayers $67 million in 2024. Assuming funding for Brantford’s local boards stays fixed in 2025, Brantford’s net operating budget is set to surpass $200 million in 2025.

“Net” is the key term here. It means we shouldn’t compare this figure to Peterborough’s gross budget, but to its net tax requirement, which in 2025 is proposed to be $187 million. Once again, we see the bigger city has the bigger budget.

We don’t share these figures to suggest MPP Smith is wrong when he says Peterborough has a spending problem. He might be right. Kingston has managed to keep its annual property tax increases below 3.5 percent in recent years; we should certainly be asking how they did that.

No, we share the figures above to illustrate something we’ve learned at Peterborough Currents through years of studying the municipal budget, namely that one should be very cautious when drawing conclusions based on just one number. There are often a lot of other factors to consider.

Municipal budgets are fiendishly complex. That’s a problem. It discourages citizen engagement and disempowers residents. It also makes it harder for us to do our job at Currents. Just last month, we made an error in our reporting on the budget and we had to update a story to correct it. Mistakes happen.

We look forward to connecting with the MPP at a later date so we can work together to build a shared set of facts and learn alongside each other as we do.