Is it fair that Guelph taxpayers subsidize the University?

Posted October 31, 2012

By Gerry Barker

Editor, guelphspeaks.ca

More than four years ago, this writer complained about the provincial government formula for Ontario’s universities paying $75 per student in lieu of property tax. It is known as the ”Head and Bed” tax.

It was established in 1987 and has never been increased in 25 years.

This was a decision by the provincial government of the time. It has been perpetrated by succeeding administrations.

A lot has happened in Guelph in 25 years.

The University of Guelph, a former Agricultural College – “Go Aggies” – owns the largest tract of land in the city. In the following years, the university developed industrial, commercial and residential properties that were built on leased land providing ongoing land-rental income.

Is it the function of the University to be in the development business?

This was never intended in 1987 when the provincial government’s decision was to protect the interests of all post-secondary institutions in the province. Protect them from whom? The municipal taxpayers?  Most of the affected municipalities encountered growth spurts that would change the balance of property tax sources forever.

Succeeding provincial governments neglected to protect the municipal taxpayer from subsidizing the growth of the University.

Instead, as the municipalities grew exponentially, the universities expanded to accommodate more and more students.

This was amplified in the City of Guelph, where the only university in southern Ontario that owns hundreds of acres of land within the city. This unique situation has impacted the collection of property taxes that the city requires to function.

This sweetheart deal falls on the shoulders of the taxpayers in the city who in effect, subsidize the operations of the university.

How so? All you have to do is drive down Gordon Street and along Stone Road to see the growth of commercial and residential buildings sitting on University leased land.

Accompanying this 25-year growth in assessment, it is the city’s responsibility to supply transit, infrastructure including water and sewage disposal, waste disposal, police and fire and medical and hospital services.

And the Guelph taxpayers experience some 22,000 students dropped into their community for eight months every year.

So when MPP Liz Sandals says there is no money at Queen’s Park to increase the “Bed Tax” rate, she misses the point.

The province sets the rate. It does not pay the municipalities. The post secondary institutions pay the municipalities based on the 25-year old formula.

She argues that the growth has brought huge economic value to the city.

No question, the university has made major contributions in economic growth, cultural life and has brought honour to the city through its research and development of the human condition.

While the university has enjoyed a cordial relationship with the city, the provincial “Head Bed” formula forces the city to assist and support the university’s growth using taxpayers dollars. These are the same taxpayers who pay a municipal property tax plus user fees; a provincial sales and services tax; Provincial income tax and Federal income taxes.

It should be noted that the Guelph taxpayers are subject to increases in assessment of their properties. The University has a locked-in deal that doesn’t permit increases in the property assessment of its institutionally owned properties.

So when our MPP suggests the cupboard is bare at Queen’s Park she neglects to account for the steady flow of cash coming from the taxpayers of Guelph.

So it is difficult to understand the intransigence of the provincial government to change the payment in lieu of property taxes in Ontario’s post secondary cities

The Sandals rationale echoes a similar message by the Guelph Chamber of Commerce, whose Chief Executive Officer. Lloyd Longfield, claimed the university contributes more than a billion dollars to the Guelph economy.

Let’s take a look at that. For every dollar spent by the university and its students the provincial government is getting an 8 per cent piece of it. Just like the Guelph taxpayers who must pay the HST (eight percent plus 5 per cent federal GST) on most purchases they make.

So when Ms. Sandals is unsympathetic to the issue of Guelph taxpayers subsidizing the university, she should look around the city.

First, the University employs 3,723 employees. In contrast, Linamar Corporation employs more than 12,000 in Guelph and as a corporation pays full property taxes. In fact, Frank Hasenfratz, founder of Linamar, said on BNN television recently, that he was concerned about the high cost of property taxes in the city. His company operates some 19 manufacturing plants in Guelph.

Now compare that, in terms of economic production with the property tax contribution of the University of Guelph.

The Liberal government of Ontario, of which Guelph MPP Liz Sandals is a member, has made no attempt in its eight years in office to correct this inequitable property tax situation.

Remember, the Guelph taxpayer supplies more than 93 per cent of the revenue required to operate the city. The university shares many of the benefits of living in the city but does not pay for those services through property taxes.

There is a coalition of Ontario municipalities, of which Guelph is part, that is attempting to correct this inequity. They estimate, during 25 years of inflation, that the current $75 per student should now be $145.

If the province acknowledged that figure, Guelph’s “Bed Tax” would increase from $1,600,000 to  $2,900,00 this year alone. This increase is vapour funds. Don’t have it, won’t get it and despite the efforts of the Coalition of Ontario municipalities to changer the rate, the Ontario Government is in chaos with the Premier resigning and proroguing the Legislature.

The governing Liberal Party is holding a leadership convention in January and will no doubt call an election sometime in the spring once the budget bill is defeated by the opposition.

All these converging elements make it difficult to change the “Head Bed” tax rate.  Perhaps a new government will change this inequity.

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2 Comments

Filed under Between the Lines

2 responses to “Is it fair that Guelph taxpayers subsidize the University?

  1. geo

    Let’s not forget that Farbridge spent millions of municipal tax dollars trying to keep Wal Mart out of Guelph but had no problem with a giant Canadian Tire, Future Shop and Zellers being built on University land.
    A Mayor who tries to keep one retailer out but has no problem with several other retailers building on her former employer’s land should be investigated.

    • Geo: Politics makes strange bedfellows, don’t you think? It’s the old story, it’s not what you know but who you know. That 11-year Walmart battle ended up costing taxpayers, the developer and the anti-Walmart union forces an estimated $7 million. That’s chump change to the university’s real estate and development department.They developed both sides of a two kilometer street lessing out their land to many different stores, offices and hotels. And they did most of it while the Walmart battle continued. It wasn’t broken until the Kate Quarrie council approved the plan to build the Walmart store.

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