The loss of $1.45 million from the province, and a higher than expected demand from the county for social services funding from the city, together have the potential to boost the tax rate by a further 1 1/2 per cent, council was told Monday.

Mayor Karen Farbridge said Wednesday that she hopes the province can be persuaded to phase out the city’s Ontario Municipal Partnership Funding of $1.45 million, rather than eliminating it all at once in 2009. “I would be optimistic that we could have a discussion about phasing it out” over three or four years, she said in an interview.

Otherwise, a further increase in the tax hike seems to be in the cards, Farbridge suggested.

Service cuts needed to reduce the budget by another $1.45 million would be “harsh,” she said. So it would be “extremely difficult” to cope with the loss of all the OMPF money in 2009 “without it being an impact on the tax rates.”

Money has been given to Ontario municipalities for years to help them cope with the downloading of services in the late 1990s by the Mike Harris government. Now, though, this funding is being reduced as the Liberal government gradually uploads responsibility for many of these services. The Association of Municipalities of Ontario (AMO) has agreed to this, said local MPP Liz Sandals.

Sandals held out little hope that Guelph could avoid losing the $1.45 million in 2009. The OMPF money won’t be going to Guelph in 2009 “as far as I know,” although “in politics you never say never,” she said in an interview Tuesday.

In denying OMPF funding to Guelph and some other municipalities for 2009, the provincial finance ministry is “simply crunching the numbers based on what AMO signed off on,” she said.

When the Liberals came to power in 2003 and examined a fund set up by the previous government to help municipalities cope with downloading, “we saw no rhyme or reason to who gets what,” Sandals said. The Liberals replaced the previous government’s Community Reinvestment Fund with the OMPF in 2005, with new criteria set out.

Under the new criteria, the OMPF does four things. It assists municipalities with their share of social program costs; includes equalization measures for areas with limited property assessment; addresses challenges faced by northern and rural communities; and responds to policing costs in rural communities.

Guelph qualified for OMPF money only under the first of these criteria, and it was getting more than it should from the fund, Sandals said. So Guelph was “red circled” and its OMPF funding was frozen at $1.45 million, she said.

In November, Sandals said, Guelph was notified that it would not be getting OMPF funding, because the benefit it would get from uploading in 2009 would exceed $1.45 million. On Monday, the province again contacted city hall to update the data, she said. The new data showed Guelph- Wellington benefitting to the tune of $2.69 million in 2009 from uploading of the Ontario Disability Support Payments program and the Ontario Drug Benefits program. The province attributed $2 million of this benefit to Guelph, which pays most of the costs of Guelph-Wellington social services.

However, the county is in charge of administering social services and social housing, and the city isn’t seeing these savings, Guelph CAO Hans Loewig said Monday. Instead, the county is increasing its demands from Guelph for social services money, telling the city that the social services budget would be even bigger if not for the uploaded costs, he told reporters after the budget meeting.

Sandals said the province’s “intent is clearly that the savings (from uploading) be shared.”

She said the city and the county appear to be “in a perpetual fight” over how to pay for social services costs, and it’s up to them to work things out.

The current cost-sharing agreement for social services and social housing between the city and the county expires in February. A dispute over how costs should be shared in the future is expected to go to arbitration next year, Loewig said Monday.

The news about loss of 2009 OMPF funding that Guelph got Monday “wasn’t really any different than what it was told in November,” Sandals said.

However, Farbridge said Wednesday that while the issue came up at a Dec. 2 budget meeting of city council, the city didn’t realize it would lose the $1.45 million. “We were aware of the potential, but we certainly didn’t have the understanding that there was a decision” by the province, she said. “So it really did catch us by surprise” on Monday.

Loewig said only 8% of Ontario municipalities are to lose their OMPF funding in 2009.

He also said Monday that instead of agreeing to a $225,000 reduction in its administrative costs to help the city bring its tax hike down to about 3.75% in 2009, the county told the city late last week that it wanted $400,000 more from Guelph in 2009 for social services and social housing.

The county told the city this increase was needed “due to the state of the economy,” which could increase the need for spending on social services, Loewig said. The city now gives the county $23 million as its share of these costs.

Sounding frustrated, Farbridge told council she’d seen a lot of work by city departments, the library board and the Guelph Police Services Board to help minimize the 2009 property tax hike at a time of great economic uncertainty. “I have not seen the same level” of effort from the county, she said. She said she would like to see a “reasonable level of effort” by the county and “a little bit of movement” on a budget item that’s a big cost to the city.

Council passed motions Monday to try to get changes in positions from the county and the province. Failure in this would mean a need to re-examine the budget early in 2009, council agreed.

In the end, council voted 11-2 in favour of a tax-supported operating budget of just under $152 million. The 3.74% tax hike that would result from such a budget would see the tax bill of the average homeowner, with a home assessed at $257,000, rise by $100 next year.

Voting against the budget were councillors Gloria Kovach and Christine Billings.