For Release on Wednesday, April 5, 2023
Ontario Cities Should Pool Funds to Create $39.7 Billion Piggybank
April 5, 2023 – Ontario municipalities should pool their reserves and cash holdings as a way to better manage taxpayers’ dollars and realize economies of scale, according to a new research report by the C.D. Howe Institute.
In “Pooling Piggybanks, The Case for Combining Ontario’s Municipal Reserves,” author Andrew Kaufman argues that Ontario’s local governments could collectively benefit from pooling these reserves and cash holdings.
“Realizing economies of scale lowers management costs and reduces the duplication of services,” Kaufman explains. “Investing fees and other costs can be reduced for local governments by pooling, which is particularly advantageous for smaller municipalities with limited financial resources.”
According to Kaufman’s research, there is about $39.7 billion in reserves sitting in unmanaged, non-pension public assets in Ontario. These reserves have grown dramatically over the last decade.
The legal landscape in Ontario already supports a pooled approach, he notes, as demonstrated by ONE Investment, a not-for-profit organization that offers a suite of fixed-income and equity funds. The 2015 Investment Management Corporation of Ontario (IMCO) Act created a public corporation aimed at providing investment management and advisory services to public sector agencies in Ontario. However, many public agencies and government organizations may still be legally restricted in their investment options by legislation.
“The Municipal Act, the Development Charges Act and the Financial Administration Act control how local governments can spend, and outline the governance, transparency, and accountability related to the investment of public funds,” says Kaufman. “There is a need for further legislative clarity and standardization concerning the ability of public agencies and government enterprises to pool funds.”
Consolidating public assets may indeed enhance efficiency and cost savings, but it also raises the question of local autonomy and accountability of local communities and stakeholders.
“When considering the case for consolidation, it is crucial to weigh the potential benefits and risks,” Kaufman adds. “Future partnerships and analysis will help determine the best course of action to save taxpayer dollars by pooling public funds.”
For more information contact: Andrew Kaufman, post-doctoral research fellow at Queen's University and Gillian Campbell, Communications Officer, C.D. Howe Institute, 416-479-9520, gcampbell@cdhowe.org
The C.D. Howe Institute is an independent not-for-profit research institute whose mission is to raise living standards by fostering economically sound public policies. Widely considered to be Canada's most influential think tank, the Institute is a trusted source of essential policy intelligence, distinguished by research that is nonpartisan, evidence-based and subject to definitive expert review.