Ontario Premier Kathleen Wynne is ruling out an increase to the HST, but says she is open to other ways to boost funding for municipalities.
In an interview with The Globe and Mail, Ms. Wynne said a province-wide hike to the harmonized sales tax (HST) was not what she had in mind when she encouraged Ontario municipalities last year to consider potential new "revenue tools."
But that is what the Association of Ontario Municipalities (AMO) came up with this week as it launched a campaign in favour of the idea at a conference in Ottawa, estimating it would raise $2.5-billion a year for local infrastructure.
Ms. Wynne said hiking the HST would run counter to announcements her government has made in recent months.
"We're lowering peoples' hydro bills. We're helping people with medical costs. We're increasing the minimum wage and those are all things to help people to deal with their costs, so to do an HST increase at this point would really fly in the face of that," she said. "It's exactly the opposite direction from what we're trying to do right now."
Ms. Wynne, Progressive Conservative Leader Patrick Brown and NDP Leader Andrea Horwath – who face a provincial election in less than a year – all addressed the annual gathering of Ontario municipal leaders. Mr. Brown and Ms. Horwath also rejected the call for a higher HST.
Mr. Brown said a PC government would ensure that promised infrastructure money actually gets out the door and would focus on eliminating waste and delays.
"I think it's no surprise to anyone that a Progressive Conservative leader is not going to support tax increases," he said while on stage at the conference on Tuesday.
The NDP leader said a sales-tax increase would hurt low-income Canadians.
"Sales taxes are not a progressive tax," Ms. Horwath said. While she added that she was not prepared to release her party's election platform, she pointed out that it has previously called for an increase in the corporate tax rate to pay for improved government services.
Even among the mayors and other city officials in the room, there was clear division over the AMO proposal. Comments in favour and against the idea both received applause.
Currently, only the City of Toronto has special taxation powers, in areas such as land transfers. Ms. Wynne said on Tuesday she would be open to extending similar powers to municipalities across the province.
Bill Vrebosch, the mayor of East Ferris, a rural municipality east of North Bay, said new taxation powers for individual city councils would not work for small communities such as his.
"What do I do? Put a toll on a gravel road? I probably can't use any of those powers," he said. Mr. Vrebosch worked with the AMO on options for addressing the funding shortfall faced by municipalities and said he was initially against an HST increase. However, as the team studied alternatives such as service cuts, higher property taxes or new taxation powers for individual municipalities, he came to the conclusion that the HST was the best option.
"We are small municipalities that can't keep up any more," he said.
Ottawa Mayor Jim Watson said he did not support an HST increase and pointed out that many other municipal leaders in the room felt the same way.
"There didn't seem to be much support, so I don't know where the momentum is to raise the HST. I don't support it," he said. Mr. Watson said his preference would be a focus on uploading responsibilities, such as maintaining specific roads, that the province had shifted to the municipalities.
"I know it's tougher for the smaller municipalities, but some of these same smaller municipalities freeze their taxes or cut their taxes and then they come to another level of government and ask them to raise their taxes to give them more money," he said. "It doesn't make a whole lot of sense."