The assignment is due.

Jim Watson became the Minister of Municipal Affairs and Housing on October 30, 2007. His job included the final stages of a complicated project to sort out relations between the province and 445 municipalities through the Provincial-Municipal Fiscal and Service Delivery Review. We are still waiting for the promised "consensus-based summary report."

It is no coincidence that the review has taken enough time to bring an elephant to term. The main issue is, who pays? The only possible solution is the province pays more. It can't be easy.

The whole process began in 2006. It is being steered by a "political panel" that includes Finance Minister Dwight Duncan. Duncan has earned a reputation for tackling tough problems. He isn't an expert in municipal finance, but he does have an economics degree, and there is a good chance he can get his mind around the most absurd financial system in the entire provincial domain.

To help the ministers there is a "political panel" of mayors and councillors selected by the Association of Municipalities of Ontario (AMO). The team includes David Miller of Toronto and the famous Hazel McCallion of Mississauga. McCallion is the leader who pointed out to Finance Minister Jim Flaherty that cities are trying to maintain 58 per cent of public infrastructure with eight cents of every tax dollar. That is the secret formula for potholes. Flaherty told municipal leaders to stop whining.

The North is represented by Mayors Richard Adams from Parry Sound and Michael Power from Greenstone. There are three past AMO presidents on the political panel, including Powers, and current president Doug Reycraft. Reycraft was a Liberal MLA in the late 1980s and should help AMO get heard.

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The political panel has a sleeper agent. He is disguised as the Minister of Municipal Affairs and Housing. Jim Waston was mayor of the City of Ottawa from 1997-2000. With Ottawa councillor Peter Hulum, the capital city may be over-represented. On the other hand, Peter may help get a sympathetic hearing from Watson.

The elephant on the table was the monstrous debt caused by Mike Harris' downloading. AMO claims the panel has already solved some problems. The province announced gas-tax sharing and money for municipal infrastructure. In February, AMO president Doug Reycraft was especially happy that the province agreed to upload costs related to two key social programs; the Ontario Disability Support Program and the Ontario Drug Benefits Program. This decision alone will take $935 million a year off municipal property taxes by 2011.

AMO has run a very successful and politically sophisticated campaign. McGuinty and his cabinet deserve credit for facing some very serious problems. Skeptics might say the reforms are politically motivated, but who cares? Political motives are fine as long as they produce the right result.

One big worry, as the process draws to a close, is that the politicians will go on to undo one of the genuinely good things Mike Harris did.

Harris threw a ratchet into municipal financing rules. Councils could reduce the differential between property tax rates for homeowners and businesses, not increase it. The new rule meant the shifting of taxes onto businesses had to stop.

The ratchet didn't actually equalize the rates, which is what the province should have done. The result is a property-tax system that is still very badly warped. Land taxes SHOULD be equal on all classes of property.

The ratchet wasn't part of the Common Sense Revolution, it wasn't even common sense, since it was bound to make voters mad. For local politicians, it is always easier to raise taxes on commercial and industrial properties than it is to make homeowners pay for services. The ratchet was good economic policy though. And the common sense of the local politicians on the political panel may lead Watson and Duncan to repeal the ratchet.

Minister Watson is a graduate of the Carleton University School of Journalism and Communications. He has been director of communications for the Speaker of the House of Commons. He is very good at listening and finding compromises. Can he also see that the logic of property taxation is a mess? Or is he saving that problem for the next government?

Dave Robinson is an economist with the Institute for Northern Ontario Research at Laurentian University.

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