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Weekly UpdatesEmerging from a period of reform in the municipal environment, the Ontario government in 2000 launched mandatory performance measurement program for municipalities in the province. The Municipal Performance Measurement Program requires municipalities to report annually on 54 measures of effectiveness and efficiency in 12 key service areas. The MPMP was designed to strengthen local accountability by keeping citizens informed about municipal service plans, standards, costs, and value. It was also meant to help municipalities improve local services by stimulating productivity and creativity. In this context, the program was designed with other management improvement activities and benchmarking initiatives in mind.
Five years later, the MPMP has proven useful to municipalities and taxpayers alike. After playing a leading role in developing the program, municipalities are now poised to receive some payback. The measures are now well defined and widely understood, and the results are available to taxpayers, elected officials, and administrators. Municipalities can compare their performance year-over-year or with the results of their peers. The public can use the information to persuade their representatives to make cost-saving improvements to services. Data from the MPMP has been used to uncover dozens of best practices in municipal service delivery--practices that have documented and quantifiable benefits and that are made freely available to all municipalities to replicate. Similarly, for the provincial government that launched the program, long-term success is now tied to the improvements it fosters.
This article examines how the MPMP has helped improve municipal accountability and service delivery in Ontario. It explains why the province embarked on the initiative and describes what the program measures and how it works. It concludes by highlighting the program results to date and the challenges to continued success.
WHY ONTARIO DEVELOPED THE MPMP (1)
With 11 million residents, Ontario is Canada's most populous province and the engine that powers the Canadian economy. Larger in area than Texas and New Mexico combined, the province comprises urban regions and agricultural communities in the south, and sparsely populated, resource-based economies in the north. The 445 municipalities in the province are a mix of large cities such as Toronto and Ottawa, and regional and county municipalities with constituent cities, towns, townships, and villages.
In the 1990s, the Ontario government initiated a realignment of responsibilities and sweeping reforms in the provincial-municipal relationship. Municipalities assumed full financial responsibility and greater control of 12 services that were previously shared with the provincial government. About $3 billion dollars in services were exchanged. At the same time, the provincial government introduced municipal financial reform that brought consistent province-wide market value assessment to the municipalities' property tax base. The same reform effort lifted 50 percent of the costs of public education from the municipal property tax base, allowing municipalities to re-direct this revenue to meet their expanded service responsibilities.
Finally, the province enacted new legislation in 2001 that gave municipalities more flexibility in managing their operations, but also required greater accountability to local taxpayers. The MPMP was a key element in the accountability framework set out in the legislation.
At the same time, many municipalities were implementing their own cost saving or performance improvement initiatives. In 2000, municipal administrators from the largest municipalities formed the Ontario Municipal CAO's Benchmarking Initiative to identify exemplary practices in public service provision. Since then, OMBI has attracted a wider clientele among progressive municipalities that see the benefits of measurement and comparison. The OMBI experience, which is discussed below, is illustrative of the timeliness and readiness for the provincial performance measurement program.
THE MPMP AND HOW IT WORKS
The MPMP is a measurement and reporting system that provides high-level information to help local taxpayers, elected officials, and administrators evaluate municipal services. The program consists of performance measures, data collection guides, and reporting tools that allow municipalities to generate, disseminate, and use standardized performance data on core municipal services.
The Ontario Ministry of Municipal Affairs and Housing is the provincial body responsible for the MPMP, and acts in an administrative capacity to ensure the program runs smoothly and improves over time. In this capacity, the ministry is also responsible for the overall integrity of the MPMP data, and has an ongoing roll in data verification and validation.
Municipal Involvement. Early on, the ministry recognized the need for municipal involvement in developing the program. Municipal administrators had recently formed the Ontario Municipal CAO's Benchmarking Initiative to identify and share best practices in municipal government. OMBI is a partnership of a progressive group of city administrators(2) and service area experts who are champions of performance measurement for municipal service improvement. OMBI had developed performance measures for municipal programs, services, and activities. For the initial group of MPMP measures, the ministry borrowed heavily from the OMBI experience. OMBI had spent considerable time and effort in developing and refining municipal performance measures, and using their measures was a logical starting point for the MPMP.
In 2001, the ministry formed the MPMP Advisory Committee in partnership with the Association of Municipalities of Ontario. AMO is the association of elected municipal officials in the province, and its support for the program was essential. The committee is made up of representatives from AMO, other municipal and professional associations, and small, medium and large municipalities. OMBI experts are also involved. Through technical working groups of subject matter experts, the committee reviews the measures and makes recommendations for improvements. It also helps facilitate the use of the measures by directing MPMP information to municipal associations, elected officials, and staff.
Performance Measures. The MPMP framework was developed taking a phased approach. At first, the program looked at 35 measures in nine municipal service areas; now it examines 54 measures in 12 areas. (3) The service areas are fire, police, roadways, transit, wastewater, storm water, drinking water, solid waste, land use planning, local government, libraries, and parks and recreation. These services represent major cost centers for Ontario municipalities, as shown in Exhibit 1.
The MPMP uses effectiveness and efficiency measures to assess performance in each of these areas. Effectiveness refers to the extent to which a service is achieving its intended results--for example, the percentage of garbage that is recycled. Efficiency refers to the amount of resources used to produce a given amount of service. The efficiency measures are based on operating costs only--for example, the operating costs per ton of garbage recycled. Although the MPMP excludes capital costs in calculating efficiency, the advisory committee is now looking at ways to include capital costs in the calculations. The program defines operating costs to exclude principal and interest payments on long-term debt so that the way a municipality funds its capital projects does not influence the performance measurement results.
After the first year, the municipal stakeholders made recommendations for improvements to many of the definitions, instructions, and formulas for calculating the required measures. The recommended changes were implemented in the next reporting year. About two-thirds of the measures were modified or replaced between the first and second year. Once the measures in the nine service areas were stabilized in the third year, the program expanded to include three additional service areas, including hard-to-measure service areas such as parks and recreation.
Accounting Challenges. One challenge to ensuring fair comparisons among the municipalities was accounting for the impact of indirect costs on the various service areas. Indirect costs refer to the costs of internal services (such as payroll) used by all municipal departments. According to municipal treasurers, indirect costs represent between 5 and 15 percent of the costs of general government. Any lack of consistency in the treatment of indirect costs would undermine the comparisons of efficiency and value in municipal service delivery.
In 2001, the ministry asked OMBI experts to develop a model for addressing indirect costs. OMBI proposed dividing general government costs into three categories: governance, corporate management, and program support. Program support refers to services handled centrally, but attributable to particular service areas. Such services include payroll and printing, for example. Corporate management costs are general expenses, such as legal support and corporate communications, which are less easily allocated to service areas. Governance includes things like municipal council expenses, which are also not easily assigned to service areas.
OMBI recommended phasing in the standardized reporting of indirect costs over a two-year period. It suggested asking larger municipalities--those with populations exceeding 100,000--to use the OMBI method, but allowing the smaller ones to allocate indirect costs as set percentages across service areas. The ministry published the OMBI methods and phase-in plan with a cautionary note explaining the transition to analysts making comparisons among municipalities.
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