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The T-word (taxes) finally takes centre stage in Toronto

November 24, 2016

4-minute read

The City of Toronto’s annual budgetfest debates just got interesting.

After months of Mayor John Tory avoiding the T-word (taxes), a city report released today puts important tax options on the table.

These options include short-term measures needed to balance the 2017 operating budget and longer-term measures to pay for the city’s capital needs.

This is a welcome development for many reasons, but here’s the main one: after limping along for years — not weeks or months, but years — there is finally a glimmer of leadership on revenue raising at city hall that isn’t about selling off a public asset.

And that is a departure from even, say, a week ago, when the only revenue raising option that seemed in play was a controversial proposal to partially sell off Toronto Hydro.

In her report, Selling Off Toronto Hydro: Private Sector Gain, Consumer Pain, CCPA Senior Economist Sheila Block shows why taking Toronto Hydro out of public hands is a bad idea. The city would give up control over hydro reliability, green energy innovation, and electricity prices.

One only has to look at Premier Kathleen Wynne’s recent mea culpa over the rise of electricity prices that is resulting in significant political blowback to be reminded of the implications of going the privatization route. She calls higher hydro bills her “mistake.”

Instead of selling off vital public assets, CCPA Senior Economist Sheila Block has been calling on the city to take leadership on addressing its revenue problem by leveraging the special tax powers given only to Toronto under the City of Toronto Act.

In her January 2015 report, Toronto’s Taxing Question: Options to Improve the City’s Revenue Health, Block updated estimates for more than half a dozen tax options. One of those options was to ask drivers who come and go from Toronto to pay a road toll to contribute to needed investments in infrastructure and public services.

The mayor is supporting a toll on the Don Valley Parkway and the Gardiner. The city’s report indicates that could raise $166 million annually. That is a substantive revenue stream.

This revenue would be dedicated to provide for infrastructure spending. City council should support the mayor in beginning implementation immediately. It will take three to seven years to put the technology in place for road tolls, but it’s a solid long-term measure.

Yes, even car drivers are being asked to help build and improve this city; public transit users have been shouldering higher fees for years.

This is a step in the right direction and it is heartening to see the city might be open to this, at long last.

But there is more that needs to be done and rapidly unfolding developments indicate willingness to stretch even further than a road toll.

As the city report makes clear, without unacceptable cuts to services, the 2017 operating budget cannot be balanced without new revenues. And capital expenditures cannot wait another three to seven years for financing.

The report has put a number of other options on the table.

It includes re-introducing the personal vehicle tax, which could raise $100 million immediately. That is a no-brainer.

Another welcome measure would be narrowing the difference between the commercial and residential tax rate. This could be implemented immediately and increase revenue by $3.8 million.

It would also make sure that commercial property owners do their part in contributing to the urgent need to increase revenue for the city.

There are also proposals to change the municipal land transfer tax, which would mirror the province’s changes: increasing the rate on homes above $2 million as well as increasing the first-time home buyer rebate and equalizing treatment between residential and non-residential properties.

While increased reliance on the land transfer tax isn’t a long-term solution, in concert with other measures to raise revenue, it can provide short-term relief.

It would also meet other policy objectives: simplification, as well as contributing to cooling Toronto’s overheated housing market.

These are measures the Canadian Centre for Policy Alternatives has long been showcasing as solutions to Toronto’s revenue problem.

In this Toronto Star op-ed in August, Sheila Block urged city council to consider all of its revenue options. She wrote:

  • “The city could draw on the special tax powers the province gave to this municipality and this municipality only; special powers that have remained untouched for years.
  • “The City of Toronto Act allows city council to raise anywhere from $300 million to $1.2 billion in news taxes, such as a flat tax on non-residential parking spaces.
  • “The revenue options — not more service cuts — are the only sustainable options before city council this year.”
The mayor is also considering a hotel tax, including extending it to Airbnb and others operating a short-term rental venture. This is another welcome development, especially in light of the findings from a report CCPA Economist Zohra Jamasi and Trish Hennessy published this September showing 13 per cent of Toronto Airbnb hosts post multiple listings and rake in almost half of all area Airbnb revenue. They’re essentially operating a commercial venture outside of existing regulations.

So, putting real, long-term revenue-generating options on the table instead of trying to sell public assets is an encouraging development at Toronto’s city hall this week. But: there is a warning in the report on hydro privatization that if revenue measures aren’t put in place, this issue will be back on the table.

City council has a moment now to get it together and do the right thing.

The Canadian Centre for Policy Alternatives has been consistently publishing research showing that city council has options and that privatization is not the way to go.

Progressives have been disappointed before — and all Torontonians continue to be impacted by lack of leadership on revenue generation at City Hall. We welcome this week’s developments.

Sheila Block is a senior economist with the Canadian Centre for Policy Alternatives’ Ontario office. Follow Sheila on Twitter: @Sheila_M_Block. Trish Hennessy is director of the Canadian Centre for Policy Alternatives’ Ontario office. Follow her on Twitter: @trishhennessy.

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