Fri. Feb 23rd, 2024

Analysis | Why Toronto is struggling to escape the financial abyss

Open in full screen mode

The City of Toronto will impose a 9% increase in property taxes in 2024 to address its revenue shortfall.

  • Philippe de Montigny (View profile)Philippe de Montigny

Year after year, the City of Toronto has to deal with a significant shortfall. The economy of the Canadian metropolis is doing very well, but almost systematically, the tax revenue it receives is insufficient to cover its growing expenses.

During the previous two fiscal years, under former Mayor John Tory, the City had to dip into its reserves to make up for its shortfall. This year, that hole widened further to $1.78 billion, representing more than 10 per cent of Toronto's operating budget.

Balancing Toronto's budget isn't as simple as postponing the addition of new photo radar or canceling pothole repairs. As with our portfolios, inflation weighs heavily on public finances.

This shortfall corresponds more or less to the whole of funding allocated to emergency services, namely the police service ($1.18 billion), the fire service ($518 million) and the ambulance services ($111.8 million).

Open in full screen mode

Toronto's shortfall is the sum of the city's emergency services budgets.

Is the Queen City too spendthrift or does it simply have its hands tied when it comes to revenue? It may be a bit of both, says Pierre-Pascal Gendron, professor of economics at Humber College in Toronto and researcher at the C.D. Howe Institute.

LoadingTaiwan: the candidate hated by Beijing wins the presidential election

ELSEWHERE ON INFO: Taiwan: the candidate hated by Beijing wins the presidential election

There is no does not have enough flexible tools to raise revenue in big cities. Property taxes are not sufficient for their needs. It's true that there are other mechanisms that exist like user fees and all that, but it's not enough, it's very small .

A quote from Pierre-Pascal Gendron, professor of economics, Humber College

The economist points out that many social programs and essential services fall into the hands of municipalities, even though they do not have the means to finance them adequately.< /p>

There is the argument that cities are actually spending too much, that there are too many programs in place for the capacity to autonomous financing of these cities, he adds.

According to political scientist Peter Graefe of McMaster University, municipalities are still too reliant on property taxes to support their services.

We always have more or less the same property tax base. It's not evolving at the same rate as economic growth, so it's very difficult, he explains.

Expenditures increase with the population, but also with the economic activity that must be supported.

Open in full screen mode

Peter Graefe, professor of political science at McMaster University in Hamilton

Different options, better indexed to the evolution of the economy, have been advances recently to redistribute the tax base.

Municipalities could, for example, collect a percentage of sales taxes, like the HST in Ontario. An idea that is generally perceived in a very hostile manner by higher levels of government, underlines economist Pierre-Pascal Gendron.

Another solution would be “Implement an income tax at the local level, which exists in particular in the city of New York,” underlines political scientist Geneviève Tellier. But there would certainly be a political cost to this option. People already pay a lot of federal and provincial taxes. It’s still the same taxpayer, she said.

Toronto city council is already exploring some options this year, such as gradual increases in land transfer tax (land transfer tax, in English ) for residences over $3 million, an increase in the tax on vacant homes and an increase in on-street parking rates.

Open in full screen mode

Geneviève Tellier, professor at the School of Political Studies from the University of Ottawa

Mr. Graefe also points out that Toronto has not increased its property taxes much in recent years compared to many other Canadian cities, which he says exacerbates the problem.

We have had 15 years of mayors who sought increases in property taxes below the rate of inflation and therefore, there is finally a recognition that there is a cost to pay in terms of overcrowding of the metros, 'access to housing and even the health of the city, he says.

Open in full screen mode

The Toyota Corolla retails at a base price of $26,595, the average price of a home in the Queen City was $1,084,692 in December 2023 according to the Toronto Regional Real Estate Board and William Nylander just renewed his contract with the Maple Leafs and will collect the equivalent of CA$15,385,792 per season.

To illustrate the extent of the shortfall, the document of Queen City budget notes it would take a 42% property tax hike to close the gap.

If hypothetically we postulated a 42% increase, the current administration would be swept away in the next election, says economist Pierre-Pascal Gendron.

The property tax increase planned this year in Toronto (9%) may therefore seem high compared to Montreal (4.9%) and Vancouver (7.5%), but remains well below what would be necessary to balance the City's budget, without intervention from the province or the federal government.

< tr class="bg-gray0 light:bg-gray0 dark:bg-gray900 even:bg-bronze50 light:even:bg-bronze50 dark:even:bg-gray800 children-of-last:border-b-0 last:children :border-r-0">

< /tbody>

Property tax increase Total operating budget
Toronto 9 % $17.0 billion
Montreal 4.9% $6.99 billion
Vancouver 7.5% $2.16 billion

Source: websites of the cities of Toronto, Montreal and Vancouver

After some resistance from the Ford government, the City of Toronto finally concluded last month , a funding agreement with the province that provides $1.2 billion over three years. This money will help alleviate a small portion of the shortfall for the current year.

The Queen City is also putting pressure on the federal government, demanding $250 million to house refugees and asylum seekers, a responsibility for which Ottawa must pay its fair share, insists Mayor Olivia Chow.

If Ottawa provides the requested amount, Torontonians would see their municipal taxes increase by 10.5% this year. Otherwise, a 16.5% increase would be considered, according to the budget document.

Open in full screen mode

Pierre-Pascal Gendron , professor of economics at Humber College and researcher at the C.D. Howe Institute

Economist Pierre-Pascal Gendron fears that the City of Toronto has gotten into the habit of begging for money from the province and the federal government. By having governments that accommodated these requests, we created a moral hazard on the side of the City of Toronto, because we are simply being rewarded, he warns.

For his part, Peter Graefe believes that Toronto's elected officials have negotiating power that many other cities do not have. They will continue to play their blackmail game, saying they are in a financial abyss and trying to look for subsidies, says the political scientist.

Ontario cities like Ottawa, Hamilton and Kitchener-Waterloo are experiencing quite difficult financial situations and do not have the capacity to raise these funds.

  • Philippe de Montigny (View profile)Philippe de MontignyFollow

By admin

Related Post