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Still a Numbers Game

City Problems Still More Politics Than Dollars

by Geordie Gwalgen Dent

City budget priorities
City budget priorities
Toronto Taxes compared to the GTA
Toronto Taxes compared to the GTA
City Debt-Servicing Levels
City Debt-Servicing Levels

Has Rob Ford saved $1 billion dollars?  Is the City in bad fiscal shape?  What is the best way to raise revenues and increase and improve services for the public?

As Toronto heats up for another election, claims around the the Cities finances and taxes border on fantasy.  In this make believe world, Toronto taxes are too high, the City is in bad need of revenue tools and spending needs to be reigned in.

Ford has been particularly on message.  He's called for keeping taxes low and pointed to his fictitious savings of $1 billion.  (Even if this were true, his predecessor, David Miller saved $1.8 billion according to Ford's math.)   

Almost all candidates are calling for cuts to (or freezing of) tax rates while the sale of money making assets remains on the table.

But the reality is that almost none of this is necessary: Toronto taxes are lowest in the region; the City has lots of room in debt that it can take on.  As previously reported in coverage of the City budget by the Toronto Media Co-op, the affect of the policies is that the City's rich, property owners are being prioritized over those who rent and/or use City services.

Taxes

The biggest red-herring in Toronto elections is the claim that Toronto taxes need to be reduced or stabilized.  All candidates have called for reducing taxes or keeping them in line with inflation. While it would be political suicide to admit it, taxes in the City of Toronto are the lowest in the GTA according to the city's own statistics and could easily be increased to levels in other muncipalities.

The City Manager's office acknowledges the low tax rates but, responding to questions from the Toronto Media Co-op noted that, "commercial, industrial and multi residential tax rates remain relatively high." Since 2005, the City has been slowly reducing these taxes and trying to shift them onto property taxes. But the City has already spent almost ten yearsdoing this and rates are still extremely low compared to other Cities in the GTA.

Besides property taxes, the other most talked-about tax in the City is the land transfer tax.  This tax kicks in when someone buys a house.  Stintz, Ford and Soknacki have all called for this tax to be reduced, even though it is the perfect time to have such a tax.

Toronto's housing market has been one of the fastest growing in the world, with speculation and price increases continuing in opposition to concerns about a bubble.  The land-transfer tax has focussed on the the 'hot money' in Toronto and  the biggest source of private wealth. If you believe in taxing those who can afford to pay during good times, there is no reason to reduce this tax.  Some could argue that it could even stand to be increased, especially for new buildings and condos that have been the most subject to speculation.

Major Funding Priorities

The biggest drain on the City budget, by far is the Toronto Police services who eat up a larger and larger share of City revenues every year, with the TTC a distant second. Almost all services have been hit hard by staff gapping.

However, one of the biggest and most contentious issues that will affect City revenues has been the Scarborough Subway.  

Three motions to defer or stop funding of the Subway were ruled out of order and did not go to vote during the last council (a motion to force the vote through failed by one vote).  The money involved reveals why this has devided council so sharply.

Concerns about future cost-overruns have been raised, along with the needs of Scarborough residents.  City Council has opted to go ahead with the subway which will, according to the City Managers office, lead to a "tax increase of 1.6% phased in over three years. The resulting City debt requirements will not increase debt service to above 15% of property tax revenues."

In fact, the City does still have some room under a self-imposed interest-payment ceiling of 15% to fund increased transit and repairs to TCHC.  However, the 3 stop subway is eating into a lot of spare cash which is why both Chow and Soknacki have vowed to axe it and go back to the fully funded 7 stop LRT.  Chow specifically has said she would cancel the tax increase and use the extra room in debt service to increase bus service and TCHC repairs.

Currently, the City has been trying to convince the Province and Federal governments kick in money for both TCHC and the TTC even though they have the lowest property taxes in the GTA.  According to the City Managers office they have requested new funding tools from the Province along with "a 1/3, 1/3, 1/3 funding partnership with the federal and provincial governments to address the Toronto Transit Commission's $2.5 billion and the Toronto Community Housing Corporation's $2.6B capital back logs."

They've been asking for money to address this for years.  Is there any chance the government will pitch in money when tax rates are still the lowest in the GTA?  Especially when property values are soaring?

Assets

One of the most contentious proposals has been the (partial) sale of Toronto Hydro.   Stintz has come out in favour of a a 10% sale while Tory has rejected any 'fire sale' of City assets.

Unfortunately, Toronto has a recent history of fire sales.  While Toronto Hydro is contributing almost $50 million a year to Toronto, Enwave was contributing nothing, having been expected to start turning a profit in coming years for the City.  Sadly the City sold it off in 2012 to Brookfield Asset Management who will likely be making mad cash in the future.

Why would you sell part of a company that will provide money to Toronto in the years to come, especially with increasing hydro costs?  Well, that probably depends on who's buying it.

It's still early in the campaign, but will there be a candidate that talks about increasing Toronto taxes in line with other municipalities?  Will a candidate talk about putting more of a burden on property speculators who are making a killing on condo developments?

Will candidates talk about mandating affordable housing units in all new condominiums (which Toronto has the power to do)?   Will anyone talk about providing more daycare spaces or community centres? Libraries? Parks? Culture and arts?

Will candidates continue to focus on the needs of the rich or will anyone talk about the needs of the poor?


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Topics: Governance

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Gwalgen Dent (Gwalgen Geordie Dent)
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