Enid Slack

Torontonians are not expected to see big tax hikes in 2017 as the city tries to close its $91-million budget gap, while grappling with $33 billion in unfunded capital projects.

Toronto City Manager Peter Wallace presented the preliminary operating and capital budgets today at a City Hall committee meeting. The proposed 2017 budget includes a two-per-cent increase in property tax and a 10-cent hike for TTC fares.

Read the full budget proposal here

The city is on the lookout for alternate forms of revenue with Mayor John Tory proposing a road toll for the Gardiner Expressway and Don Valley Parkway – a move that could bring in more than $200 million annually, but may not be fully implemented until 2024.

There are also some short-term revenue recommendations in the proposed budget including reinstating the personal vehicle tax and introducing a hotel tax.

Enid Slack weighs in on Tory’s toll proposal

As City Council begins debating the proposed budget, U of T News spoke with city experts Matti Siemiatycki and Enid Slack about how Toronto should handle its financial and operational woes.

Enid Slack is director of the Institute on Municipal Finance & Governance (IMFG) at U of T’s Munk School of Global Affairs

What do you make of the 2017 preliminary budget?

I think this is the same problem we see every year at budget time in the city of Toronto. We come to the point where there is a gap – this year it's $91 million. I think it's telling us we have a bit of a structural problem here.

We seem to have this problem with the gap, and in the short run, there's only two ways to deal with it. If our expenditures are greater than our revenue, we either have to cut back our expenditures or we have to increase our revenues, and so that's what this budget is trying to do. It's trying to cut expenditures and find some way to increase revenues.

In the work we did more recently, we talked about how over the long term we have to think about whether the property tax and the land transfer tax are sufficient to meet the growing expenditure needs of a large city like Toronto, and we concluded that they aren't enough. In Toronto and other major cities in Canada, we need to look at other sources of tax revenue.

Is this budget addressing both the short-term and long-term revenue needs for the city?

This budget is I think focusing more on the short-term fix in the context of understanding that in the long term we have to do something bigger. Some of the recommendations on municipal land transfer tax or personal vehicle tax may be short-term solutions. I think it really does both.

The biggest problem here is that the major source of revenue for cities in Canada like Toronto is the property tax, and the city has made a commitment to only raise property tax by the rate of inflation or less than the rate of inflation. I think, while I understand the politics behind doing that, it does put the city in a bind in terms of trying to balance its budget.

Why the resistance to increase property taxes?

The property tax is a very visible tax. If you look at other taxes, like the income tax or sales taxes, they're much less visible. Most people who are on salary, for example, don't know what they paid in income taxes last year.

When it comes to sales taxes, we know we pay 13 per cent, but nobody knows at the end of the year, how much they put out in sales taxes. But people do know what their property taxes are – this is money they have to pay maybe twice or six or twelve times a year. It's very visible. That's very good from an accountability point of view – people know what they're paying to their local governments, and they know what services they're getting. But that visibility makes it very hard to increase those taxes.

Matti Siemiatycki is an associate professor of geography and planning at the Faculty of Arts & Science

Is tolling the right way to go?

We had a lot of conversations over the last number of years about what to build, where to build and how to build it. The part that's always been missing is how we're going to pay for all of this investment and all of this infrastructure. I think the conversation about tolls is really the next phase, which is the hard part of the conversation.

You've heard all sorts of responses to this – one of which is that it's not enough, and it's too far down the road. If we're really looking at 2024, that's a lot of years between now and then that have to be bridged. If you look at how much money they raise, which is somewhere in the $200-million- to $250-million-a-year range, that's a starting point but the gap on the operating side annually is far larger than that, and the gap on the capital side is extremely large.

What I would ask people is, if you don't like this tool, if you don't like tolls, how else are we going to raise the big dollars to pay for the infrastructure that I think there's a consensus that we need?

What’s the alternative?

There are a fairly small handful of taxes and revenue tools that will generate large amounts of money and for various reasons a lot of those are also unpalatable for people. If it's not tolls, then what are the other options? It's a fairly short list.

One option is a fairly significant property tax increase, another option is a city-wide sales tax, which the city doesn't have the capacity to levy themselves – they'd have to get provincial permission, another is a commercial parking levy and a local income tax.

Fixing the Gardiner Expressway is now estimated to cost $1 billion more than expected – is this another hiccup for Toronto infrastructure spending?

That's been one of the frustrations – the budgeting and delivery has been challenging for a lot of big projects. That’s really part of what we need to address in this region and in Canada more broadly. We have an issue with how we pay for infrastructure, that's true, but we also have an issue with how we deliver the projects once we select them and once we actually decide to proceed.

That's proving to be frustrating for people and it's sapping public confidence and trust that government, if we decide to give them more money, can actually deliver on these projects efficiently and in a cost-effective manner.

In terms of transportation, what would you like to see Toronto focus on in 2017?

You really have two things going on at the same time – one is the long-range planning and the big visionary projects – the subways, the light rail lines, the bus rapid transit project, the really definitive city building initiatives.

There's a big planning push that's going to happen, but we also have the day-to-day operations of our system – we have, on the one hand, discussions of mega-projects that are costing billions and on the other hand, we have the TTC and other city agencies under a request of a 2.6-per-cent budget cut. What I want to see is at the same time that we're planning the mega-projects, we're also figuring out how to put the operations of the service that people use on a solid footing and to make sure those budgets are in place.

One step in the right direction is the low-income transit pass, which the executive committee last week looked at and approved. That, to me, is a really important step. Transit is a key barrier for people with low incomes – a barrier to jobs, a barrier to health care, a barrier to being a part of the city. I think that bringing in a pass is really an important step for the city to ensure that accessibility is available to those who are really in need.

Mayor Tory’s Gardiner, DVP toll good for Toronto, says U of T’s Enid Slack

Romi Levine — Thu, 24 Nov 2016 19:44:25 +0000

Mayor Tory’s Gardiner, DVP toll good for Toronto, says U of T’s Enid Slack

Romi Levine Thu, 11/24/2016 - 14:44

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Traffic snarls on the Don Valley Parkway test drivers' patience (photo by Jess via Flickr)

Romi Levine

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Romi Levine

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Toronto Mayor John Tory announced plans to implement a $2 road toll for the Gardiner Expressway and Don Valley Parkway today, hoping to generate much-needed income for the city.

The highways carry thousands of commuters in and out of the city each day, but Tory said the tolls would raise $200 million every year – funds that could then be used for transit costs and expansion projects. With $33 billion in unfunded capital projects, the city is in need of a new source of revenue, he said.

Tory also proposed a number of cost-cutting measures such as a hotel tax and a 2.6-per-cent reduction in the operating budget of city divisions like police and libraries.

U of T's Institute on Municipal Finance & Governance (IMFG), which is part of the Munk School of Global Affairs, released a paper this week outlining different taxing options for cities like Toronto in order to generate revenue.

U of T News spoke with Enid Slack, IMFG director and co-author of the report about Tory’s toll proposal and alternative revenue sources.

Why does Toronto need more sources of revenue?

What we've talked about in our paper is really the demands on municipal expenditures and how they've changed over the last 30 years – so for things like roads and transit, investing in infrastructure that's deteriorating, investing in new infrastructure. Our cities over the last 30 years are more interested in being more internationally competitive and that means not only providing water, sewer, roads and the traditional services but also making our cities very livable so we can attract young, skilled workers. Frankly, they can go anywhere, but we want them to come here.

The list goes on and on for the expenditure side of the budget, but when we get to the revenue side and look over the last 30 years, nothing much has changed. Cities in Canada have property taxes, user fees and some provincial and federal transfers so the time has come to think about what other sources of revenue are appropriate for cities.

When we looked at cities around the world – they all have other sources of revenue. They are not reliant on property taxes as their only source of revenue.

This is not as bold as you might think. Other cities are doing this, and other cities have tolls on their major roads.

Other than generating income, what are the benefits to introducing road tolls?

The obvious benefit is to reduce congestion so that fewer people will get in their cars – maybe they'll carpool or maybe they'll take transit. It has a lot of time benefits for people and environmental benefits – less pollution, fewer health care costs as a result, fewer accidents, less policing costs. There are a whole lot of benefits over and above just the revenue.

The point with tolls is that the users of the road are paying for it – whether they live in Toronto or somewhere else. And if the money is put into improving the roads or into transit, everybody benefits as well.

Tory also proposed a hotel tax during today’s announcement – an initiative included in the IMFG paper – what can this kind of levy provide for the city?

Hotel tax has advantages because it's a tax on visitors. When visitors come to the city, they use services. They walk on the streets. They use parks and policing services, and they don't pay any taxes in Toronto. A hotel tax is a way to get tourists to pay for some of the services they use when they're in the city. Other cities in Canada have hotel taxes – Vancouver, other B.C. municipalities, Montreal, Charlottetown. When you look around the world, many cities have hotel taxes.

How can Torontonians be convinced that increased taxes or taxes on more services will benefit them in the long-run?

We shouldn't start the conversation with taxes. We should start the conversation with what's our vision for cities in Canada. What do we want to see? People know what they want. They want good services. They want good transit. They want roads that aren't congested. They want parks. They want libraries. And we have to pay for them. If they have some understanding that those taxes are paying for these services, that they are getting something for their taxes, I think they're less unwilling to pay taxes.

Some politicians will also need convincing that taxes are a good idea. How can that be done?

If we want a great city, we all have to understand – citizens and politicians – that we will have to pay for it. If we don't, our cities will crumble. Infrastructure will deteriorate. The services won't be very good, and people won't be very happy when that happens.