Every week (or so), two Torontoist staffers square off to debate an issue that’s important to our city. We invite our readers to join the debate in the comments section following the post.
At Toronto Summit 2007, Mayor David Miller launched a campaign to get the Federal government to share one cent of the GST with Canada’s cities. Toronto’s share of one cent of the GST would amount to an estimated $400 million, but so far the idea has been shrugged-off by the Conservative government. Is One Cent Now the best way forward for funding our city, or is it this just another way of begging for cash? Torontoist has two cents that it would like to share with you.
There’s something wrong in Toronto. The city is $300 million behind in road repairs, public parks look like landfills in training, social services can’t keep up with the rising population, and of course there’s the TTC (remember when other cities still used tokens?). Whether you support David Millers’ “One Cent” initiative or not, it’s clear that something, or more accurately, someone, has got to give if Toronto is going to maintain the quality of life which its citizens quite reasonably expect.
That said, all government is essentially parasitic, and all money that the city spends ultimately comes from you and me, either in the form of user fees or taxes. It’s ludicrous to suggest, as some commentators have, that going to Ottawa for more cash constitutes “begging”, as if the feds had somehow earned the money and asking for it is the moral equivalent of moving back in with your parents. No, the money belongs to the taxpayer, and it’s really just a case of determining how we can get the most bang for our buck. And that bang won’t come from letting the Ottawa and Queens’ Park dole out the money at their pleasure and convenience, but from recognizing that cities have become the key economic and social driver for the rest of the country. It is madness to continue to treat the major urban areas as economic vassals to provincial governments.
In 2005, 51% of economic growth and 51% of employment growth came from Canada’s major urban centers, and yet municipalities (of all sizes) get just about 12% of the total tax revenue collected by government, with the remainder going to the federal and provincial governments. 80% of the population lives in cities, and yet the funding distribution mechanism reflects a time when Canada had a population that was primarily rural.
Not just the size of our cities, but their needs have changed dramatically. The polyglot immigrants who overwhelmingly settle in major urban centers require the provision of new housing, training programs, and public services in multiple languages. Infrastructure designed 50 years ago for a much smaller population is showing cracks under the strain of rapid growth. The social and artistic initiatives that are needed to attract and keep people and business here go chronically underfunded.
Against this unique set of benefits and needs, cities have very limited resources in terms of stable funding. Right now property taxes account for about 41% of all revenues received by the city. Property taxes, however, reflect the value of property, and do not necessarily grow with population or economic activity. Moreover, they are often inherently unfair—a pensioner on a fixed income could be forced to cough up $10,000 a year in taxes just for having the perspicacity to have bought a house in the Beach or the Annex 40 years ago. Increasing property taxes further would be disastrous for the city.
No doubt the Miller administration could do a better job at spending our money ($120,000 for a program to “increase the attendance of Police Officers at Court”—really?). However, that’s eminently true of all levels of government, and in general, the closer those who spend the money are to those who pay for it, the more accountable they are.
If Toronto is to survive and thrive, we must have an assured income stream that will grow with the economy, and while it doesn’t have to be a penny from the GST, that’s as good a place as any to start. Failure to keep Toronto and the rest of Canada’s cities vibrant and prosperous will be disastrous for the whole country.
The City of Toronto Act was supposed to change the way that things are done. The idea was that it would finally provide Toronto with all the tools and the power it needed to look after itself. Yet here we are, just a few months after the Act came into effect and the big idea that’s come out of City Hall for increasing revenue is this: let’s ask the Federal government for more money. Well done.
According to the city’s own conservative estimates, with our newfound power we could raise an extra $188 million a year through the introduction of three very simple programmes: a vehicle registration fee, a small land transfer tax, and a surcharge on the purchase of alcohol. These are all taxes that are commonplace in other large North American cities, including Chicago and New York, and they would go a long way to wiping out our current budget shortfall.
But, despite our urgent need for more cash and all the power we need to raise it, council has not shown any indication that it has the guts to actually raise revenues on its own. They would much rather stick with what they know: putting their hands out. After all, if they raised taxes or introduced new fees, then people might get upset with them. No, it’s much easier if someone else collects the taxes and then just gives us whatever portion of those we think we deserve.
And the $188 million the city has estimated is just the tip of what is possible. The Act also gives us the ability to increase taxes on cigarettes, road use, entertainment, and much more. A report produced by the Toronto City Summit Alliance has outlined over $1.8 billion in new revenue that could be raised each year, and all of it without the slightest increase in property taxes.
One of the big arguments used in One Cent Now campaign is that we need a revenue base that grows along with the economy. Fair enough, but consider this: one of the biggest changes in Toronto’s economy in the last ten years has been our incredible housing boom, yet property taxes have not grown along with that boom. In 1998, the residential property tax rate was 0.8%. Today the rate has dropped to 0.567%. That means that the real property tax rate has fallen 30% in the last ten years and it gives Toronto one of the lowest residential tax rates in the country.
Of course, the rate decrease is offset by the huge boom in property value, but imagine if the GST was also designed to drop as the economy became more robust. If that were the case, the Federal government would not have a surplus for us to clamour after. If Toronto had just kept the residential property tax rate steady at 0.8% during the real estate boom, we’d have more money than we know what to do with right now. Of course, I’d hate to see a pensioner forced out of his home because the property he bought for $20,000 forty years ago is suddenly worth a million bucks, but if 0.8% was a fair rate a decade ago, what makes it an unfair rate today? It doesn’t make sense to ignore the massive increase in property values while the city is in the hole and property taxes form the main source of our revenue.
City politicians are like politicians everywhere. They want to provide for their constituents, but they also want to get re-elected, so they shy away from anything that might be viewed as a tax increase. But, we campaigned hard for the powers given to us in the City of Toronto Act and asking for a handout when the cupboards are full is more than just unseemly, it’s practically un-Canadian.