Fact Check: John Tory Makes False Claim About SmartTrack Taxes
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Fact Check: John Tory Makes False Claim About SmartTrack Taxes

On Metro Morning, the mayor makes claims about his SmartTrack campaign promises that don't match up with reality.

Image courtesy of CBC.

Image courtesy of CBC.

This morning, John Tory went on Metro Morning for an interview about the multi-billion dollar negotiations between the City and the Province and what it means for the mayor’s signature transit proposal, SmartTrack.

They got into it right away, with the mayor making a claim about financing SmartTrack that had us scratching our heads. So we decided to fact check it.

The Claim: John Tory says on Metro Morning that he didn’t promise “no new taxes” for SmartTrack, just “no increase in property taxes.”

Galloway: When you ran for mayor, you promised 13 new stations in seven years with no new taxes. What are we actually going to get?

Tory: No increases in property taxes—

Galloway: Right.

Tory: —is what I said. What we’re going to get is a train system, and in fact I think you add up the number of new stations that are included in the Eglinton West LRT—you have to count that—that is going to be the western part of SmartTrack system—you’re going to get lots of new stations. You are going to get that built without increasing property taxes if I have my way, because I think we will find, as you said “and/or” other sources of revenue, and specifically the City report says you can find his money needed to finance our part through other means, not property taxes, and that’s my intention.

When John Tory launched SmartTrack in May 2014, his comments were not limited to no increases in property taxes to pay for his transit plan. Instead, he stated in an ad promoting SmartTrack that, “SmartTrack will solve congestion. Citywide express rail that moves the most people in the shortest time. In seven years, without new taxes.” (Starts at 0:26, emphasis added.)

In the financing explainer that accompanied SmartTrack’s launch [PDF], Tory’s campaign cited tax increment financing as the sole financing means that the City would need to fund his transit proposal.

They wrote:

The total cost of the SmartTrack line is $8 billion. The City’s one-third share will be paid for using Tax Increment Financing (TIF). Tax Increment Financing, as introduced in provincial legislation in 2006, allows the City of Toronto to dedicate a portion of tax revenue from development along the SmartTrack line and stations to fund construction. The remaining funding would come from the provincial and federal governments.

…To fund the SmartTrack line, Tax Increment Financing revenue will be leveraged over 30
years as development activity and assessed values increase along a new transit route. It is
estimated that $2.5 billion in present value dollars can be raised over that time. All revenue estimates are based only on projected new office development in three precincts
within the following districts along the SmartTrack line: the Central Core; the
East Don Lands site; and Liberty Village.

The argument from Tory was that for the Toronto portion, this transit plan would pay for itself by allocating additional property tax revenue in SmartTrack TIF zones.

City staff now write that for various reasons (risk, development potential, the cost of servicing new development) it is not prudent to rely on TIFs alone to cover the cost of SmartTrack and that the financing mechanism should only be used to cover 50 per cent of the City’s cost.

It would be a City policy decision to notionally allocate all or a portion of the tax increment revenue to fund the debt charges associated with the SmartTrack Project. The risks that must be mitigated in this approach, however, are twofold. If all of the future incremental property tax revenues are pledged for the capital project, then insufficient funding would be available to fund the increase in demand for services arising from this growth. Similarly, forecasted development activity and property value increases may not materialize, leaving a shortfall in funding availability for debt charges. The default position in this case would be to turn to property taxes to cover any shortfall.

For the above reasons, staff believe it to be prudent to allocate only 50 per cent of the projected tax increment revenue from new development to the SmartTrack Project. This also leaves some funding room should actual development activity fall short of the forecast level, in which case the TIF capture level could be revisited by City Council.
-City Funding and Financing Strategy, page 6 (PDF)

City staff say that with the recommended 50 per cent TIF allocation, a 3 per cent property tax increase or its equivalent in other revenue (around $75–85 million per year) would be needed to pay for SmartTrack’s capital costs (this also assumes contributions from the federal government, the City of Mississauga, and the Greater Toronto Airport Authority).

While Tory sometimes claims that his campaign didn’t have the resources of City staff and did the best analysis they could at the time, various media outlets (like Torontoist and the Toronto Star) provided a critical analysis of TIFs at the time and came to the same conclusions as City staff: it was a very risky plan, and the numbers didn’t cover the costs.

Mayoral contender Olivia Chow made the argument in 2014 too. She said that if there were shortcomings in TIFs—and Tory’s proposal was tax increment financing on a globally unprecedented scale—then the City would have to cover it with additional property tax revenue. (The link is that tax increment financing is intrinsically linked to property taxes revenue, which is why the City cites it as the “default position,” among other reasons.) When Chow estimated a possible 4 per cent property tax increase to cover shortcomings in the SmartTrack financing plan, Tory’s campaign said, “[she] has no grasp of basic facts on transit and financing issues.” John Tory repeatedly stated on the campaign trail that he would not raise property tax revenue to pay for his plan, which might be what he’s getting at when he specifies property taxes in the interview with Galloway.

But he also promised that tax increment financing alone could pay for SmartTrack, and it could be built “without new taxes.” In fact, during the campaign Tory said he didn’t support any new taxes at all.

John Tory’s claim that his campaign promise to fund SmartTrack only excluded property taxes is false. During the campaign, he repeatedly stated that tax increment financing alone would pay for his plan and implied that this represented a transit plan that paid for itself. He dismissed any alternative taxes and rejected critics who pointed out the shortcomings in his financing plan that were later confirmed by City staff. To now say that he only said or meant to limit the discussion to excluding property taxes seems like a convenient way to save face when confronted with the realities of SmartTrack, and to decrease the blow to his credibility that should come along with it.

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