Toronto residents could be paying a 10.5-per-cent property-tax increase this year, far outstripping recent hikes, with the prospect of that rising to 16.5 per cent unless the federal government commits money to support refugees.
The $17-billion operating budget proposed Wednesday by city staff was unveiled less than a year after Olivia Chow was elected mayor. During the race, her opponents accused her of planning huge tax increases, while she said she would assess city needs and then tax accordingly without committing to a specific number.
Ms. Chow would not say whether she supports the proposed tax increase, telling reporters that she would spend the next few weeks consulting the public. She also wouldn’t say whether she thought residents could afford a double-digit tax hike.
“I think it’s important to listen to the people of Toronto,” she said. “We’ll see what people say to us, I do not want to predict what I will be hearing. And I just do know that I did not create this financial mess, but it needs to be fixed.”
Explainer: How are municipal property tax rates calculated and what do they pay for?
The mayor now has about three weeks to revise the budget, with her version scheduled to be tabled Feb. 1. Council will have its own chance to make adaptations and vote on the budget two weeks later.
The proposed increase in Toronto follows a series of property-tax rises in cities across the country, though others have tended to be in the single digits.
Councillor Brad Bradford, who ran against Ms. Chow in last year’s election, said residents can’t stomach such an increase.
“I think this is a nightmarish scenario for Torontonians,” he said. “The hard work in any budget process is not the spending. The spending is easy and Olivia is showing us that. The challenge is the savings and the efficiencies.”
The proposed 10.5-per-cent increase in Toronto comprises a 9-per-cent rise in the property tax rate and the preplanned 1.5-per-cent boost in the city-building fund, which raises money for transit and housing.
In a presentation to the budget committee, staff said that the budget process began with a $1.78-billion shortfall, representing about 10 per cent of the entire operating budget. That gap was reduced through measures including city-found savings and money provided via the “new deal” signed in November with the province.
The proposed 9-per-cent tax increase would close the gap by another $380-million. But that still leaves $250-million needed to fund about 4,300 beds for refugee claimants. Councillor Shelley Carroll, the budget chief, said the city must have a federal commitment to that money by later this month.
“This is truly a federal responsibility,” she said, adding that if Ottawa doesn’t come through by Jan. 26, she will ask staff to add a six-percentage-point “federal impact levy” to tax bills.
A spokeswoman for Finance Minister Chrystia Freeland did not answer directly when asked whether Ottawa would commit to this funding.
“Our government has been – and will continue to be – a strong partner for the people of Toronto, on housing, public transit, and much more,” Katherine Cuplinskas said in an e-mail. “We have contributed more to the City of Toronto than any federal government in Canadian history.”
Toronto city manager Paul Johnson, asked about the federal response during a technical briefing, said “none of that is untrue” before adding: “I don’t know how that helps us today.”
Although Ms. Chow will present a revised budget, Ms. Carroll suggested that there was limited room for change. She told reporters Wednesday that the city had to recover from years of underfunding.
“We cannot keep kicking that can down the road,” she said. “When times are tough, that is precisely when people need to be able to count on their city to deliver.”
Canadian cities have long struggled with the diverse range of responsibilities. In some cases, these have been downloaded by higher levels of government. In others, cities have reacted to citizen needs or stepped up when no other government was willing to act.
Upward pressure on property taxes across the country has prompted repeated calls for diversified sources of municipal revenue. However, provincial and federal governments have been reluctant to approve measures such as road tolls or local sales or income taxes.
In spite of their growing mandates, cities remain largely reliant on property taxes.
“It’s the wrong way to do it,” Mr. Johnson told the briefing.
“The property-tax base just cannot generate the kinds of resources that are required to adequately fund the infrastructure of cities, to adequately fund the full breadth and depth of programs that cities are now delivering.”
Oliver Moore