Tory asks council to back study of new taxes and fees, calls for new 'fiscal framework'

Mayor John Tory is asking city staff to study a range of new taxes and fees that could address Toronto's financial challenges in a report that could come before council this summer. 

Tory made the request in a motion to city council this week asking staff to examine a series of "revenue tools," update their estimates of the amount of money they could raise and what they'd cost to administer. The motion also calls on staff to assess how such taxes and fees have been used in other cities. 

Tory said it's part of his push to create a new "fiscal framework" for Toronto, and all cities, as they grapple with budget shortfalls made worse by the COVID-19 pandemic. 

"I think with the updated information … we can then make an assessment in the clear light of day as to what should be done," he said, adding that he also wants a "broader discussion" of the role of the federal and provincial governments.

"It can't all be up to us to do this all at the local level."

Tory estimates the city's current spending gap amounts to over $1.5 billion related to costs from 2022 and 2023. He blames the city's "COVID hangover" for much of the problem and says Ottawa and the province must address it..

The province has committed to cover some costs related to pandemic measures for 2022, but thus far the federal government has not. 

Property taxes aren't enough, Tory says

Tory has long maintained that Toronto's main source of revenue, property taxes, can't fund all programs and services. They also can't keep pace with the city's crumbling roads, sewers and expressways, with a $9.5 billion state-of-good repair backlog this year expected to double over the next decade.

Tory said he can't keep going to both levels of government to press them to pick up the tab every year.

"It's like Groundhog Day," he said. "You just go on and on and on."

Coun. Chris Moise has seconded Tory's motion, and in recent months has stressed that the city must look at the new taxes and fees. It can no longer afford to wait for bailouts from upper levels of government, he says.

Moise, who represents Ward 13, Toronto Centre, is optimistic that with the mayor's backing, council will endorse this study. He's hopeful that some of those taxes or fees will eventually be adopted.

"I think we need to have a long-term strategy in place to make sure that we don't use this stop-gap year-after-year."

Moise supports implementing a commercial parking levy, which would tax large lots and could raise hundreds of millions of dollars a year. The motion set to hit the council floor has a specific request to study that tax.

"Montreal, Vancouver, New York, they all have it," he said. "So we, as a city, can decide how we want to implement it."

City funding drawn from rules created in 1840s

Enid Slack, the director of the Institute on Municipal Finance and Governance at University of Toronto's School of Cities, says Toronto fiscal problems can be traced back to legislation crafted in the 1840s.

The funding powers awarded to all communities at that time limited their ability to raise money through means other than property taxes, user fees or government transfers, Slack says.

"Municipalities didn't do very much back then," she said.

"I think we need to rethink that based on what they are doing and what they should be doing. Do they have the right revenue sources to pay for them?"

Slack says the city should try to work out a new agreement with upper levels of government. But it could also create some taxes on its own, which are within its power under existing legislation.

"Those revenues are fairly small in magnitude," she said.

."You're talking about alcoholic beverage taxes, entertainment, taxes, tobacco taxes, motor vehicle registration, tax and commercial parking Levy," Slack added.

"The commercial parking levy could potentially bring in the most revenues, but still wouldn't meet that shortfall."

'There will be a backlash' 

Former city councillor Joe Mihevc says every generation at city council faces the same questions about how to raise revenue and balance the budget. He wants council to adopt new taxes or fees, but he says it will be politically difficult.

"There will be a backlash from folks; there historically has always been when you've imposed a tax on anything," he said.

"This time, perhaps, council will have the nerve and the strength and the commitment."

Mihevc says the larger challenge for Tory will be to somehow persuade the province to give the city a better fiscal deal.

"Provincial governments have a real tough time decentralizing. And this provincial government probably has one of the most difficult times not putting their hand in the city's cookie jar."