Toronto could be $200 million richer

January 20, 2015

With a new mayor at the helm, the City of Toronto's 2015 budget season is about to begin in earnest.

Cue the debate over which services we can't afford to maintain.

Cue the debate about how major infrastructure projects will have to wait until senior levels of government pitch in to help.

Cue the perennial "we can't afford" to be a great city line of defence.

Of course, things could be different. In fact, things in Toronto could be a lot better if the city pursued all of the fiscal tools at its disposal.

There is much lamenting that Toronto does not have all the taxation powers of large U.S. cities, including sales and income taxes. That is true and should be corrected. However, that is a long-term project.

Meanwhile, the new council and mayor have a range of fiscal tools at their disposal to start rebuilding our city immediately, starting with the 2015 budget. These include making fuller use of the property tax and using council's unique powers to broaden the city's revenue base.

The city isn't broke. It doesn't have a spending problem. Toronto's real problem is that it's not making the most of the tax room that's already available to it.

For instance, the city's decisions under Mayor Rob Ford on property taxes mean Toronto didn't even allow property taxes to rise with inflation and population growth. Neighbouring GTA cities do it. Why not Toronto?

Doing so could yield an additional $200 million in revenue. Imagine the subsidized child care spaces that could create, the public library services that could improve, the reduced public transit fees that could fund.

The city is also sitting on another untapped reservoir of power: the City of Toronto Act provides Toronto with special revenue-raising powers available to no other Ontario municipality. And the city could do so much more with those powers.

The act proves the city with a menu of options that could raise more than $400 million annually. Revenues that could be put toward Toronto's nascent poverty-reduction strategy — especially given the gap between the richest 1 per cent and the rest is the second highest in the country (after Calgary).

Or the revenues could go toward making it easier for people to move around the city.

Here's how these options could work. If the city asked patrons of live sports events, movies and concerts to contribute an additional five per cent entertainment tax, that could raise $18 million a year for public programs.

A new tax on cigarettes could yield an additional $30 million a year. A new tax on alcohol retail sales from LCBO breweries and wine producers could yield an extra $77 million a year.

A 10-cent road toll on the DVP and Gardiner during peak hours that dropped to five cents during non-peak hours could raise an additional $78 million. A flat tax on non-residential parking lots could raise $175 million a year.

Reintroducing the Vehicle Registration Tax that the Ford administration eliminated could yield $66 million a year.

The city needn't leverage every single tax available to it, but it could signal a shift to more responsible governance if city council took up more of the special powers that it has been allotted — to contribute to a more sustainable funding base for public programs that benefit everyone.

Mayor John Tory and the new council have an opportunity to start this administration with a clear break from the recent past. The city could take immediate leadership in its 2015 budget to increase taxes to pay for needed services. If the city makes fuller use of the special powers within its grasp, it would increase its credibility in asking for increased transfers or taxation powers from senior levels of government.

There is a new mayor in town and that signals an opportunity to mature the conversation about Toronto's well-documented revenue problem beyond simply going cap-in-hand to the senior governments. Added benefit: it would strengthen the city's hand in its negotiations for needed support from other levels of government.

Sheila Block is a senior economist at Canadian Centre for Policy Alternatives' Ontario office (CCPA-Ontario). This piece was originally published in the Toronto Star