Faction seeking new taxes likely to clash with Tory

A move to consider new taxes – and revive an old one – is in the works at Toronto city hall, as councillors look to improve the city's long-term financial health and grapple with this year's proposed budget.

Councillor Shelley Carroll, a member of the city's budget committee, is pushing for a report on sources of revenue the city can use to reduce its reliance on property taxes. That could include reinstating the controversial vehicle registration tax killed during the last term of council, or asking the province for new powers to impose an income or sales tax, she said.

The initiative, which Ms. Carroll plans to bring to the budget committee next week, comes as councillors are considering a plan by Mayor John Tory to borrow money from the city's capital reserves to balance the books for 2015. The strategy, which requires council approval, would smooth out the effect on property taxes of the withdrawal of $129-million in provincial funding. Without the loan, the average residential tax bill would rise an additional 2.4 per cent, or another $62.58, according to figures provided by city staff Friday.

The loan would allow Mr. Tory to keep his election pledge to hold taxes at the rate of inflation. His proposed budget calls for a 2.75-per-cent increase, including a levy for the Scarborough subway. That translates into a $83.19 increase on the average residential tax bill of $2,679.

As councillors weigh the merits of the unusual move to solve this year's funding gap, some – including city manager Joe Pennachetti – are raising the topic of new taxes as a way to give the city more sustainable funding in future years.

"We are probably the only city of 3 million residents or more in the world that funds all of its services from property taxes," Mr. Pennachetti said Friday. "There's no sales tax.

"There's no income tax. There has to be change at some point in time in order for us to get through all of the growing pressures we have from transit to housing, all the social services that we now have to fund from property taxes."

City officials will begin discussions with the province next month on revisions to the City of Toronto Act and Mr. Pennachetti said he will be looking for a mandate from council for those negotiations, which could include a request to expand the city's powers to levy a sales or income tax.

"We need a clear, strong direction," he said. "It would be helpful to get it through the budget process."

Getting consensus on the controversial topic will not be easy. During the previous term, council considered a range of options to finance transit and rejected every one. In the end, it eventually supported a special levy to fund the Scarborough subway expansion as part of the 2014 budget.

On Friday, both Mr. Tory and his budget chair Councillor Gary Crawford showed little enthusiasm for reopening the tax debate. Mr. Crawford said he continues to focus on solving the city's money troubles "in house" by finding savings. "I'm not supportive of those kinds of taxes or revenue tools," he said.

Mr. Tory's office responded with a brief statement: "The mayor is on record saying no to the vehicle registration tax. The city has no powers to institute a sales tax and we have no plans to do either," it read.

But Ms. Carroll, who sits on the police commission and was appointed deputy speaker by Mr. Tory, said the new mayor was aware of her stand on this issue when he gave her those posts. She plans to push for the report, even if it puts her on the opposing side from the mayor.

Mr. Tory and his executive committee need to "be mature," about the topic she said. Blocking a report could endanger "the harmonious council" the new mayor is looking to create.