A person jogs next to a backdrop of the Montreal skyline as ice fog rises off the St. Lawrence River in Montreal, on Jan. 22, 2022.Graham Hughes/The Canadian Press
Life is getting more expensive for Canadian homeowners as cities struggling to balance their books, amid growing budgets and lingering pandemic effects, drive property-tax increases well beyond the rate of inflation.
Toronto could be up more than 10 per cent this year over last, while in Vancouver the past two annual property-tax increases add up to nearly 20 per cent. Calgary and Edmonton are up this year between 5 and 10 per cent and Halifax is likely to land somewhere similar.
The hikes across the country follow years of warnings from city officials that municipalities were creating future problems with repeated low tax increases. But critics countered that cities were taking on too many roles, including refugee support and the opioid crisis.
While cities have pared some expenses, overall spending keeps rising. And experts argue for a different funding model, saying that property taxes aren’t the right way to fund all city services.
“If the cities are doing more what I call social services … these are services that redistribute income from high-income households to low-income households, is the property tax the best way to pay for that, even if it is enough?” said Enid Slack, director of the Institute on Municipal Finance and Governance at the University of Toronto.
“I would say probably not, that you need probably an income or sales tax to address some of these issues.”
EXPLAINER: How are municipal rates calculated and what do they pay for?
The expanding municipal role is also renewing calls for cities to do less.
A budget task force in Vancouver spent most of last year looking for ways to save money. Its report, made public Wednesday, was billed in advance by the mayor as a “made-in-Vancouver” approach that would be copied by other cities.
Many of the recommendations trod familiar ground, including seeking more support from higher levels of government and selling city assets. More controversially, the task force called for Vancouver to define its role more strictly.
Task force chair Randy Pratt had signalled that recommendation during a late November presentation to Vancouver council, saying that “previous councils have made decisions that bind future councils on service delivery that is, in our opinion, clearly outside of mandate.
Although Mr. Pratt said later in the meeting that his task force would not recommend abandoning services not obviously part of the city’s mandate – he cited health care in the Downtown Eastside as one example – his discussion of a mandate was met with skepticism.
In an interview earlier this month, before the report’s release, Councillor Adriane Carr said that restrictions of what the city should do are at odds with the reality of councils being elected to fulfill promises, while meeting challenges that emerge.
“The real role in being elected is to make sure that the city is functioning well,” she said. “To assume that there can be a list of finite things [for council to do] is, I believe, unrealistic and not only that, dangerous. Things arise that were not anticipated.”
An example of that is playing out in a showdown between Toronto and the federal government. The city said on Jan. 10 that it needs a firm commitment this month for $250-million from Ottawa to shelter refugees – whose arrival Toronto notes is the result of federal policy – or it could be forced to raise the property tax another 6 percentage points.
Asked about this on Jan. 11, Finance Minister Chrystia Freeland cited past support for the city and said, without making specific promises, that the federal government “will continue to be here for Toronto.”
Ms. Slack, at the University of Toronto, said cities are asking too much of the property tax already and argued that the diverse role cities are now playing requires a mix of funding mechanisms.
“There are different kinds of services that should be funded in different ways,” she said, recommending a mix of property taxes, user fees, municipal income taxes and transfers from other levels of government.
Toronto City Manager Paul Johnson notes that a 1-per-cent increase in the property tax generates only about $42-million. The city’s operating budget this year is $17-billion.
“The property-tax base is the wrong way to fund social programs, it is the wrong way to fund the infrastructure deficits that we have as a city,” he said. “It needs to be there for those core operational services … if we did that and we had a different way of funding some of those other services, it’d be a whole lot more sustainable.”
Higher levels of government must approve most other funding sources, though, leaving municipalities largely reliant on property taxes, which are now rising sharply.
A possible outlier is Winnipeg, which has until March to pass its budget. Mayor Scott Gillingham has pledged to keep to his campaign promise of a tax increase no bigger than 3.5 per cent, while dropping repeated hints that this will be a difficult budget.
In an interview, Mr. Gillingham said he would work with newly elected Premier Wab Kinew in pursuit of sustainable funding that grows with the economy. In the meantime, he would not say where the city will find the money to keep his property-tax promise this year. But he hinted at cuts and possible deferrals within the city’s capital program.
“You can’t say yes to everything. And so we have to make choices and, you know, the public will see the choices that we make when our budget comes out,” he said.
“Difficult decisions are having to be made. You know, you raise capital budgets, there’s such a demand for infrastructure investment and … all things cannot be funded.”