Toronto mayoral candidates (left to right) Josh Matlow, Olivia Chow, Mitzie Hunter, Brad Bradford, Mark Saunders and Ana Bailao take the stage at a mayoral debate in Scarborough, Ont., on May 24.Chris Young/The Canadian Press
Toronto’s next mayor will inherit an expected budget shortfall of nearly $50-billion over the next decade – and no clear way to fix it.
The city is already expected to be short $1-billion in its operating budget this year, as it continues to contend with pandemic-related losses, largely owing to a drop in transit revenues. To balance its books, Toronto has been putting off maintenance and infrastructure spending, dipping into reserve funds and relying on higher levels of government to bail it out.
But the reserves are running dry. The federal and Ontario governments have been slow or unwilling to answer repeated calls for more funding. And residents are losing patience with unfilled potholes and overflowing garbage bins.
While the top candidates in the June 26 mayoral by-election have pitched plans to start tackling the city’s financial problems, none of them are proposing dramatic changes that would make Toronto’s finances sustainable over the long term, conceding that any solution will require support from higher levels of government.
What’s driving Toronto’s budget shortfalls
In billions of dollars
Inflation
Growth
COVID-19
$2.5
2.0
COVID-19
impacts
$933-M
1.5
1.0
.50
0
2014
2015
2016
2017
2018
2019
2020
2021
2022
2023
the globe and mail, Source: toronto.ca
What’s driving Toronto’s budget shortfalls
In billions of dollars
Inflation
Growth
COVID-19
$2.5
2.0
COVID-19
impacts
$933-M
1.5
1.0
.50
0
2014
2015
2016
2017
2018
2019
2020
2021
2022
2023
the globe and mail, Source: toronto.ca
What’s driving Toronto’s budget shortfalls
In billions of dollars
Inflation
Growth
COVID-19
$2.5
2.0
COVID-19
impacts
$933-M
1.5
1.0
.50
0
2014
2015
2016
2017
2018
2019
2020
2021
2022
2023
the globe and mail, Source: toronto.ca
Who are the candidates for Toronto’s 2023 mayoral election?
Enid Slack, director of the Institute on Municipal Finance and Governance at the University of Toronto’s School of Cities, said the city has limited tools to raise revenue on its own beyond increasing property taxes.
“I think people have to understand if they want great services and they don’t want their infrastructure falling apart, they have to pay for it,” Dr. Slack said. “If that means increasing property taxes, then that’s the trade-off.”
Dr. Slack said governments need to decide where responsibilities lie, especially with cities taking on more financing of social services and climate initiatives in recent years.
“We need to rethink who does what. What role should municipalities be playing? What expenditures should they be making versus the province and the federal government?”
Toronto’s leaders have sounded the alarm over the past several years, pleading for financial assistance from Queen’s Park and Ottawa to rebound from the pandemic. The city’s transit budget took a major hit, with revenues expected to be $328.1-million short this year alone owing to reduced ridership, which will likely reach about 73 per cent of prepandemic levels this year.
Former mayor John Tory, whose resignation earlier this year triggered the by-election, called in February for a review of potential ways to generate revenue, including a new commercial parking levy on property owners that could generate up to $535-million a year. A report is due back to council in the fall. The city currently relies on commercial and residential property taxes for more than 30 per cent of annual revenues.
Deputy mayor Jennifer McKelvie, who has taken over many of Mr. Tory’s duties, has cautioned that the city could need to cut services and planned infrastructure projects if the provincial and federal governments don’t come to the table with money. The city covered a $454-million budget hole last year by deferring capital projects and using a chunk of the reserve fund.
Legislation passed last November by Ontario Premier Doug Ford’s government has also reduced the number of housing projects the city can collect development charges on to help pay for the cost of associated infrastructure. The city projects the changes would cost upward of $200-million in lost revenue annually. The province is conducting an audit of Toronto’s finances and has pledged to keep the city “whole” for any lost revenue as a result of the changes.
The city’s financial problems have been building as it kept property taxes at rates that are among the lowest in the province, with increases typically at or below inflation since Toronto and surrounding suburbs amalgamated about 25 years ago.
Some mayoral contenders, including councillor Josh Matlow and former Liberal MPP Mitzie Hunter, have said property taxes need to be increased above inflation to catch up on the challenges. Ms. Hunter’s Fix the Six plan includes an annual 6-per-cent increase for residential property owners, but only 3 per cent for households with a combined income of less than $80,000.
Former NDP MP and former city councillor Olivia Chow, who polls suggest is the front-runner, said she supports a “modest” property tax increase but hasn’t offered specifics. The lack of detail has opened her up to attacks from opponents, who have warned that her platform promises could lead to a significant rate hike.
Ms. Chow told The Globe and Mail that she would not commit to keeping property tax increases below inflation because it’s not clear what that rate will be in future years.
Like many of her her opponents, Ms. Chow has said she would press higher levels of government for more money, arguing that her experience as an MP makes her well-placed to wrest money out of Ottawa.
“I think every candidate is going to tell you there needs to be a better deal for the city. The advantage I have is I’ve been a member of Parliament,” she said. “It’s serious, it requires all the residents of Toronto to work together and to talk to the federal government.”
Taking a different approach, former police chief Mark Saunders has pledged to review the city’s budget line by line if elected, to determine what activities can be paused until the city’s finances are in order. He has also taken issue with “pet projects” approved by council, such as building a new St. Lawrence Centre for the Arts for upward of $400-million rather than repairing the existing facility.
Some of the candidates have brought forward other ideas to save money. On top of raising property taxes 2 per cent above inflation, Mr. Matlow said he supports the commercial parking levy being studied by city staff. Under his plan, which would exempt grocery stores, small strip malls and spaces for people with mobility challenges, Mr. Matlow expects the city will make $200-million a year to be redirected to climate initiatives.
“We need to be honest about the need for new revenue,” he said in an interview with The Globe.
Former councillor Ana Bailão said the budget deficit can’t be solved simply by raising taxes or cutting services, and is calling on the province to take responsibility of the costs for the Don Valley Parkway and the Gardiner Expressway, which she says is about $250-million a year.
Councillor Brad Bradford said he plans to remove limits on what companies can bid on municipal construction projects, he estimates could save $200-million annually by making the bidding process more competitive, and also expand capacity to get road and affordable housing projects built faster.
Mr. Saunders, Ms. Bailão, Mr. Bradford and candidate Anthony Furey have pledged to keep taxes at or below inflation.