Toronto homeowners in the 2010s became accustomed to modest increases in property taxes, an average of about 2.5 per cent annually.
People in Toronto also became accustomed to a city where services seemed to be in decline. It was a primary theme of last year’s mayoral election. But the reality of a big and rapidly growing city that could benefit from greater investments didn’t soften the blow of the proposed property tax increase for 2024 that landed last week: 10.5 per cent. (The increase could be even higher if Ottawa doesn’t help support refugee costs.)
A 10-per-cent increase is always going to be jarring. And this space will question any government that proposes such a jump: are increases in spending necessary investments? And has everything been done to ensure money is being well-spent and operations have been scrutinized in detail?
The proposed increase, however, is less brutal than it appears. The average homeowner – in a city where the real estate board reports the benchmark price of a home is $1.1-million – would pay an additional $35 or so per month to city hall in 2024 compared with last year. Household budgets are strained these days, it is true, but this isn’t an egregious burden.
But context doesn’t change the fact that Toronto, under Mayor Olivia Chow, is looking for a double-digit tax increase, far higher than in recent years.
One of the core underlying reasons is cities have a lot less leeway when it comes to generating revenue than the provinces or the federal government. Inflation has been a sting for everybody but those two higher levels of government in fact also benefited from inflation. They saw revenues surge, with rising personal and corporate taxes. The additional money flooded into the treasuries, without actually increasing tax rates. There’s a separate issue of whether that money was well spent – the federal Liberals seemed willing to immediately spend almost every new dollar that arrived – but the fact is cities have had to grapple with the pain of inflation and a long hangover from the pandemic without seeing their own revenues jump to help cushion the blow.
Still, to make the case for a tax increase, Ms. Chow has work to do. The process includes the mayor presenting her own version of a budget by Feb. 1 and a special city council meeting on Feb. 14. The city has identified $376-million of what it calls reductions and offsets. Has staff done all it can to find savings?
There should also be a broader rethinking of what the city does. The pandemic has upended services such as transit, where ridership is still down compared with 2019. Before the pandemic, transit in Toronto was among the least subsidized systems in North America. Broad cuts to transit service would be short-sighted, but the city could look at more innovative approaches, such as surge pricing for fares.
Other options could also be considered, from how the city hands out contracts for work such as construction to raising revenue from underpriced services like parking. Most of the proposed property tax increase is projected to generate $380-million on a budget of $17-billion. A report last summer said higher commercial parking fees could produce as much as $490-million a year.
Vancouver is in a similar situation as Toronto and its experience is instructive. Mayor Ken Sim was elected in 2022, promoting his business acumen, and last spring he started a mayoral budget task force to use tax money “more efficiently and responsibly.” That review has failed to produce results. What did happen was a 10.7-per-cent property tax increase last year and 7.5-per-cent jump in 2024.
Hikes today stem in part from a long trend: city councils across Canada have been hesitant to tap homeowners for more funds. Cities deployed other methods, such as putting extravagant charges on new housing. Look at Toronto. A newly built two-bedroom condo is taxed $80,210. A decade ago, it was $15,695. Yet this happened without an uproar.
No one likes higher taxes. But given the many challenges Toronto faces, the city needs money. Ms. Chow has to make sure the budget she presents pushes harder to find savings. But, more broadly, there’s an important choice. Toronto in the 2010s chose low property taxes, and services and infrastructure started to tilt toward threadbare. There’s another path. Moderately higher taxes are an investment in the present and future of Toronto, a city that pictures itself as – and should aim to be – world class.