Borrowing from Peter to pay Paul
The city has announced plans to meet a shortfall in this year’s current budget primarily by “borrowing” from the capital budget. They would do this by postponing some $60 million of planned capital expenditures. The effect of this approach will be to increase the cost of proceeding with these capital projects on a delayed basis. It is about as fiscally prudent as an individual raiding savings accumulated to replace an aging car, and using this money to buy groceries. This plan does nothing but postpone tough decisions that need to be made.
Toronto Property Taxes are Low, not High
What makes the Toronto situation particularly silly is that Toronto property owners enjoy – and have long enjoyed – the lowest property taxes in the GTA (Greater Toronto Area). In my (co-authored) text Local Government in Canada, there is a chart (on page 277) showing the taxes paid in 2007 on a home assessed at $400,000. The City of Toronto taxes of $2355 were by far lowest amongst the various other GTA municipalities included in the chart. To drive the point home, a footnote in the previous (7th edition) went on to point out that if the authors of this text had written romantic novels instead of local government texts, and could as a result afford to live in a house assessed at $400,000 in their rural township, their taxes would be $4500!
We should also remember that Toronto lobbied for many years for additional taxing powers, as befitting its perceived status as the predominant municipality in Canada. The city got its wish via the 2006 City of Toronto Act but then was hesitant to use these powers. Eventually a vehicle registration tax and a land transfer tax were introduced. Almost immediately upon his election, Mayor Ford succeeded in getting council to abolish the car tax. By an interesting coincidence, at the time of its abolition, in December 2010, it was estimated that this tax would generate $64 million annually. It is long past time for Toronto’s politicians and citizens to have some honest and realistic discussions about the costs of operating the city and the accompanying responsibility for funding these costs.