How Toronto’s low tax rate measures up against the rest of the province and what it means for city services

Thestar.com
Oct. 18, 2022

If you just woke up at 6 a.m. -- again -- and couldn’t get your daughter into swim lessons, this story is for you.

If you are still waiting for the latest bestseller on hold at the library, this story is for you.

If you are concerned about the number of homeless encampments in parks, this story is for you.

With the Toronto election on Oct. 24, the Star is looking at the ways in which the city can do better -- the things that are broken and what we can do about it. This story is about your taxes.

Every year, when council decides its multibillion-dollar budget, it has the opportunity to choose how to spend on the services that matter most to Torontonians. It does that through what’s called the operating budget. At $13 billion annually, the operating budget pays for things like pools staffed by lifeguards, digital literacy classes for seniors at the library, and an increased number of shelter beds for the city’s most vulnerable.

By law, the city’s operating budget must be balanced every year. Unlike the provincial and federal governments that can borrow money and run up a deficit, the city must only spend what it earns to operate city services.

Typically, about a third of all the money the city earns is through property taxes -- about $4.65 billion in 2022.

City council is responsible both for setting tax rates -- how much to bring in -- and how to spend on services across city divisions. Think of it like planning your household budget based on your income for the year, if your household had nearly three million people.

Over the last eight years, council -- at the direction of Mayor John Tory -- has started the budget process by first setting how much to increase property taxes before deciding on spending, rather than deciding what the city should spend on and then setting the tax rate accordingly.

Following on a promise during election campaigns, Tory has pushed for the property tax increase to be at or below the rate of inflation, despite a ballooning population and growing needs through a pandemic that has put additional strain on services like recreation centres, libraries and shelters.

That means council has set how much revenue it can receive through property taxes and then decided how to divvy it up among all the services the city provides.

Today, Toronto remains one of the lowest-taxed cities for homeowners in the province. Let’s take a look:

For the last 17 years Toronto’s residential tax rate has hovered between 0.9 per cent and 0.6 per cent. But how does that compare to other Ontario municipalities, big and small?

For some perspective, here’s where Toronto sits compared to the average tax rate across the province. Only the small township of Seguin, Ont., which we have little data for, had a lower tax rate in 2011-2012.

So, who’s at the top? That would be Greenstone, Ont., northeast of Thunder Bay, with a tax rate that is consistently at least double Toronto’s.

Let’s focus on the region a little closer to home: the GTA. For example, compare Toronto to
Mississauga

Some of those places, of course, are not as urban as Toronto, with much smaller populations. Toronto has nearly 3 million people, Scugog just over 22,000.

Here’s Toronto compared to the five next largest municipalities in the province: Ottawa, Mississauga, Brampton, Hamilton and London

What these tax rates mean in actual dollars depends on the type of home and where it is. In Toronto, where the assessed value of properties is relatively high compared to other parts of the province, the average residential property taxes were $4,207, while in Timmins, the average taxes were $3,703. In Ottawa, they were $4,517. Across the GTA, only Brock and Milton had lower average property taxes.

So does this mean for Toronto’s finances?

While Toronto has more residents to draw taxes from than, say, Timmins, its relatively low taxes mean the much larger city with complex problems around mass transit, homelessness and more is stretched to provide services for all those people who expect modern, urban conveniences -- the bus to show up on time and the pool to be open when the schedule says it will be.

What’s more, scaling up services -- adding more recreation classes, growing the library collection and expanding shelter spaces -- becomes an added stress on simply maintaining that existing level of service with tax rates that are not keeping up with population growth.

What could an increase mean for the operating budget?

In 2021 a one per cent residential property tax increase would have generated $33.2 million -- or almost 10 per cent of the entire parks, forestry and recreation budget that year. That amount could almost double the library’s materials budget for the year or cover about 20 per cent of the budget to service and rent shelter spaces.

Meanwhile, the city continues to grow at unprecedented levels.

Provincial population projections predict that by 2046 the city will have grown by 1.07 million people.

Many of those people, like you, may wish to sign their child up for swimming lessons, borrow the latest bestseller or need a safe place to sleep at night.