Olivia Chow to endorse new revenue tools as Toronto sends signal to Ottawa and Queen’s Park

Thestar.com
Aug. 17, 2023

Mayor Olivia Chow will on Thursday endorse new “revenue tools” to help the city start to claw its way out of a massive pandemic budget shortfall that, left to grow, would cripple her ability to reinvest in city services, the Star has learned.

City manager Paul Johnson will release a staff-drafted “long-term financial plan” expected to include possible tools to boost revenues, including Chow’s campaign pledges of an increase in the existing vacant home tax and higher rates of land transfer tax on homes sold for more than $3 million.

Chow will vow to take those proposals and a “laundry list” of other options from city staff to her executive committee next week and full city council on Sept. 6, said a source with knowledge of the plan.

The increased vacant home tax, and the “mansion” tax on pricey home sales, could get council approval in September and start generating new revenues in the tens of millions of dollars next year, said the source who was not authorized to speak on the record.

“Our financial reality is challenging, but we can’t stop the work of building a city that’s more affordable, safe and caring,” said Chow, who during the mayoral campaign promised a “modest” property tax hike in 2024, in a statement Wednesday.

“That’s why we’re looking at the tools available to us in the long-term financial plan. The City of Toronto is stepping up; we’re inviting our federal and provincial partners to step up, too.”

During the byelection, Chow’s campaign initially estimated that tripling the vacant home tax could raise more than $100 million a year, but was forced to reduce that after the city released lower-than-expected vacancy rates midway through the race. She pegged incremental annual revenue from a new luxury home tax at almost $30 million. Her projections were disputed by rival candidates, and city staff will provide their own estimates for the measures in Thursday’s report.

New revenue from those two tools would make a tiny dent in the city’s projected shortfall of at least $1.6 billion for this year and next, but it would send a message to Deputy Prime Minister Chrystia Freeland and Premier Doug Ford that, after multiple past reviews that saw city hall create no new revenue sources, this mayor and council are “doing the work” to address the fiscal crisis, the source said.

Other revenue tools expected in the report include a levy on commercial parking spots, something former mayor John Tory floated as a possibility earlier this year as part of council’s request for the new staff report, which Chow fast-tracked after winning the June byelection to replace Tory.

Coun. Gord Perks (Ward 4, Parkdale--High Park), whom Chow appointed last week as vice-chair of the budget committee, said the new mayor’s decision to call a special summer meeting showed she was treating the city’s financial sustainability with greater urgency than her predecessor.

“It’s night and day. Former Mayor Tory swept the problems under the rug and implemented austerity,” Perks said. “Calling an executive meeting right away shows a sea of change in the way the city of Toronto operates, and I’m delighted.”

A 2021 city staff report estimated that a levy on commercial parking spaces of between 50 cents and $1.50 per day could raise between $191 million and $575 million each year. Supporters of the idea say the tax would also discourage driving in favour of more sustainable options.

But, with a business lobby staunchly opposed and logistical questions such as whether to tax just massive lots, including those of shopping malls and huge employers, or also those of neighbourhood strip malls, city staff are expected to recommend further study rather than quick adoption.

It’s unlikely such thornier options could be established quickly enough to inject badly needed revenues into the city’s 2024 budget, after a year in which council maintained services only by depleting financial reserves that will be gone for good.

Chow is expected to say Toronto can only recover from COVID-19 -- which boosted city costs for services such as seniors homes while slashing TTC revenues -- with short-term bailouts from Ottawa and Queen’s Park and a long-term “new deal” for Canadian cities.

Options would include giving cities the ability to impose their own sales taxes, like many U.S. cities, or a tiny slice of the harmonized sales tax that flows billions of dollars annually to the federal and provincial governments, or a slice of income taxes now collected by both levels of government.

Chow’s newly appointed budget chief, Coun. Shelley Carroll (Ward 17, Don Valley North), said she couldn’t predict which revenue options council might ultimately support, but argued that after having “ragged the puck” on sorting out Toronto’s finances for the past two decades, the city has to act.

“We’ve been struggling with an inadequate fiscal framework really since amalgamation and kicking the can down the road. We’ve reached the end of the road,” she said.

Although any new taxes are likely to face public opposition, Carroll said most residents are fed up with the deteriorating state of city services like transit, road repairs, and recreation programs, and recognize Toronto needs to bring in more revenue.

According to a third-party review released in March, Toronto is facing $46.5 billion in operating and capital pressures over the next decade that unless addressed will further degrade city services and infrastructure.

Carroll didn’t reveal details of Thursday’s report, but said staff had prioritized taxation measures that wouldn’t place additional financial burdens on low-income residents.

“Those who are making the most out of being in this megacity and can invest in the city should be the ones who are investing in the city,” she said.