Council to ask for a city sales tax in bid to ease Toronto’s budget crunch

But with Ford not in favour of a sales tax, city staff warn new measures passed Wednesday night won’t fill the budget hole estimated at $46.5B over the next decade.

Thestar.com
Sept. 7, 2023
David Rider

City council has formally asked the provincial government for the ability to impose a sales tax to help address Toronto’s budget crisis.

And in an early test of Mayor Olivia Chow’s ability to advance her progressive agenda, members also agreed to impose higher taxes on the sale of luxury homes, a central plank of her successful June election campaign.

But with the premier signalling no appetite to grant Toronto a sales tax, and city staff warning that even with new measures the revenue tools at the city’s disposal are insufficient, the municipality still has no clear path to address a pandemic-triggered budget shortfall estimated at $46.5 billion over the next 10 years.

In a speech to council near the end of a marathon session Wednesday to debate the city’s long-term financial plan, Chow reiterated the city’s position that to get itself on solid financial footing, it ultimately needs a new “fiscal framework” with the provincial and federal governments that could include new taxation powers.

“Council members are really agreeing on one thing, that we need a new deal. We know that. We agree to that. But how do we get there?” she said.

Chow said she supported exploring the flurry of ideas councillors put forward to help address the deficit, which included a lottery, uploading municipal highways and a levy on passengers at Billy Bishop Airport.

“There’s lots of great ideas there and we’ll see what kind of campaign we can put together,” she said, promising councillors would have input in her 2024 budget.

Councillors voted 16 to 7 to ask the provincial government for the sales tax power or a slice of the 13 per cent HST, after receiving a staff report that outlined what it described as the city’s dire need for new revenue sources.

Staff argue that, unlike the property taxes Toronto currently relies on, a sales tax would grow with the economy and allow the city to capture revenue from people across the region who use its services.

“Those are people that come into our city, use our parks, leave their garbage, flush the toilet, use our transit, drive on our roads, contribute to our potholes,” said Coun. Jennifer McKelvie (Ward 25, Scarborough--Rouge Park).

But while council’s request sends a message to Queen’s Park, it looks unlikely to lead to more revenue flowing to city coffers any time soon.

A city sales tax would require provincial approval, and Premier Doug Ford has indicated his Progressive Conservative government isn’t on board.

“Our government is focused on keeping costs down for people, especially at a time when the cost of living is going up,” his spokesperson said after the report was released last month.

Staff predict that unless Toronto negotiates a new revenue-sharing agreement with the other levels of government, it only has the ability to cover about 40 per cent of its long-term budget shortfall.

Council did take steps Wednesday that will raise some revenue. In a rare approval of a new tax measure, they voted 20 to 3 to increase the land transfer tax rates on the sale of homes valued at $3 million or more, which staff estimate will raise $26 million per year.

They also voted to lift the $5-an-hour cap on rates for metered on-street parking places.

Staff will report back before the 2024 budget on a suite of other potentially cash-spinning moves recommended in the report, including a levy on commercial parking spots, a 911 levy and Chow’s campaign promise to triple the vacant home tax.

But in a sign the new mayor’s influence on council is limited, members opened the door to a proposal from Coun. Brad Bradford to hire a consultant to conduct a “core services review” that would identify which services the city could cut or try to off-load to the provincial or federal governments.

Bradford, who ran against Chow in June and is emerging as an early critic of her administration, argued that costs of living in Toronto are already too high, and the new tax measures council supports are just “a whole lot of ways to make the city more expensive.”

“What we’re not seeing a lot of is cost control measures,” he said.

Chow said she opposed the review, which echoes a controversial push for service cuts that former mayor Rob Ford launched in 2011. She said the city doesn’t need to hire “outsiders” to find savings.

“We have the expertise,” she said. “We know what is core service and what is not.”

Council voted to ask for a report later this year on the cost of the review, in a vote of 13 to 10. Chow voted against.

In a separate 23-1 vote, council asked staff to return later this year with a report on achieving higher targets for affordable and public housing under the mayor’s housing plan.

Council also agreed to request that the federal government cover a one-time payment of $750,000 to reimburse churches and community groups that took in, fed and sheltered refugee claimants earlier this year. If they do not by Sept. 16, the city will release the amount from a reserve fund.