Revenue tools ‘not a dirty word’ says new Toronto city manager
Peter Wallace says freezing or cutting spending alone is unlikely to solve a growing gap between Toronto's costs and what it takes in through taxes.

thestar.com
Oct. 15, 2015
By David Rider

The new boss of Toronto’s public service says the city must not shy away from new revenue tools as rising costs, particularly for police and transit, outstrip the city’s ability to pay.

However, in a speech and other remarks Wednesday, Peter Wallace emphasized that his staff need to quantify how much money is needed for what and inform Toronto councillors, who have final say on service levels and any new taxes or levies to pay for them.

“‘Revenue tools’ is not a dirty word,” Wallace, who become city manager in May, told the crowd at his first public address to the Institute on Municipal Finance and Governance.

“Revenue tools are exactly what has saved the City of Toronto and exactly what has allowed the city of Toronto to continue to prosper and make public investments.”

The issue of whether to solve Toronto’s chronic fiscal gap by cutting costs - and services - or by generating new revenue, with tools such as a gas tax, parking levy or payroll tax, hangs over city hall. Property taxes, the city’s main source of revenue, do not rise with inflation, while the city's costs do.

Wallace’s predecessor, Joe Pennachetti, advocated for Toronto to push for a slice of the HST and to consider other tools, even while mayors Rob Ford and then John Tory rejected the politically difficult idea of new taxes.

The previous council, presented in 2013 with potential new taxes to fund new transit, voted them all down.

Wallace said the debate should not start with tools, but with objectives for transit, social housing and more: “What are we trying to accomplish, how much does that cost and at what point does that cost become unaffordable in our current model?

“And then use that to build in a sensible conversation around how you fill that in.

“Otherwise it’s way too easy to characterize it just as a tax grab. And it’s not meant to be a tax grab - it’s meant to add real value to our communities.”

Toronto has managed to cope with major development pressures while helping its neediest residents, thanks to existing revenue tools - including user fees on garbage collection, water, recreation and more - and the land transfer tax that rakes in hundreds of millions of dollars a year, Wallace noted.

But the 2015 TTC budget is $1.8 billion, up 16 per cent, while the police budget grew 10 per cent, to $1.16 billion. Long-term capital costs will add more pressure, Wallace added, and it’s unlikely spending cuts alone will allow the city to fund existing services and “core city-building priorities.”

With Toronto nearing its self-imposed debt limit - that repayment costs should not exceed 15 per cent of property tax revenues - and with big-ticket projects such as Mayor John Tory’s SmartTrack transit plan on the horizon, Wallace was asked if that limit will have to be increased.

Noting that it will be council’s decision, he said: “We are in all likelihood going to be bouncing up pretty hard against that 15-per-cent limit, and we’re likely going to have to give council advice to consider (changing) that.”

But Wallace cautioned against expecting much financial relief from such a move, noting that increasing the city’s debt load translates into higher servicing costs in the operating budget.