The budget practice of the current city administration is to make a fetish of the shortness of money, then to snip and chop away at existing city programs. The budget process was not always so cynical.
City budgets used to be the occasion for the mayor and councillors to talk about new priorities and how programs might be reshaped to serve people better. No one ever claimed that city hall was swimming in money, but since politicians seemed to feel there was a reasonable balance between needs and financial resources, they could wax eloquent about future possibilities.
What has changed? Why does city hall constantly claim poverty?
One reason is that in recent years city council has deliberately starved itself of the money it needs. You may remember the 1997 campaign when Mel Lastman ran on a platform of freezing the property tax.
Barbara Hall said that you couldn’t do that without cutting programs, but Lastman got elected. He froze property taxes in 1998.
A property tax rate increase equal to the rate of inflation brings in roughly an extra $25 million. The tax freeze in 1998 meant that in 1999 the city couldn’t count on that $25 million as part of the revenue base on which it could build. As well, the city had to cope with inflationary costs of its own.
Lastman then froze taxes again in 1999 and yet again in 2000. By 2001, the city was short about $75 million in its base revenue, as well as having to pay the costs of downloading imposed by the Harris government. After making serious cuts, city hall still had to rely on provincial handouts to make ends meet.
Once elected in 2003, Mayor David Miller re-established regular property tax increases, but he could never get back the lost base revenue from the years of the tax freeze. City council was forced to continue snipping away at various programs to balance the budget.
Mayor Rob Ford was elected promising a tax freeze, which was imposed in 2011. Eliminating the car registration tax meant another $64 million in revenue was lost. So the city’s revenue base is now about $160 million short of what it would have been if tax rates had kept even with inflation.
For next year, Mayor Ford is proposing a tax rate increase at about half the rate of inflation. Freezing taxes and cutting sources of revenue have caused major problems, which is why city hall is constantly trying to chop back programs, particularly programs designed to serve those with the fewest resources.
But there’s another factor at play — the explosive growth of condos in the city. To accommodate growth the city must build new capital facilities – transportation improvements, parks, recreation centres, libraries, water, sewage and waste facilities.
City council’s budget for growth related capital expenditures this year is $659 million; $811 million in 2013; and $568 million in 2014. Council imposes a development charge for each new unit of housing, but the total revenue from development charges is budgeted at just $91 million this year and smaller amounts for the following years. The shortfall in meeting the costs of growth is well over a half-billion dollars a year. And the property taxes collected from these new units is not expected to pay for the operating costs of the new facilities. All that growth is causing a major financial problem.
City council has painted us into a position where the base revenue is not there to restore funding to the services the city needs. To deal with the revenue shortfall, Toronto could follow the lead of Mississauga, which imposed a 7.4 per cent property tax increase this year, but could Toronto ever admit that Hazel McCallion got it right? It’s a lot more difficult to face up to the costs of growth.
Until there are some bold steps at city hall to restore lost revenue, it looks like we’re on a downhill journey.
Post City Magazines’ columnist John Sewell is a former mayor of Toronto and the author of a number of urban planning books, including The Shape of Suburbs.
