Thursday, February 13, 2014
Toronto Property Taxes
Since 1998, city councillors have increased the property tax rate an average of 1.7 per cent a year — less than half the increases that were levied in neighbouring Mississauga and other GTA cities.
In the past decade, the average annual hike in Pickering came in at 4 per cent. It’s been 3.8 per cent in Mississauga, 3.4 per cent in Oakville and 3.2 per cent in Richmond Hill and Ottawa. Toronto? Just 1.8 per cent.
The tax impact has been higher on homeowners than business, but even here, in comparison with other GTA municipalities, Toronto is below, on average — a full percentage point below Mississauga.
The numbers portray a counter-narrative to claims by some politicians and ratepayers that Torontonians are overburdened by their property tax bill.
“Despite what they might say on talk radio, Toronto has a good, responsible fiscal record,” the city’s CFO, Rob Rossini, said in an interview.
Rossini has worked in Halton Region, Hamilton, Mississauga and in provincial ministries, so he’s seen the landscape. His staff compiled the numbers from a number of municipal sources.
They show that since 1998, Toronto council has frozen the annual property tax rate four times; in eight of those 15 years, the increase came in under 2 per cent. Most times, the hike has been under the rate of inflation.
The 15 years of budget tightening and tax pressure has left the city with little room to manoeuvre even as the need for service improvements or repairs continues to build.
City manager Joe Pennachetti warned council last month that the day of reckoning is near. It was an unusual moment of candor from a man who’s presided over much of the belt-tightening — as chief financial officer under mayors Mel Lastman and David Miller and top bureaucrat under Miller and Rob Ford.
Rossini says Pennachetti is spot-on.
“What keeps me awake at nights is: How are we going to fund the $5 billion (in infrastructure shortfall) that’s not in the budget?” he says. The city’s housing stock is $2.6 billion in arrears; the TTC needs about $2.5 billion that’s not yet found.
“I hate to be the bearer of bad news, but inflationary increases just will not do it,” Rossini said.
Penanchetti says history shows Toronto will find partners to address capital needs; it’s the ongoing operating budget that has him worried. “We’ve had hundreds of millions of dollars of efficiencies and budget savings over a decade. We’re capped out,” Pennachetti said.
Ever since amalgamation, the city’s budget-making has been a torturous adventure of nip-and-tuck spending.
Municipalities depend greatly on property taxes to fund the many services they provide. Property taxes are stable, but inelastic. While provincial and federal revenues skyrocket in good economic times, they fall during recessions. Cities, meanwhile, trundle along all the time because property assessments don’t see-saw.
Toronto, unlike most Ontario cities, has big-ticket items — 90 per cent of the GTA’s social housing and 75 per cent of the province’s; plus Ontario’s only subway system; and highways like the Gardiner and Don Valley Parkway (only Hamilton also has a highway). The property tax base is stretched to cover them. That might suggest the need for huge hikes. But the city also has a huge commercial base, and this has insulated homeowners from huge increases over the years.
In fact, Toronto’s commercial properties used to be taxed at more than four times the rate of residential properties — a fool’s paradise that turned sour when commercial business started leaving Toronto for the ‘905’ region.
In 2006 the city started shifting the tax burden disproportionately onto residential properties, to fix the imbalance. For every 1 per cent hike levied against homeowners, commercial properties experience a hike of only one-third of 1 per cent.
This has made Toronto attractive again for commercial investment, but it has implications for how much money the city gets. City councillors know they must tax residents three times as heavily as businesses, but it is residents who vote, so the councillors measure the rate hike by how it affects the homeowner.
In keeping residential taxes below inflation, the net effect is often an overall tax increase of less than 2 per cent — not nearly enough for a big, complex city with unique services.
There is another piece that affects the property tax bill: education taxes, levied by the province. That’s fodder for another day.
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