Toronto budget fails to hold the line on property tax – The Globe and Mail

Toronto budget fails to hold the line on property tax

Toronto City Hall

Deborah Baic/The Globe and Mail

City’s $9.2-billion budget includes user-fee hikes, minor service cuts and the promise of a permanent transit funding deal with the provincial government.

Kelly Grant, Anna Mehler Paperny and Karen Howlett

Globe and Mail Update

Toronto homeowners will see their property taxes increase by 4 per cent under a proposed $9.2-billion budget that includes user-fee hikes, minor service cuts and the promise of a permanent transit funding deal with the provincial government.

The property-tax hike will add $93 to the annual bill for the average Toronto home valued at $407, 374. Non-residential taxes will rise by 1.3 per cent.

The city’s 2010 budget, unveiled Tuesday, is balanced. But it was more difficult than expected to cover the operating shortfall because the province did not shell out 11th-hour transit funding as it has in recent years.

Queen’s Park, facing its own $24.7-billion deficit, instead offered the promise of a permanent transit funding deal to be completed by Dec. 1, 2010, with the money beginning to flow in 2011.

“[The TTC] remains the single largest ongoing operating budget structural challenge affecting the city,” Mayor David Miller said. “Transit is too important to be financed with ad hoc, year-end or one-time funds and the TTC too important to the future of Toronto to allow it to suffer from uncertain funding year after year.”

The lack of provincial funding left city finance officials scrambling to close a gap forecast at $821-million in May 2009. The measures the city took included:

-reducing costs ($172-million)

-increasing and adding new user fees ($13-million)

-TTC fare increase ($50-million)

-Land-transfer and vehicle-registration tax increase ($12-million)

-Interest and investment income, parking authority revenue and new billboard tax ($22-million)

-Provincial upload ($22-million)

-strike savings ($31-million)

-reserve draws ($63-million)

-prior year surplus, applied to TTC operating ($219-million)

-assessment growth ($33-million)

-property-tax increase ($87-million)

The residential tax hike is in keeping with increases in recent years. Property taxes went up 4 per cent last year, and 3.75 per cent in 2008, the first year Toronto balanced its books at the start of the budget process since amalgamation.

Despite consistent – if modest – property tax increases since Mr. Miller’s election in 2003, expenditures have continued to outstrip revenue. Spending has increased at a rate of 5.9 per cent per year since 2002, according to the Toronto Board of Trade. Labour costs are largely to blame: They rose an average of 6.5 per cent per year in the same period and accounted for 47 per cent of last year’s $8.7-billion budget, the board says.

All this means the city’s structural deficit keeps growing. Reserves are bled nearly dry. The Toronto Transit Commission, police and fire continue to gobble up the lion’s share of property-tax revenue.

Although City Manager Joseph Pennachetti asked all city departments and arms-length agencies, boards and commissions to slash their budgets by 5 per cent this year, the police force asked for approximately $37-million more in 2010 than it did in 2009, an increase driven largely by an arbitrated salary settlement.

The TTC, the library and the board of health also requested and received budget increases.

Making matters worse, the recession drove up Toronto’s welfare caseload. For every 1,000 people added to the rolls, the city pays out $2.5-million. (The Progressive Conservative government of Mike Harris downloaded part of welfare costs to cities; the current Liberal government has agreed to take some of those costs back, but slowly in Toronto’s case.) Toronto’s average welfare caseload in 2009 was 88,506, up from 75,708 the year before. Fortunately, the city predicted welfare cases would soar and budgeted for 90,000 in 2009.

The city did not have to turn to more radical measures to balance the budget. The proposed budget does not recommend selling assets or stakes in assets such as Toronto Hydro or Enwave, the city’s deep-lake-water cooling utility. It helped that more than half of the city’s divisions met the target of a 5-per-cent budget decrease.

Still, the budget doesn’t begin to solve the city’s structural deficit.

In fact, the Toronto Board of Trade is predicting that, left unchecked, the city’s annual operating budget shortfall could grow to nearly $1.2-billion by 2019.

Mr. Miller said the province has “agreed to talks” on long-term annual funding for the city’s transit system operation, which will take up 14 per cent of the operating budget this year. But he wouldn’t put a figure on how much the province might commit to pay. The city’s hoping for a deal by December, 2010, with funds rolling out for the 2011 fiscal year.

Such a deal is vital, Mr. Miller said, if the city is to face down its structural deficit and looming shortfalls of more than $400-million.

“I think it’s a good thing the premier and I are on the same page on that,” he said.

City budget chief Shelley Carroll confirmed some of the $172-million in cuts will include layoffs and positions unfilled, although she wouldn’t say where or how many. A city press release noted staff reductions in bylaw enforcement, that hiring will be deferred when positions become vacant.

Mr. Miller said the increases, the second 4-per-cent property tax increases in a row, are “moderate” and necessary in the city’s efforts to balance the books coming off a recession year.

“This year’s budget is balanced. We’re talking about permanent strategies so this city can succeed permanently. We’ve taken very significant steps this year to ensure the city is sustainable in the future. But in the long run, the city needs two things,” he said: A permanent annual commitment from the province, and revenue that grows with the economy – ideally a sales tax.

The idea of a city sales tax has been floated before – Ms. Carroll herself proposed adopting revenue tied to economic growth last fall – but never pursued because of its political unpopularity.

“We’re starting off in a much, much better place in the planning for 2011. In the long run, however, for this city government’s finances to be stable we do need an agreement with the province.”

Meanwhile, Premier Dalton McGuinty suggested that Canada’s largest city should not look to the province for help with its budget shortfall. Ontario government officials are in talks with Toronto officials, but the province is facing a record deficit of $24.7-billion for this fiscal year, Mr. McGuinty told reporters on Tuesday.

The key issue for the city is the budget for the Toronto Transit Commission, he said.

“Ideally, we’d like to find a way to address that over the long term, but this is our toughest year as well, not just theirs,” he said.

The proposed budget goes to city council April 15 and 16. The public can make comments on the budget at two meetings at city hall March 1 and 2.

Service cuts in 2010 budget include:

– Reducing Sunday hours at 27 libraries for five Sundays in the fall.

– Eliminating in-person front-counter service at city hall and civic centres

– Reassigning work “that may result in delays in service times within some areas.”

– Reducing staff in bylaw enforcement

– Eliminating Saturday service at Toronto courts

– Closing city courts at 4:30 p.m. during the week, instead of 5 p.m.

Deferring facilities maintenance within parks

Reducing advertising and promotion costs of the city’s new LiveGreen program

Eliminating door-to-door pet-licensing program

Reducing enforcement of temporary sign bylaw

Posted via web from Toronto Real Estate News | Blog

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