Toronto city council to deliberate on proposed sales tax and a commercial parking levy in September session

Mayor Olivia Chow’s executive committee approved a number of recommendations to help manage the city’s financial crisis. These strategies will now be considered by the rest of council members at a city council meeting in September.

By AMARACHI AMADIKE, Local Journalism Initiative Reporter

Last week, Mayor Olivia Chow’s executive committee approved city staff’s long-term financial plan which aims to address Toronto’s $46.5 billion budget shortfall over the next 10 years.

Staff recommendations, which came at the request of city council last February, urged council to adopt a number of measures that will generate revenue for Toronto as the city tries to escape its current financial crisis. The approved recommendations will now be considered by the rest of council members at September’s meeting in city hall.

“Toronto is the economic engine of this province and this country,” said city manager Paul Johnson. “And as such, we believe that the time is now to have that serious conversation about how we balance the reality of what Toronto brings – in terms of the prosperity not only of the city and province, but of this country – and how we balance that against the needs we have in order to maintain that strong economic position in this country.”

With Toronto being the largest contributor to Canada’s economy–comprising 21 per cent of federal GDP and 51 per cent of provincial GDP, city staff are sounding the alarm that it is unfair that it only receives 0.3 per cent of the federal annual budget and 1.3 per cent of the province’s.

“That means that as Toronto goes, the rest of this province and country goes,” said Johnson. “And that’s not an ego statement. That’s the reality of who we are, where we are positioned and what we bring to the table.”

City staff’s recommendations relied heavily on property-based tools such as a municipal sales tax; a two per cent increase in the vacant home tax; an increase in the transfer tax on luxury homes over $3 million beginning on January 1, 2024; and a parking levy, which gained much support from community members who spoke at the meeting.

Speaking in favour of increased taxes were representatives for various organizations such as the Regent Park Neighbourhood Association, TTC Riders, and The David Suzuki Foundation.

“This could make a serious and long-lasting solution to the city’s operating budget pressures,” said Gideon Forman, a member of the David Suzuki Foundation.

Forman says that implementing a parking levy will be an essential asset to decreasing Toronto’s budget deficit, citing similar strategies witnessed in Montreal.

However, Real Property Association of Canada (REALPAC) CEO Michael Brooks believes that this strategy will affect commercial, industrial and retail properties whose tenants – not the landlords – will bear the brunt of the taxation.

“The parking levy will hit the small and medium size businesses the hardest,” said Brooks. “They rely on cars to bring customers to them and while those on major public transit routes can take transit, there’s a million cars in this city.”

Brooks also highlighted a research report by Altus Group Economic Consultant which worries that the parking levy would come with a high cost and take over a year to implement. The report also found that a dollar-a-spot daily levy would result in just $72 million annual revenue.

“We think it’s much less than the originally estimated $355 million,” said Brooks as he questioned how much would really be generated after exemptions for small businesses and sub-markets.

In agreement with Brooks was Etobicoke Centre Councillor Stephen Holyday who is wary that landlords would find a way to pass on their increased costs to small businesses “who will ultimately pass it on to the consumer,” further exacerbating the inflation of Toronto’s economy.

This, according to Brooks, is because “all asset classes – office, retail, industrial – are structured under net leases” which allows for the pass through of property taxes which is likely to include a parking levy that “might be applied on a shared parking lot amongst retail or industrial tenants.”

The parking levy and other property tax-based measures are controlled by the city. However, other recommendations “go beyond what the City of Toronto can do on its own,” according to city staff.

Although skeptical about the parking levy, Brooks pledged to support city council on advocacy with senior levels of government to avoid utilizing this revenue tool in exchange for ones that are currently not legislatively available to city council.

These include a one-per cent municipal sales tax which, according to Don Valley North Councillor Shelley Carroll, “taxes those who can spend and doesn’t tax those who can’t.”

Holyday expressed skepticism about the report as he believes it is too reliant on “ideas on how to squeeze more money out of taxpayers.”

Earlier this week, Beaches-East York Councillor Brad Bradford shared similar worries in a statement to Beach Metro Community News.

“City Hall must also get its own house in order,” said Bradford. “The public service has grown 25% since 2017, alone, with little in the way of accountability. The city’s operating budget has rocketed from $11 billion in 2018 to $16 billion in 2023. In addition to looking for new sources of revenue, Toronto needs to look for ways to control costs.”

Some Torontonians agree with this sentiment, one speaker telling members of the executive committee at Thursday’s meeting that she believes even if all the proposed taxes are applied, it would still not be enough for councillors because they are “spending like drunken sailors.”

So far, Ontario’s government has not shown signs of support for a municipal sales tax.

“As you know, our government is not in favour of tax increases,” said Ontario Finance Minister Peter Bethlenfalvy at an Association of Municipalities of Ontario conference in London on Tuesday. “There may be a time. Not now. A lot of people are hurting in this province and we have to work on the various things the citizens want.”

A municipal sales tax is estimated to generate about $800 million for the city annually, but council cannot proceed with this approach without permission from the provincial government which would first need to amend the City of Toronto Act.

Although the implementation of all the proposed taxes will only get Toronto about 30 per cent closer to its goal of fixing the budget deficit, Councillors appeared in agreement that this move depicts to other levels of governments that city hall has exhausted all avenues at its disposal to fix Toronto’s financial crisis.

— Amarachi Amadike is a Local Journalism Initiative Reporter for Beach Metro Community News. His reporting is funded by the Government of Canada through its Local Journalism Initiative.

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