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Property Tax Time Again
14/12/2004

Municipal budget season is back and the news is that Toronto homeowners are facing another 3% tax increase. That this isn't as bad as it might sound is old news around this blog.

As usual, the City is going to be going to Queen's Park to say that we don't have enough money and we need a bail-out from the province. The response that gets pushed back from the other side is that Toronto really needs to get its own financial house in order first. James Rusk wrote a column in the Globe and Mail today that serves as a good example of this phenomenon:

What worries many at Queen's Park, they say, is that no matter how many bowls of financial porridge the province ladles out for Toronto, the Oliver Twists at city hall will still come back for more, arguing that its size and complexity make it a special case.

"The history with Toronto has proven that. . . . People have a sense it's never going to be enough," one Queen's Park official said. Toronto is the only municipality in Ontario that comes to the province every year for help to balance its budget, the official added.

On, the other hand, on Saturday, John Lorinc wrote an interesting article that brings some perspective to the Toronto budget situation. Generally, he seems to argue that Toronto -- and other municipalites -- while obviously imperfectly run, have relatively little room for cutting. And, specifically, he mentions:

Many other large Canadian cities, facing the kinds of pressures and demand for services that typify dense metropolitan areas, find themselves in similar financial straitjackets, although Toronto is unique in the amount of social-program spending it must incur.

The social spending issue has been the crippling factor in Toronto's budget since Mike Harris downloaded these costs onto municipalities around the time of amalgamation. Although it seems to be unfair for the province to require a municipality to pay for things such as social assistance, disability support and homeless shelters out of property taxes -- instead of provincially-pooled and progressive income tax -- Liberal Dalton McGuinty hasn't done much to acknowledge this problem.

What's more, the City of Toronto alleges the province isn't even paying its minimal share of the bill anyway (link PDF). For example:

For the Hostels per diem, the province has capped the amount it will cost-share for shelter bed nights at $39.15 per night. This means the maximum amount of subsidy it provides per shelter bed night is $31.32, based on the 80/20 cost-sharing. The actual cost of the average shelter bed night is $57.32. Based on this, the provincial subsidy, at 80%, should be $45.86 per bed night. This has resulted in a projected base funding shortfall of $22 million in 2004.

In other words, the province only pays about 55% of a cost it has promised to pay 80% of.

Anyway, the City is always going to be in a tough spot so long as these social costs are dumped onto municipalities. It concentrates costs on Toronto and pushes property tax rates up. Meanwhile, the City is under pressure to compete on tax rates with bordering cities that don't have quite the same social needs.

It's all compounded by Current Value Assessment and the provincial education property tax -- both programs implemented by a former premier, who I'll try to avoid mentioning again in the hope that maybe this time I won't be flamed in comments as someone who "hates conservatives". The net result of these two programs is that there is a financial penalty to be paid for living or owning a business in downtown Toronto.


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