Toronto city council to consider municipal sales tax, parking levy at September meeting

Mayor Olivia Chow's new executive committee has approved a plan to deal with Toronto's grim fiscal situation after city staff recommended a slew of new taxes and fees to head off a financial crisis.

The approval means a city staff report and its recommendations will be considered by council at its September meeting.

The report, passed unanimously by the executive committee on Thursday, paints a dire picture of Toronto's future without new revenue tools and more help from the provincial and federal governments. The city faces an "unprecedented financial crisis" that, if left unaddressed, threatens its fiscal foundations, the report says.

"I think what is in front of the executive committee today is a pulling together of all those options and saying we have to do something," Chow told the meeting.

Chow said potential new taxes are not intended to affect Toronto residents who are struggling financially.

"Some of the options in front of us proposed by city staff are targeting people that have a lot more money," the mayor said.

Land transfer tax, vacant home tax also on the table

According to the report, the city could increase the land transfer tax and vacant home tax as well as implement a new parking levy and municipal sales tax to raise much-needed funds.

The report details a combined $46.5 billion in operating and capital pressures over the next decade. That includes an immediate $1.5-billion operating shortfall the city will have to contend with when it opens discussions on its 2024 budget.

Toronto would need permission from the provincial government to implement a municipal sales tax, and so far, the Ontario government has not said whether or not it would approve the measure.

Budget committee vice-chair Gord Perks said at the meeting that the city needs to invest in services.

"An awful lot of what makes Toronto affordable is the services that we provide." Perks said.

Councillor Stephen Holyday, for his part, said the city needs to get its own house in order before turning to taxpayers.

"My overall criticism of the report is that it's heavy on ideas on how to squeeze more money out of taxpayers."

No word from province or feds on proposals: Chow

Earlier this week, Chow said she hadn't heard from either the province or the federal government about any of the measures proposed in the city report, including the sales tax. But the city is open to measures other than the sales tax, so long as they "grow with the economy," she said.

"What is encouraging, though, is no one has said 'No'," she said on Monday.

"It's up to the provincial and the federal government to say, 'Yeah, we think we'll pick that,'" she said. "We don't want to be prescriptive."

Toronto faces $1.5 billion in budget pressures this year but the city, and all municipalities in Ontario, can't run deficits by law. 

Included in the plan is a staff recommendation to ask the Ontario government for permission to levy a one-per cent sales tax charged in Toronto in addition to the HST.

City staff estimate a municipal sales tax would generate between $800 million and $1 billion annually, but would require the province to amend the City of Toronto Act.

Ontario finance minister hasn't rejected request

For its part, since the Toronto staff report was released, the province has seemed cool to the idea of a municipal sales tax, but has not told the city it wouldn't back it. 

Earlier this week, Finance Minister Peter Bethlenfalvy seemed to pour cold water on the idea, but did not directly reject the request.

"As you know, our government is not in favour of tax increases. There may be a time. Not now," he said. "A lot of people are hurting in this province and we have to work on the various things the citizens want."

Asked last week if the province would allow the city to levy a sales tax, a spokesperson for the premier's office did not answer directly.

"Our government is focused on keeping costs down for people, especially at a time when the cost of living is going up," Caitlin Clark said.

Time to reconsider who delivers services: expert

Enid Slack, the director of the Institute on Municipal Finance and Governance at the School of Cities at the University of Toronto, said the city's books are in bad shape.

Increasingly, cities across the country have been asked to provide services normally provided by upper levels of government like immigration settlement, social services and shelter services. But funding to provide those supports has not kept pace, she said.

"I think it is time to think about who does what and how to pay for it," she said.

Slack said instead of the annual requests from the city to upper levels of government, it might be time for the province and federal government to grant Toronto a revenue source like a municipal sales tax or a share of personal income taxes.

"It's not in the interest of the federal government for Toronto to fail," she said. It is not in the interest of the provincial government for Toronto to fail. So, I think they are going to have to come to the table."