Debate on new taxes, fees could be on horizon as Toronto's fiscal struggles loom large

Facing a $993-million budget shortfall this year, city council could be poised to once again study new taxes on parking, congestion or retail sales to shore up Toronto's fiscal health.

Councillors on the city's budget committee were briefed this week by staff on eight measures that could raise hundreds of millions of dollars. And with the city facing perennial budget shortfalls, which have only grown worse since the COVID-19 pandemic, Coun. Chris Moise urged his fellow councillors to ask staff to study some of the measures in depth.

Waiting for provincial and federal bailouts to balance the budget every year isn't sustainable, he said.

"If we continue down this path, the same things will continue," he said.

"What's the definition of insanity: Doing the same thing over and over again and expecting different results. And so, in my mind, what we continue to do is somewhat insane."

Moise said he will ask his fellow councillors to endorse a request to city staff for further study of a parking lot levy. Consultants have estimated that fee could raise hundreds of millions of dollars for the city each year. His request is expected to come before council at its Feb. 7 meeting.

Vehicle registration tax could resurface

Earlier this week, staff delivered briefing notes on taxes and fees in response to councillor requests, culling much of the information from past reports to council. 

Those notes say an alcohol tax could raise between $21 million and $151 million a year. An entertainment and amusement tax on entry fees to places like amusement parks and movie theatres could raise $4 million to $35 million annually.

Resurrecting the vehicle registration tax on licence plate renewals, which was scrapped by council under former mayor Rob Ford, would raise between $18 million and $94 million a year. Congestion pricing set at $5 to $20 a day could generate between $89 million and $377 million annually. 

A municipal sales tax set at one per cent on some goods and services could raise $360 million a year. 

A personal municipal income tax would raise approximately $580 million a year if it was set at one per cent on the employment income of city residents. It could raise $926 million a year by putting a levy on taxable income. 

And a commercial parking levy on city-wide lots is projected to raise between $171 million and $535 million a year.

Staff caution numbers need updating

City staff cautioned that much of the information used to supply those figures dates back to a 2016 report from consulting firm KPMG. Many of those same taxes and fees require millions in administrative costs and special permission from the province or federal government to levy. 

"I think we do mention it in the note that this data is outdated and that we do need to work with an external party that has expertise in these areas to help us create better forecasts," city treasurer Heather Taylor told the committee this week.

Coun. Gary Crawford, Mayor John Tory's budget chief, said many of the fees could take from one to two years to study and implement. 

"I just want to be clear that this is something years down the road, even if we decide to go forward as quickly as possible," he said.

Coun.  Michael Thompson stressed that any discussion of new taxes or fees should take place independent of the budget process so that council and staff can dig in on the numbers.

He said any additional fees imposed on residents — beyond the proposed 5.5 per cent property tax increase and 1.5 per cent hike in the city building levy currently in the budget — will be hard to swallow.

"A lot of my residents, they work two or three jobs just to actually make ends meet," he said. "So every increase that we put in place with respect to the taxes, it has an impact."

Transit advocates call for parking levy

Earlier this month, transit advocacy group TTCRiders called on council to study and implement the parking levy, saying the city has left hundreds of millions of dollars a year on the table since it first studied the fee in 2016. 

The group argues such a levy could help fund transit and stave off future service cuts. 

Moise supported that call and said the city can't afford to dismiss options right now.

"We have to be creative in how we actually generate revenue," he said at the time. "And I believe the commercial tax levy for parking is one way to do that."

The president and CEO of the Toronto Region Board of Trade said that tax would have a negative impact on businesses. It would also hurt low-income workers who can't take transit in some parts of the city, Jan De Silva said.

"It's going to keep more workers out of the downtown at a time when our small businesses need to be standing up better on their feet," she said. 

"There are major parts of the city that are underserved [by transit]," De Silva said.

"Look at Etobicoke, look at Scarborough. These are folks that are either having to take four or five buses to get to where jobs are or need a car. So taxing parking is just simply the wrong solution."

De Silva said the board wants to help the city press both the federal and provincial governments for sustainable support. Uploading highways, public housing stock and transit systems to those governments is key, she said.

Tory's office said in a statement on Friday that he is open to further taxes or fees in the future, but not right now. 

"This is a challenging time for affordability for Toronto residents, which is why beyond the hotel tax, vacant home tax, and modest increases to property taxes and the city building levy, recognizing those very real challenges, Mayor Tory and Councillor Crawford are not looking at introducing any further new taxes this year," spokesperson Taylor Deasley said.