BY SHELLEY CARROLL
It’s that time of year again — the City's 2020 Budget was launched last Friday. That means, for the first two months of the year, I become a bit of a broken record. From launch day to Council’s final vote, I spend a lot of time scrutinizing and speaking about our annual budget exercise. It’s a lot of your money, and my chief responsibility is to track where your dollars go. There is a long way to go before the final Budget is approved on February 19, with lots of opportunity for tactical amendments and fiery debate.
I'm also hosting a Budget Town Hall in the ward next Wednesday (January 22) at Fairview Library at 6:30PM. There, City staff and myself will present you the Budget and then we'll have a Q&A session. I'll give you a primer on the Budget now, and in the coming weeks I'll focus on some key areas that are under pressure or will see change. Operating and Capital Budgets The Operating Budget is what keeps your services humming. The draft Operating Budget for 2020 totals $13.53 billion — of that, $1.94 billion has already been approved for garbage, water and the Toronto Parking Authority. These services are funded by fees that have to be set at the beginning of the year and do not use property taxes or city debt. That leaves $11.59 billion to deal with all other services that are property tax funded.
The other side of the City Budget is the Capital Plan — the money that goes to constructing, repairing, renewing and purchasing things. In other words, it's the things we build. The draft Capital Budget for 2020 proposes a ten-year plan worth $43.4 billion. Tax increases You're probably thinking, “Cut to the chase. Where's the increase?” I’ll expand on what you may have already heard in the news. According to this proposed budget, the average residential household will pay $128 more in property taxes in 2020. That comes from two places: first, a 1.5 per cent increase to the City Building Fund. That money will go straight to urgently-needed transit and housing projects.
Second, there’s an inflationary tax increase of 2 per cent. That’ll be used to fund ongoing operating programs and services. As always, the City touts the 2 per cent budgetary increase as being at the rate of inflation. But that refers only to the increase for single-family dwellings. Businesses, condos and apartments also pay property tax, but legislation requires their rates to be increased at a slower pace until 2023. That's because their property tax rates are actually higher than single-family homes. This will balance out eventually, but in the meantime the overall tax increase is not what you think. Not what you think When you look at the full range of increases in the slide below, you’ll see the increase in the 2020 budget is just 1.43 per cent. Furthermore, due to legislation, the additional City Building Levy can’t be applied to businesses until 2023. That means overall revenue is growing at a rate significantly below inflation.
Each year when the budget is launched, the news media focuses entirely on the single-family residential property tax rate. I can understand the frustration some feel when wondering why Toronto can't just manage to keep up with inflation. The range of different increases you see above is your answer. And if you look at the graph below, you'll see our spending has stayed largely the same for years.
Now, hearing that we are not keeping pace with inflation is small comfort to those actually paying the bill. In my own case, I’ve only owned my current home since 2001 but it has seen a couple of huge assessment jumps and the bill reflects that. Assessment plays a part whether the Mayor promises to keep increases low or not. That's why I've been saying our city needs an entirely new funding formula that reduces the reliance on property taxes. Municipal sales tax Every year, our Budget Committee and City staff comb through the books looking for savings. But after many years of this, it's hard to find savings that won’t chip away at your quality of service.
The 2020 Budget process found $27 million in savings. But investments are needed to serve a city growing and aging at the same time. New property taxes do not fill that gap with new money. The new residents who become ratepayers demand the same service level as you — so, new firehalls, paramedic stations, libraries and community centres are not only built but also require more staff. The way other large cities around the world afford big-ticket items such as transit systems and projects such as Raildeck Park and the Gardiner East Hybrid is by shifting away from property tax as the principle source of revenue. It's perfect timing that next Tuesday I'll be appearing in an episode of Political Blind Date on TVO. I'll be alongside my colleague, Budget Chief Gary Crawford, as I explain how a municipal sales tax allows cities such as New York and Chicago reduce their reliance on property tax.
I promise it's not as dry as it may sound — with the help of a few special guests and an exciting location, it's going to be an informative yet colourful episode. You can tune in next Tuesday at 9PM on the TVO channel or watch it online at TVO.org. I hope you'll give it a watch — it will provide some useful background for our town hall next week and our budget discussions going forward.
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