A TAXING PROBLEM
How can Toronto accomplish its goals when it has limited ability to raise money through taxes? Highway tolls, shopping mall parking meters, taxes on deliveries and a dedicated slice of the provincial income tax, to name a few, economists say
“I’m coining it ‘the Amazon Tax,’ ... a surcharge on deliveries that enter certain parts of the city at certain parts of the day.” CHERISE BURDA
HEAD OF RYERSON UNIVERSITY’S CITY BUILDING INSTITUTE
In explaining his revenue-raising ideas for Toronto, York University economist Amin Mawani quotes Jean-Bapiste Colbert, the tax minister to 17th-century French King Louis XIV.
“The art of taxation consists in so plucking the goose as to obtain the largest possible amount of feathers with the smallest possible amount of hissing,” the imperious Colbert was said to have quipped.
Putting aside the disturbing thought of plucking a live goose, what this brings to Mawani’s mind is the idea that levying small, relatively painless taxes and fees — but lots of them — may be the best way for a city to raise revenues.
“Basically you want lots of small taxes, none of them that do too much harm,” he says.
But large or small, new revenue streams will almost certainly be needed as the city concludes the first, fraught year of the decade and heads fitfully off toward Toronto 2030.
And as it happens, there’s also no lack of ideas among economists and planners about what these new streams — large or small — could be.
Highway tolls, shopping mall parking meters, taxes on deliveries, a dedicated slice of the provincial income tax.
All of these — and many more — could help augment or replace the traditional revenue sources that seem to have kept the city on the brink of fiscal crisis for decades.
“Revenue has been a long-standing challenge for the City of Toronto,” says Matti Siemiatycki, interim director of the University of Toronto’s School of Cities.
“And there’s always a question in this city about whether they have the right tools (and) whether they’re using them to the full extent,” Siemiatycki says.
The traditional tools the city has relied on are property taxes — the largest source — development fees, and charges on such things as parking, garbage and water.
And whether the city is charging too much or too little for these has been the source of fierce debate for years — especially in this time of pandemic, Siemiatycki says.
But another constant — though capricious — source of money flowing into the city has been provincial and federal transfers.
These transfers — particularly from Queen’s Park — have helped build and support transit, urban parks and other major city infrastructure and cultural institutions.
But crippling COVID-19 spending by both senior levels of government will almost surely push these transfers down significantly in the coming years, Siemiatycki says.
“The risk at this moment is that during the pandemic … the provincial and federal governments have stepped into the breach and are providing that funding to the municipalities,” he says.
“But there is going to come a time when those levels of government start to pull back and retrench and reach their budget limit.”
Cherise Burda, head of Ryerson University’s City Building Institute, contends senior-level transfers to Toronto have always been ad hoc anyway and too tied up in the shifting politics of Queen’s Park or Ottawa.
And they’ve often been used to fund projects that — though politically beneficial to them — are far from optimal for Toronto, Burda says.
She points to multibillion-dollar upgrades to GO Transit and to the Scarborough subway line that serve low-ridership areas but earn political points for their provincial funders.
“Most transit trips are local, they’re not regional,” Burda points out.
“And the province looking regionally has really spread the peanut butter to favour projects outside of crowded downtown or lots of Toronto where … there is a high transit ridership,” she says.
The long-standing city need for fast and cheap projects — like bus rapid transit to serve low-income neighbourhoods on the city’s outskirts for example — has been revealed in full by the COVID-19 crisis, Burda says.
“There are two workforces now; there are workers who can work from home and there are essential workers who don’t have that option,” she says.
“And a lot of these workers who are getting on these very crowded buses where they can’t distance properly are from neighbourhoods that have been underinvested in transit for years.”
Mawani suggests an alternative to the fickle and often inefficient transfer schemes that produce such inequities would be for the province or Ottawa to grant the city a small but permanent share of their lucrative income taxes.
“This is particularly important if the city is getting involved in (social) service provisions like child care, COVID-19 testing … community development or the settling of immigrants,” he says.
“This is not like your library things, sewage, the basic essentials of the city, this is now going into some things that the province would do.”
And with the city under pressure to do more of these things, they might well deserve a slice of the income tax pie, says Mawani, who suggests a two per cent wedge might be appropriate.
“I’m not arguing for an additional income tax, but rather I’m arguing for the feds and the provinces giving up some of their income-tax room and giving it to the municipalities,” he says.
Mawani says cities could use as much of this bequeathed tax room as they choose, but however much they do use, he says, spending it would be at the municipality’s total discretion.
This idea would be part of the diversified portfolio of taxes and charges that Mawani envisions — one that could raise significant funds while keeping the hissing ire of Toronto taxpayers to a minimum.
Burda envisions a host of new revenue streams herself.
And for her, many would adhere to the phrase “pay what you burn, not what you earn.”
“If we really want to move forward and fight climate change we need to think
about the types of policies, the type of taxation that is going to support a sustainable future,” Burda says.
“How do we charge for pollution and invest in sustainable businesses and transit and cycling lanes and things like that,” she says.
One of the most promising ways would be to charge road tolls on the Don Valley Parkway and Gardiner Expressway.
“As we grow outward, we need to think about putting road pricing in place to pay for services, to pay for roads, to pay for offset pollution and to pay for car dependency,” she says.
Siemiatycki agrees that road tolls on the Gardiner and DVP should be considered, as they could raise as much as $1 billion a year for the city.
But he stresses those revenues should be allocated exclusively to upkeep on the two roads and improvements to transit.
Burda says parking charges at shopping malls and big-box stores would also help cut down on pollution, as well as lay down a more equitable playing field for mainstreet businesses.
“It’s absolutely free when you’re at a shopping mall or big-box store,” she says, adding that local stores look out onto parking meters across the city.
There’s also the idea of a delivery surcharge, Burda says.
“I’m coining it ‘the Amazon Tax,’ which would be a surcharge on deliveries that enter certain parts of the city at certain parts of the day,” she says.
“And the goal of that is to offset the ecological and other impacts of goods delivery and use that revenue for other things.”
Burda says there were more than one million deliveries made across the GTA each day prior to the pandemic.
And, she says, Statistics Canada data has shown that delivery across the country in pandemic 2020 has risen by more than 110 per cent. “So we know deliveries are going up (in Toronto) and we know that companies like Amazon are the winners,” Burda says.
“And yet when you think about municipalities, they have to bear the costs of all these deliveries (in) road maintenance, pollution, congestion (and) think about all the increased cardboard in the wastestream,” she says.
Burda says the city could also revive the vehicle registration tax that Rob Ford scuttled after becoming mayor in 2014.
“That’s not a lot of revenue, it’s small potatoes compared to things like a property tax, but it’s not nothing,” she says.
In surely going against the hissing goose theory, Mawani also suggests the city could deploy some higher technology sensors that could detect speeding and parking infractions more readily.
“Investing in some kind of things to automatically ticket you if you have parking or speeding infractions, that could increase some revenue,” says Mawani, an associate professor at York’s Schulich School of Business.
David Amborski, a professor at Ryerson’s School of Urban and Regional Planning, says the city could make better use of a concept known as “land value capture” — which provides a host of tools to earn revenues off of the increased value of land due to various government actions.
“Land-value capture tools are where you try to capture increases in property values for the public sector rather than the private sector,” Amborski explains.
He says that property values increase in many instances because of the instalment of public infrastructure — such as transit stations — or because of zoning permissions that allow development in an area.
And some of that public-generated val
ue increase, Amborski says, should go to the city for use on further transit improvements or other public goods.
“There’s many tools under this rubric,” he says.
One of these is known as public land leasing, Amborski says.
“If you own public land, rather than selling it off at the current price to a developer, you can lease it and increase the lease rates as the value of the land goes up to capture that value,” he says.
Another example that’s already been used in Toronto can be found in the trade-offs made in the development of the once dreary and dangerous Regent Park area of the city, Amborski says.
“They (the city) used the increase in the value of the land where Regent Park was (and) gave the developer some of the land for market condos,” he says.
“In exchange, the developer rebuilt all the social housing and provided community benefits.”
A further Toronto example can be found along the city’s waterfront on Queens Quay East, where parks and walkways were installed before any of the public lands were sold, making them more expensive to developers.
Amborski says the city should explore such land-value capture options at every turn as the city develops into the future.
These sorts of arrangements aside, it’s difficult to speak about higher taxes or new revenue streams in the midst of a relentless pandemic, Siemiatycki says.
“There are these charges that other cities have used that could raise significant amounts of money, and that even in this region have been recommended by commissions and panels,” Siemiatycki says.
“But all of those are very difficult at a moment right now where retailers are really struggling,” he says.
In the end, Burda says, COVID-19 may have made people more amenable to new revenue ideas. That, however, is because the disease has made it plain that the infrastructure and lifestyle that those revenues pay for must also change.
“It’s not just revenue,” she says. “It’s also how do you create carrots and sticks to help fight climate change and to reduce car dependency and create the types of neighbourhoods with vibrant mainstreet businesses that we need and we want.”
“As we grow outward, we need to think about putting road pricing in place.”
CHERISE BURDA HEAD OF RYERSON UNIVERSITY’S CITY BUILDING INSTITUTE