The city’s executive committee has approved a 1.3 per cent residential property tax hike despite a warning from top city officials that the proposed operating and capital budgets contain “fiscal risks” and rely too heavily on the use of reserve funds.
Mayor John Tory had pushed to cap any tax hike to an inflationary increase of around 1.3 per cent but in recent weeks a number of city councillors had raised concerns that doing so would compromise the city’s ability to pay for needed infrastructure and social programs.
In a staff report that was presented to executive committee today City Manager Peter Wallace and Chief Financial Officer Rob Rossini echoed those calls, noting that there are “fiscal risks that the city needs to be aware of.”
Specifically, Wallace and Rossini point out that the budget is balanced based “on the assumption that all-time-high Municipal Land Transfer Tax Revenues realized in 2015 will be sustainable” and that the city will bring in $100.5 million more from the tax than its budget called for in 2015.
Wallace and Rossini also note that the 2016 budget utilizes “various one-time strategies such as reserve contributions and dividend payments” that will “drive additional pressures” on the 2017 budget.
“In 2017 and beyond, the city needs to set priorities for capital work and assess revenue options in order to address unmet capital needs,” the report said. “The revenue options may include development financing, tax incremental financing, higher debt, capital levies, asset sales, road tolls and other new revenues.”
In addition to the 1.3 per cent property tax hike, homeowners will also face a 0.6 per cent levee for the Scarborough subway, meaning the total increase will be 1.9 per cent.
Discussing the increase with CP24, Coun. Janet Davis said it simply “does not cover basic operating costs of the city” and kicks Toronto’s fiscal problems down the road.
“This budget draws significantly on reserves or one-time savings accounts and that’s not a way to balance a budget. It means we are going to have to fill that hole again next year,” she said. “If we really want to invest in programs and services like transit, housing and child care — the things that our communities need — we need to get real. These need to be financed on an ongoing basis and not with a patchwork of one time solutions.”
Some previously announced items won’t be funded
In order to balance the budget and keep the tax increase to 1.3 per cent, members of the city’s budget committee decided to only include about 40 per cent of $67 million in unfunded but previously announced initiatives in the budget that went to executive committee on Tuesday.
While that number is actually higher than the percentage of unfunded initiatives that were approved by budget committee in 2014 and 2015, Coun. Gord Perks says it still sets a bad precedent.
“It is not a great thing that we have some of the leadership of council walking around making promises and then refusing to fund them later on,” he told CP24 at city hall on Tuesday morning.
Perks, who doesn’t sit on the executive committee or the budget committee, added that he has serious reservations about supporting a budget that city staff have raised concerns about.
“It is not sustainable. Our city manager has gone to the extraordinary step of criticizing the budget committee proposals. That has never happened before,” he said.
A 1.9 per cent tax increase (including the Scarborough subway levee) would cost the owner of a property valued at $549,586 an additional $51.24 a year.
The proposed budgets will go to city council as a whole for final approval on Feb. 17 and 18.
