City Manager Peter Wallace says that additional money from the provincial gas tax won’t be a “direct substitute” for the revenue the city could have generated by introducing tolls on the Don Valley Parkway and Gardiner Expressway.
Premier Kathleen Wynne announced last week that she would not allow the City of Toronto to introduce road tolls and would instead double the portion of the provincial gas tax given to municipalities.
At the time, Wynne argued that the city will get “exactly what it asked” for since the change would result in an estimated $170 million in additional annual revenue for Toronto as of 2021, which is the amount that city staff had said would have been generated by a $2 toll on the Gardiner and DVP.
Nonetheless, in a three-page letter sent to city councillors on Tuesday and obtained by CP24 Wallace identified several areas in which the additional gas tax revenue will fall short of what could have been accomplished with the introduction of road tolls.
Wallace said that the “amount of future gas tax revenues are not guaranteed and are subject to future provincial policy,” even if legislation was passed confirming the change.
He also said that the city will not have the means to raise additional revenue through higher tolls or improvements in tolling technology, severely limiting its financial flexibility going forward.
As well, Wallace estimated that the annual additional gas tax revenue would only be $158 million as of 2021.
“A future toll priced at the cost of public transit access could generate well over $250 million, again in 2016 dollars. This would have further expanded borrowing and investment options,” he wrote.
City could have borrowed against future toll revenue
While Wallace acknowledged that the increase in gas tax revenue will allow for “increased annual investment in transit and transportation priorities,” he said that there are “limitations” with the funding.
Notably, he said that the city would have been able to borrow against future toll revenue for capital projects but won’t be able to do that with gas tax revenue, which fluctuates and is outside of the control of council.
As a result, Wallace urged council to scrap plans for an additional $5.6 billion in incremental capital investment that were included in the budget on the expectation that Wynne would allow the city to go forward with the tolls.
“The transfers do not meet the standards associated for allocation against recoverable debt and cannot provide the debt finance leverage envisaged by Budget Committee. Progress against the capital overhang will be similarly limited,” he said.
Mayor Tory called Wynne’s refusal to allow Toronto to introduce road tolls “shortsighted” and “not right” while speaking with reporters last week.
He also said that the move undermines Toronto’s autonomy.
In his letter Wallace said that the provincial City of Toronto Act affords the city the ability to toll roads and Wynne’s refusal to sign off on the measure “creates greater challenges in advising City Council with respect to its decision making authority.”
“The City of Toronto Act provisions with respect to tolling have been in the legislation since its inception in 2006. The requirement for a provincial regulation would provide appropriate oversight to ensure that Toronto decision making was not at the expense of broader provincial economic interests or discriminate against non-Toronto residents. But the core access to road pricing has long been part of and broadly understood as an important element of the unique toolkit afforded to the city,” he wrote. “The recent development creates greater challenges in advising city council with respect to its decision making authority. As well, Toronto's dependence on provincial revenue authority and capacity is further entrenched.”
