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The City of Toronto has launched its 2024 budget process, with city staff recommending a 10.5% residential property tax hike, including the “city-building levy.”
That’s a tax hike of $374 for the average home, and if the city doesn’t get the shelter funding it’s counting on from Ottawa, the hike could be as high as 16.5% or $589 on a typical home. This is on top of a 7% increase last year.
This is the first budget under Mayor Olivia Chow, who may revise the figures before releasing her proposed budget on Feb. 1. Given that the city’s financial blueprint for 2024 will go to city council for final approval on Feb. 14, Councillor Jon Burnside described the looming property tax hike as a “Valentine’s Day massacre.”
But rather than raising taxes on homeowners, city council should look to cut spending.
— Start with construction spending: According to a report published by the Cardus think-tank, last year an estimated $1.65 billion in infrastructure construction in Toronto was subject to “closed tendering,” meaning only certain unionized companies could bid for that work. This uncompetitive process meant taxpayers overpaid for construction by an estimated $347 million.
— Another big-ticket budget item is transit, which brings in some revenue, but is heavily subsidized by taxpayers. One proven way to reduce the burden on taxpayers, while increasing service and increasing safety — now a major concern for riders — is privatization. This model has been proven successful in Hong Kong, London, Melbourne and other cities. Turning spaces over to private management to improve service and increase safety applies not only to transit but to parks, too, as shown most famously in New York.
— Next, the city should reduce recreation spending. Take golf, for example. There’s no good reason for taxpayers to subsidize golf, but they do it now because city-owned golf courses lose money. “Including overhead expenses,” a city report noted in 2017, “golf operations incur a net loss on an annual basis.” A consultant’s report done for the city in 2021 similarly found that from 2013-20, the city’s golf courses experienced net losses in five of those years, before capital expenditures of $6.4 million.
— City staff salaries, if not across the board, then likely almost everywhere in municipal operations, are also ripe for reductions. A study by the Canadian Federation of Independent Business (CFIB) estimated municipal government staff in Toronto were paid salaries 11.2% above private-sector market rates, and 25.9% higher after accounting for benefits such as pensions and working hours. The CFIB study was based on 2011 National Household Survey data, so is somewhat dated, but there’s no reason to think there has been much change in the intervening period. Indeed, a Fraser Institute study in 2023 found government (federal, provincial and municipal) workers in Ontario were compensated 10.9% better than comparable private-sector workers, alongside better pensions and job security.
Construction, transit, recreation and staffing costs are just some places where the City of Toronto can and should spend materially less, but they are not the only areas. Instead of imposing a significant property tax increase of 10.5% or more on its residents, city council should plan to reduce spending where there is excess.
— Matthew Lau is an adjunct scholar with the Fraser Institute.
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