Can Toronto meet growing demand for services with existing resources?

Should Toronto implement more revenue tools, including a sales tax, to help meet the growing demand for services and to address the problems of its citizens who are not benefiting from the city’s success?

The question was the focus of a session sponsored by the Institute on Municipal Finance & Governance (IMFG) at the George Ignatieff Theatre on Oct. 14.

Alumnus Peter Wallace, Toronto’s new city manager, spoke to an audience of what President Meric Gertler called “an A-list gathering of city builders” and was interviewed by Gertler afterwards. (See a photo gallery from the event.)

Enid Slack, director of the institute at the Munk School of Global Affairs, opened the session by noting that while Toronto has revenue tools such as property taxes, user fees, the land transfer tax and a billboard tax, “as we look around the world we see that other major cities have access to a broader mix of taxes, and the question we always ask is here is can Toronto remain fiscally healthy without the ability to levy other taxes?”

Wallace, a former senior civil servant in the Ontario government and city manager since last July, then gave an outline of the city’s fiscal situation and talked about the “standard dilemma” government officials face: “Give us (citizens) more for less.”

People want more transit, better environmental protection and more public safety, but are really uncomfortable paying more taxes to get them, he said.

Wallace, who holds both a BA in political economy and an MA in public administration from U of T, then sat down with Gertler in a question and answer session. 

Gertler said that “other cities around the world do indeed levy a pretty broad range of taxes….I think folks in this room would argue that there is capacity for the city to do more in this regard.”

The president asked: “Does Toronto need to consider levying other kinds of taxes, and if so, what approach should one use” to make that happen?

Wallace said from his perspective “it doesn’t start with revenue tools” but rather a commitment from local politicians on what core investments they want to make. “You have to make wise choices otherwise it is just considered a tax grab.”

He noted that Toronto “does not yet have access to progressive revenues…we have a property tax that in its structure has the potential to be regressive.”

Wallace also took questions from the audience and one came from alumna Anne Golden, the former head of the Conference Board of Canada and ex-president of the United Way of Greater Toronto.

A study conducted by the conference board about the “fiscal gap” in the city concluded that “we needed access to a growth tax,” Golden said. She added that from her perspective, after working for the United Way for 20 years, it is clear that many Torontonians aren’t benefiting from the growth in the city, especially those in public housing.  

“If you put those two perspectives together, it does seem to me you need to look a revenue changes to keep the city sustainable.”  

Her personal favourite, she said, is a “small sales tax,” not large enough to dissuade people from buying but large enough to raise meaningful revenue. 

Wallace said there needs to be a “reality-based conversation” about such revenue tools, but noted that the land transfer tax has brought in $500 million to the city, “radically over-performing expectations.”  

Gertler said some American cities are holding referenda to ask citizens whether they would support new tax increases for specific spending priorities, “as a way of building confidence among the electorate that indeed money is being used for a specific purpose, (so that it is) less an act of faith on behalf of the voter and more a social contract to deliver better transit, or for example, better library services.”

The president asked Wallace: “Can you ever imagine these kinds of ballot initiatives coming to Toronto?”

Wallace said “that is not something that comes naturally to me” and suggested there are enough existing mechanisms to deal with allocating money for city projects. 

In terms of city borrowing money to fund major projects, Gertler said “many people have suggested that this is a good time to take on debt given the state of interest rates…is it not time to reconsider the city’s debt strategy?”

Wallace said increasing debt “won’t buy you as much as you think it will, even at low interest rates.” 

The president summarized the debate by saying “many of the problems that we have stem from the success of the city…we are fortunate to have considerable growth but in the future it can’t be taken for granted, and even with growth we still face pressing needs in terms of services and infrastructure.”

Gertler said it is critical that the city address these issues “to ensure that we don’t kill the goose that is laying the golden eggs.”

One of the president’s main priorities is to work more closely with its partners in the Toronto region, to the mutual benefit of both parties.

Read more about Cities and the 3 Priorities

“A goal is to make the imaginary boundary around the University more porous, easier to transcend, as a way of fostering collaboration and partnership,” he told the audience.  

In that vein, Gertler asked “how do we start a larger conversation about what the city needs to do,” with other organizations “such as the one in which we sit, playing a part to convene that conversation?”

Wallace said he agreed that U of T could play an “enormously important role in that discussion,” since it is both a “place for inspiration and a source of talent” that the city could use in deciding its future.