Facing decline in gas-tax revenue, Montreal looks for new ways to generate funds

Quebec's gas tax isn't filling municipal coffers like it once did because fuel consumption is on the decline. This has been a growing concern in Montreal for several years and now the city is looking to stem the tide.

It was announced this week that the city's finance committee is exploring ways to generate new streams of revenue through taxes that could, for example, charge people for the distance they drive, known as a kilometre tax, or for the vacant housing units they own.

"We have to prepare for the future," said executive committee chair Dominique Ollivier, and that future includes Quebec's plan to ban new gas-powered vehicles in 2035.

A substantial portion of the gas tax has long been pumped into Montreal's public transit system. As recently as 2017, there was talk of installing toll booths around Montreal in an effort to replenish funds lost to the decline in gas consumption.

In 2021, car registrations went up for motorists in Montreal suburbs to generate an estimated $100 million for public transit.

The finance committee commissioned a study, polling 1,000 people in the greater Montreal area about a possible kilometre tax and 58 per cent of respondents were against the idea. However, 70 per cent were in favour of a tax on vacant dwellings.

Nicholas Ryan, spokesperson for CAA-Quebec, said a kilometre tax is something to think about eventually given the shift to electric vehicles, but not at this point.

"It's just asking again to go in your pocket and ask for more and more and more," Ryan said. "For us, it's not the time right now to start taxing people more."

Property tax hikes below inflation rate

The Plante administration is well aware of the toll inflation is currently taking on Montrealers, Ollivier said.

"We know that everything costs more, and everything costs more for the city as well,"  she said.

The city has not raised property taxes at the rate of inflation in recent years so as to avoid putting more financial burden on residents, she said.

But at some point, she added, Montreal needs to face the question: "Do we keep going on that archaic model which relies on property taxes — about two-thirds of our budget — or do we want to diversify sources of revenue?"

Fuel sales in Quebec have been on the decline for many years, limiting the amount of revenue generated through the province's gas tax. (Paul Chiasson/The Canadian Press)

The city needs to explore models that ensure people who use resources are paying for those resources, she said. The first step is to put the discussion on the table and study options.

The Plante administration has delegated that job to the Montreal Metropolitan Community (CMM), but even if a potential solution evolves from these explorations, ultimately it will be up to the province to make the final decision based on what municipalities and the CMM recommend, she said.

Opposition pushes for solutions

Something needs to be done, according to Alan DeSousa, opposition councillor and mayor of the Saint-Laurent borough, during Monday's city council meeting.

As it stands, Montreal has been spending more than it can pay for the last five years, while borough funding has not seen a significant increase, he said.

"Inevitably, this will have an effect on the services for citizens," he said.

His party, Ensemble Montréal, has voiced support for eco-fiscal measures in the past. For example, it proposed a tax on vacant housing during the 2021 municipal elections.

Cities like Vancouver and Ottawa have implemented similar measures. Montreal is currently suffering from a housing crisis, and such a tax would be aimed at decreasing the number of vacant dwellings while generating revenue for the city, the party says in its minority report for the city's 2024 pre-budget consultation.

Either way, such taxation should not be looked at as a punishment, said Kevin Manaugh, associate professor in McGill University's department of geography and Bieler School of Environment.

"It's not simply a matter of punishing people for doing something," he said. "It's saying how can we reinvest and make this city a safer place?"