Will Ford sign off on Toronto's sales tax? Council will need to make the case for revenue tool

A major piece of Toronto's new plan to address its long-term fiscal woes hinges on the cooperation of Doug Ford, as the city faces the daunting task of persuading the premier to support a municipal sales tax.

That tax is part of a slew of new "revenue tools" proposed by city staff as a way to address over $46.5 billion in financial pressure faced by Toronto over the next decade. The city's financial problems have been mounting for years but were made worse by the pandemic as the shelter system strained under the pressure of increased demand and transit ridership — and revenues — hit rock bottom.

City staff, backed by a consultant's report on new taxes and fees, are recommending council ask the province to grant it the power to levy a municipal sales tax, which could raise between $800 million and a billion dollars a year. Asked why she is optimistic Ford will approve the tax, Chow said it's because there are examples of it across Canada.

"Quebec provides a growing source of revenue to a big city like Montreal," she said. "I was just talking to the mayor of Montreal. My gosh, I'm really jealous. I am."

The update to Toronto's long-term financial plan was released Thursday and has a number of staff proposals aimed at addressing what staff call an "unprecedented financial crisis." The city faces a $1.5-billion budget shortfall this year alone, staff say.

In addition to the sales tax, city councillors will have to consider increasing property taxes, the vacant home tax, the municipal land transfer tax and selling off city land. Chow said she intends to raise the sales tax with Ford when they next meet.

"We are the level of government closest to the people," she said. "It's hard to say 'no' when someone needs the help."

Tax could be a tough sell

The request for the sales tax could be a tough one considering Ford's past stance on taxes.

Ford was elected to Toronto council in 2010, the same year his brother Rob was elected mayor vowing to end the "gravy train" at city hall. Their platform focused on cutting waste and eliminating a vehicle registration tax created by council to raise revenue.

Toronto Mayor Olivia Chow said that even if the city adopts all of the various possible revenue tools outlined by staff, they still would not generate enough money to make up for projected budget shortfalls in the long term. (Michael Wilson/CBC)

Ford came to power as premier in 2018 making good on a promise to scrap the then-Liberal government's cap and trade system to address climate change. Throughout that election campaign, he labelled it a punitive carbon tax that made life more expensive for Ontarians.

When its comes to Toronto's recent requests for new taxes and fees, Ford quickly rejected the idea of tolling both the Don Valley Parkway and Gardiner Expressway when it was floated last year by former mayor John Tory. Toronto would have required the province's permission to levy those tolls and a previous request to do it was rejected by former premier Kathleen Wynne's government.

Asked this week if he would grant Toronto the power to levy the tax, Ford's office did not directly answer the question.

"Our government is focused on keeping costs down for people, especially at a time when the cost of living is going up," Caitlin Clark said in a statement.

Request will come as 'no surprise' to Ford: McKelvie

Deputy Mayor Jennifer McKelvie said the city has been advocating for additional revenue sources for some time, so the request will come as no surprise to Ford.

She thinks the city can make the case for the tax because of increasing shelter costs and declining transit revenues brought on by the pandemic.

"I also think that the financial situation of the city has changed dramatically since the premier was a councillor here," she said.

Coun. Gord Perks, who is the vice-chair of the city's budget committee, said Toronto simply can't afford to do many of the things the province has deemed priorities — like build more housing or expand and operate the transit system — without the money to pay for it.

"The premier says he wants housing, the premier says he wants transit," Perks said. "And these things aren't free."

Perks said he's optimistic that Chow can negotiate with Ford and find a way to get him to sign off on the new sales tax. He points to her successful discussions with the federal government just days after assuming office to address a refugee housing crisis.

"Mayor Chow has a long, long and very successful history of working across partisan lines to achieve things nobody thought could happen," he said.

Sales tax will drive shoppers elsewhere: Holyday

Coun. Stephen Holyday said not only is he concerned about the proposal to create the municipal sales tax, he thinks Ford, and people across the city, won't support it. The city needs to do more to contain costs on its end before asking for the province's blessing to create a sales tax, he said.

"Just as we owe citizens the proof that we've done everything we can do, we also owe the pPremier and other orders of government the proof," he said. "And I suspect there are still doubts."

Holyday said he opposes the municipal sales tax because he believes it will drive shoppers to neighbouring communities to spend their money. The councillor for Etobicoke-Centre, Ward 2, represents a constituency that borders Mississauga.

"Why on earth would somebody buy a car on the east side of the Etobicoke Creek when they could go to the west side … and avoid the sales tax," he said. "And that is a flaw with that proposal."

Toronto Metropolitan University politics professor Myer Siemiatycki said selling the sales tax to Ford will be an uphill battle, but might not be impossible. Cities across North America, including many in the United States, have sales taxes to help fund services.

Ford "has got a record of borrowing city governance patterns from Chicago," he said, pointing to the premier's admiration for that city's "strong mayor" system imposed on Toronto last year.

"Chicago has a sales tax. So, it's not like this is something outlandish."

Siemiatycki said beyond building the case to Ford, Toronto's new mayor and council may need to give the premier political cover so he won't be blamed by voters for enacting the tax.

"I think this does put Premier Ford in a jam. His instinct is going to be to say 'no'," he said. "But when municipal services start being cut back even further, you're going to get the blame for not having provided Toronto the revenue tools that they asked for and that they were prepared to take responsibility for themselves."

Chow's newly formed executive committee will meet Thursday to debate the plan and possible taxes. City council will dig into the report at its meeting on Sept. 6.