'Substantial' property tax increase coming to Toronto, city's budget chief warns

Toronto's budget chief is warning that a "substantial" property tax increase will be part of the city's new spending package, as council grapples with a long-brewing fiscal crisis.

Coun. Shelley Carroll, who was appointed budget chief by Mayor Olivia Chow last year, had a blunt message when asked if property taxes are headed up: Yes.

And not by a small amount, she said, because Toronto needs to face its structural deficit head-on.

"I'll go so far as to say it will be substantial, because we really have reached a point where if we're having to solve our own problems, it means a substantial increase," Carroll said. "We're now being honest about what it takes to get the city you want."

Toronto's month and half long budget process officially launches this week when city staff will outline proposed operating and capital spending packages. That kicks off a series of public meetings at city hall and civic centres across Toronto. Then, in February, the mayor takes that feedback into consideration, in addition to the work done by city staff, and presents a budget to council.

Council will ultimately vote on the final budget package on Feb. 14.

City budget deficit topped $1.8 billion by November: Carroll

Carroll did not provide specific figures on a proposed property tax increase, but acknowledged affordability is a key concern.

Despite signing a new deal with the province which will provide billions in relief over the next decade, the city still has on-going fiscal challenges. That includes a deficit had reached $1.8 billion by the fall, she said.

The budget chief said the city's needs cannot be sustained by large property tax increases alone. Toronto still needs a revenue tool that grows with the economy, like a sales tax, she said.

"You can say, 'OK (city council), go have that conversation with the premier,'" she said. "No, the electorate needs to have that conversation."

Toronto budget chief Shelley Carroll says a "substantial" property tax increase is coming to help head off the city's structural deficit. (CBC)

Carroll is critical of council's approach to property tax hikes over the last decade, which have largely been at, or around, the rate of inflation.

Last year, former mayor John Tory raised property taxes by 5.5 per cent, with an additional 1.5 per cent dedicated to the capital budget's city building levy. That accounted for the single largest property tax increase since amalgamation in 1999.

"We've actually not been investing in the city's budgets," Carroll said. "So, it's a real struggle right now."

City to change some budget practices

Carroll says part of her job as budget chief is to change some practices council has used in recent years which alter the city's financial picture. First, pandemic-related costs will be rolled into the spending package, instead of parcelled off as reimbursement requests to upper governments.

Many COVID-19-related costs are becoming permanent fixtures in some city departments and that needs to be reflected in the budget, she said.

"Recovery is about admitting this is the new financial picture that we're in," she said.

The second part, which is linked to those pandemic costs, is the practice of balancing the city budget with dedicated line items that are contingent on requested federal or provincial funding.

Critics have said that this practice effectively means the city, which must balance its budget by law, does not actually achieve balance because sometimes that money doesn't materialize.

Affordability will be a key question in budget process

Even though the budget process officially kicks off this week, Mayor Chow held a round of pre-budget consultations in November. That was part of a campaign promise she made last spring to make planning for the budget more participatory.

Deputy Mayor Jennifer McKelvie said that during those sessions she heard repeatedly that affordability is top of mind for many city residents.

"We want people to be able to afford to live here," she said. "We want our children to be able to afford homes here one day."

Coun. Brad Bradford, who ran against Chow in the spring mayoral byelection, stressed that any tax increase should come in around the national rate of inflation, which is 3.12 per cent.

"It's very important for municipal government to remember this is not the only bill that Torontonians are facing," Bradford said. "Grocery prices continue to increase, car payments have gone up, mortgage rates are up, rent is up, everything is up."

Coun. Stephen Holyday said the city needs to take a deep look at the services it provides, and that it might be time to cut back.

"There's no doubt that there's a lot of people in need, but I just don't know if taxpayers in the city can cover all of those costs on their property tax bill," he said.

Delicate balance ahead in mayor's first budget: expert

Toronto Metropolitan University politics professor Myer Siemiatycki said Chow's administration has been laying the groundwork for a tax increase for some time.

"I think the mayor in her end of year interviews and messaging was kind of priming people to put aside a little bit of money in your own personal budget for 2024, in expectation of increased property taxes, because those are coming," he said.

But Siemiatycki said Chow will have to find a "sweet spot" in her first budget of not going overboard on the tax increase while bringing in enough revenue to address slumping city services.

"That's going to be a tough act to carry through," he said.