They've never once mentioned that it's set in Toronto, though they do nothing to hide the fact as evidenced by the wonderful aerial scenes of the city shown throughout the episode. Also, the SRU uniforms all have Canadian flags on them.
The show uses real street names and city names (i.e. "The suspect was last seen driving south on Bayview" or "the hospital is located in Rexdale").
They've even gone as far as to ask new members of the unit to "go get the team some Timmies" which I thought was quite Canadian of them.
The stories have been a mix from what I've read. Some are based on actual events in Toronto like the series premier about a hostage situation in T.O.'s business district, while some are stories out of the US while others still are completely fictional.
I enjoy watching the show (evidenced by the above), and not just because it's a Canadian show filmed in Toronto.