[Glen]

Toronto: Three Cities in More than One Way


selected quotes

It is easy for academics to blame a lack of social welfare spending, or suburbanization for the problem. The real problem is the loss of local policy making power resulting from amalgamation. For the most part, the areas losing ground the fastest are the formerly middle class suburbs amalgamated into the city. In contrast the “exurbs†just outside of city boundaries have thrived. This is no coincidence. The real takeaway from this study is that the suburbs have different needs than the central core. By attempting to accommodate the needs of both, the megacity has benefitted neither. Short of de-amalgamation, the only hope for the city is to substantially decentralize policy making. No amount of spending can make up for the loss of local autonomy.

Perhaps more important than city wide regulations is the centralization of taxing power. Since the merger, the city now sets tax rates across the entire megacity. This also allows the city to control the ratio of residential to non-residential taxes. The city of Toronto has the highest ratio of non-residential to residential taxes in Ontario. This means that businesses carry a higher share of the tax load in the city than anywhere else in the province. The combination of tax and regulatory policies in the city have lead the Canadian Federation of Independent Businesses to rank Toronto as the second least business friendly city in Canada. On a scale of 1-100, Toronto came in at 33, slightly ahead of Vancouver’s 31. Meanwhile, the rest of the (Greater Toronto Area) GTA is near the top, at 61. Neighbouring Oshawa took the top spot in Ontario with 69.

Now the share of non-residential to residential taxes in Toronto may actually make sense downtown. The core is home to the third biggest financial sector in North America. These jobs are heavily concentrated in the downtown core.

Downtown Toronto isn’t competing with low tax Vaughan or Barrie for these jobs. They are competing with high tax cities like New York and Chicago. This means that employment in the core is not as easily chased off by taxes and regulations than in the suburbs. But in industries like wholesale and manufacturing, which are far more important outside of the core, employment can easily relocate to Barrie, Mississauga, Oshawa, and so forth. Indeed, jobs have been leaving the city since before the recession hit.

Since 2004 Downtown and North York have prospered but the rest of the city has lost jobs. This should make the results of the Professor Hulchanski’s report unsurprising. The financial sector isn’t enough to keep the entire city employed or lift wages in the city-controlled suburban rings. As a a result despite the thriving financial sector, Toronto was dead last in the GTA in terms of median incomes.

 

[taal]

That's a great article, it keeps it pretty high level without delving into the details that make it hard for most to interpret. Unfortunately I doubt many will even see it; and if they do give it a chance, as there have been a plethora of such articles over the last decade - many of which are biased and written off by the general public.

It really reached a simple conclusion; Policy making should be local even within the 416.

But here's a question / comment / issue:
Toronto is big, but there are many other large cities in North America. Mississauga, our neighbor, would qualify as a fairly substantial in Canada. So the question is, why aren't all these cities experiencing a similar problem ?
It also points that the tax ratio may be appropriate in some areas such as downtown but not in others. Well wouldn't that likely apply to say MCC as well - and indeed there's been very little job growth there.
In some sense this whole notion that policy making doesn't work at large scales is going to favour the suburbs of all major cities in North America! Unless some cities actually make decisions at a local level internally.
Or cities that haven't amalgamated

The point about Vancouver is interesting but flawed - the point being btw that it is even worse (at least by that index and however that was computed). Please correct me if I'm wrong but I believe the tax ratios in Vancouver suburbs (a.k.a their 905) are very similar to Vancouver proper, unlike Toronto ? In other words, competition across the area is on a very level playing field. So competition is more national in nature verse regional, and tax decisions mean less on this scale.

One solution I see; Get all of the 905 to match our ratio today . One may argue this may push things even further, but this along with the greenbelt and the like will shift the competition in the GTA to a more national level.

Here's another thing I'm unsure about, they mention Waterloo, last I checked (and I'm probably completely out to lunch) their business tax rates are also very high, it's possible their residential rates are also high, but still .


I actually reached a conclusion about this all a little while ago; It's fairly negative but I think realistic: Regarding the tax imbalance on a regional scale here in the GTA there is NO short / medium term solution. The absolute rate in Toronto will be higher and it's gong to be like that for many many years. At best new construction in the outer 416 can be enticed but huge subsides. I very much hope this happens but I'm not holding my breadth.
I say this because the difference is so large right now; factor in the politics if increasing the residential rates; and the 3:1 ratio will not work - as it's set throughout the GTA; Toronto would really need to apply to break the rule the other way around i.e. raise the residential rates at rates say 10:1. It won't happen ...

 

[TrickyRicky]

Great read and keep up your passion on this issue Glen. That said I remain convinced that tax policy within the narrow range we are discussing has very little long-term influence on urban settlement patterns and demographic trends. Taxes are like market interventions or social policy initiatives. They can have some short-term influence on behaviour outcomes but they are not, and should not be confused for primary factors driving the changes we are seeing in the GTA.

 

[Dan416]

I wonder if in other big, amalgamated cities if they can set different tax rates in different parts of the city, say, in NYC or LA for example.

 

[jje1000]

All these facts are nice to know, but in the end, what really matters is whether or not Ford is actually willing to cut commercial taxes.

Is he?

 

[taal]

All these facts are nice to know, but in the end, what really matters is whether or not Ford is actually willing to cut commercial taxes.

Is he?

I used to hold out hopes for this but if you do the math it's basically a political impossibility - to do it residential rates would need to go up, and by quite a bit more.
Technically with the 3:1 ratio rule, it was require a smaller cut on the residential side as well - don't forget there's a huge 700 million deficit leading into the next budget. All the penny pinching here and there can, what at best (and this is really optimistic), find 100 million ?

 

[freshcutgrass]

I wonder if in other big, amalgamated cities if they can set different tax rates in different parts of the city, say, in NYC or LA for example.

I'm not sure what you mean by "amalgamated" cities. You are either a legal entity called a "municipality"...or you aren't. I know Toronto is a bit confusing, because we used to have a two-tiered municipal structure for a while (but represented exactly the same thing as we have now).

Other big cities simply don't rely on "property" taxes as the main source of revenue. Toronto is the oddball. And it is very, very stupid. We did manage to convince Queen's Park that it is no longer the 19th century, and that cities need to be able to source revenues from sources that make more sense.

In NYC for instance, there are many sources of revenue, including a municipal income tax. Municipal income tax makes much more sense than property tax, because it is more directly geared to your ability to pay, rather than just the value of real estate you own. Also, in NYC, public transit (MTA) is not funded by the city, but rather a state-run "Authority" (with an annual $12 billion operating budget, $5 billion capital budget, and $30 billion in debt). And you thought Toronto has problems?????

Chicago has a municipal sales tax that helps fund its transit system (RTA sales tax of 1.25%).

How Toronto manages to do what it does, on a shoestring budget and an antiquated municipal taxation system is nothing short of a miracle.

 

[jje1000]

I used to hold out hopes for this but if you do the math it's basically a political impossibility - to do it residential rates would need to go up, and by quite a bit more.
Technically with the 3:1 ratio rule, it was require a smaller cut on the residential side as well - don't forget there's a huge 700 million deficit leading into the next budget. All the penny pinching here and there can, what at best (and this is really optimistic), find 100 million ?

Which is strange, because Glen apparently supported Ford more than other candidates on the grounds that Ford would cut commercial taxes; and that he would also go to Ford to discuss the issue.