The City of Toronto is at a critical juncture, facing an unprecedented financial crisis that demands innovative solutions. In a significant move, the Toronto City Council recently approved an Updated Long Term Financial Plan, accompanied by a comprehensive set of actions aimed at proactively addressing the city's fiscal challenges. Among these actions are new housing-related revenue streams and an array of policy tools designed to secure Toronto's financial future.
Understanding the Financial Challenge
The city's financial predicament, as detailed in the 2023 Financial Update and Outlook report, is twofold: an immediate pressure of approximately $1.5 billion on the 2024 operating budget and a staggering $29.5 billion requirement for the 10-year Capital Plan. This forms part of a daunting $46.5 billion shortfall predicted over the next decade.
However, even with the actions approved by the City Council, Toronto underscores the urgent need for sustained support from both the Government of Canada and the Province of Ontario. Consequently, the City Council has made a bold appeal to the Province of Ontario to authorize new revenue tools that align with the city's economic significance.
Recognizing the gravity of the situation, City Council has swiftly implemented several immediate actions:
1. Graduated Municipal Land Transfer Tax Rate: Effective from January 1, 2024, high-value residential properties valued at $3 million and above will experience new tax rates.
2. Property Tax Strategy: A multi-year approach for property tax rates is being developed to ensure fiscal stability.
3. Parking Rate Review: The removal of the on-street parking rate cap enables a comprehensive review of parking rates, ensuring they reflect the city's evolving needs.
4. Vacant Home Tax: A report is requested to explore the possibility of increasing the Vacant Home Tax rate from one to three per cent, following the example set by Vancouver.
5. Enhancing Public Transit: The Toronto Transit Commission (TTC) is collaborating with the City and the Toronto Arts Council to revitalize ridership, addressing both revenue and public service aspects.
City Council has also requested staff reports on the feasibility of an array of new revenue and policy tools designed to diversify revenue sources and bolster fiscal resilience:
1. Foreign Buyer Land Transfer Tax: A tax targeting foreign buyers of residential properties, aimed at curbing speculative investment.
2. Commercial Parking Levy: A levy on commercial parking spaces, generating revenue from business activities.
3. 911 Next Generation Levy: A dedicated levy to support the implementation of advanced emergency response services.
4. Emissions Performance Charge for Buildings: Encouraging sustainable building practices while generating revenue.
5. Additional Land Transfer Tax: Applying a higher tax rate to buyers of residential properties who own more than one property within Toronto, with suitable exemptions.
Beyond Immediate Actions
Recognizing that the financial challenge demands a multifaceted approach, the City Council is committed to a series of comprehensive measures:
1. Imagination, Manufacturing, Innovation, and Technology (IMIT) Program: Restructuring or dissolving this program to optimize resource allocation.
2. Development Charge Exemptions: A review to consider reducing or eliminating non-residential, non-ground floor area development charge exemptions.
3. Real Estate Asset Optimization: A comprehensive evaluation of surplus or under-utilized real estate assets to maximize their value and usage.
4. Billy Bishop Toronto City Airport Levy: Exploring the feasibility of implementing a levy per passenger from Billy Bishop Airport.
5. Municipal Property Tax Rates: Consideration of graduated municipal property tax rates for high-value residential properties that are not the owner's primary residence.
6. Municipal Lottery: Exploring the potential benefits of introducing a municipal lottery as an innovative revenue source.
Impacts on Toronto's Housing and Real Estate Market
The introduction of these measures is expected to have significant implications for Toronto's housing and real estate market. The increase in Municipal Land Transfer Tax rates for high-value properties may influence the purchasing decisions of high-end buyers and potentially impact property values in this segment of the market.
The proposed Foreign Buyer Land Transfer Tax, if enacted, may introduce new considerations for international investors. The aim of curbing speculative investment could lead to a more stable and sustainable housing market.
Moreover, the Emissions Performance Charge for buildings aligns with Toronto's commitment to sustainability. This policy may encourage environmentally responsible construction practices and the development of more energy-efficient properties.
While these measures introduce changes and considerations for the housing and real estate market, their full impact will become more apparent over time as they are implemented and integrated into the city's financial landscape.
A Unified Call to Action
The City of Toronto's response to the financial crisis extends beyond its borders. It calls upon the Government of Canada and the Province of Ontario to collaborate in securing the city's economic future. The consequences of inaction are real, with the potential to impact essential services and critical capital projects that benefit not only Toronto but the broader region, province, and country.
Property taxes, while essential, cannot shoulder the weight of provincial and federal responsibilities that the city delivers daily. Approximately 22 per cent of the City's annual property tax revenues subsidize federal and provincial obligations, including child care, long-term care, public health, and more.
In addition to financial measures, the City has expressed its readiness to pause negotiations on Provincial Priority Transit Projects and future provincial transit expansion projects if funding is not secured. Urgent funding is also required for key transit projects like the Eglinton Crosstown and Finch West lines.
Toronto's financial challenges are multifaceted and require innovative solutions. The approval of new housing-related revenue streams and policy tools represents a proactive approach to addressing immediate and long-term fiscal issues. However, the city's call to action emphasizes the necessity of collaboration with higher levels of government to secure its economic future.
Toronto is not merely a city; it is an economic engine of the region, province, and country. The commitment to finding solutions remains unwavering, and the coming months and years will be pivotal in determining the city's financial destiny.