Road Tolls Are Not the Issue

Everyone’s talking road tolls. Mayor Tory raised the idea in a speech on Thursday and opinion is already sharply divided. The problem is that his speech wasn’t about road tolls, nor were the bundle of City reports that came out around the time he gave the speech.

The speech and the reports were both efforts to address the City’s over-all financial problems. Reading through the speech and the reports it becomes very clear that the issue of road tolls is a sideshow. There are two really big questions. What’s the plan for managing the City’s services and finances? Will the plan work?

The Mayor’s plan is quite different from the plan staff recommend. His plan has no chance of working. The staff plan just might.

The Mayor and City staff agree on the nature of the four challenges we face.

First, we don’t have the right tax mix to pay for the day-to-day services we operate. This year we will come up a few hundred million dollars short. Even if we cobble something together this year, next year we will have an additional few hundred million to figure out.

The second problem we face is we have no way at all to fund the one-time big ticket items: rebuilding the Gardiner, buying new buses, fixing rundown public housing buildings, etc. City staff and the Mayor put the cost of these big ticket items that have no funding at $33 billion.

Third, we don’t have enough transit service and road space to move people and goods around the City. We need more and better transit, and we need it now.

Fourth, we have far too much poverty in Toronto, more people per-capita live in poverty in our City than in any other in the country. Additionally, as housing costs sky-rocket, a generation of Torontonians are being priced out of the City.

Here’s the Mayor’s plan with some comments.

  1. Ask the Province to permit us to toll the DVP and the Gardiner. Although he didn’t declare how much the toll would be, the most likely scenario is $2.00 per trip. This would net us about $166 million per year. Over 30 years that would be worth $5 billion. That sounds big, but one of the many staff reports that came out Thursday says that maintaining the Gardiner and DVP over that period will cost $3.65 Billion. That number is bigger than we expected. In yet another staff report they informed us that we will need $1 billion more than we thought to pay for the Mayor’s plan to keep the Gardiner and slightly realign it.

  So the net value of the tolls over 30 years will be $1.3 billion. It’s time to take a second look at whether we can afford the Mayor’s plan to keep the eastern section of the Gardiner.

  1. Already introduced is an infrastructure fund using a property tax increase that starts a 0.5% and will apparently rise to 2.5%. This will allow us to pay for $900 million worth of capital projects. On a worrisome side-note the Mayor wants this and the toll money administered by an “independent body”.

  Americans call this taxation without representation. I’ll just say that it’s a basic rule of democracy that we elect the people who manage public money.

  1. The federal government has committed to paying $850 million toward repairs and equipment replacement for the TTC. However, we must match it dollar for dollar. The capital funding the Mayor has committed to adds up to $2.2 billion over the next two or three decades. Take away this commitment and we have $1.35 billion left.
  1. Ask the Province to allow us to institute a tax on hotels that will yield $20 million/year. This would support day to day operating costs.
  1. Eliminate an existing tax rebate for vacant commercial properties. This would yield $22 million for our operating budget.
  1. Next is a proposal to contract out the remaining publicly collected garbage services. (Everything east of Yonge St.) It is important to note that this has nothing to do with the City’s main budget. Garbage service is (mostly) paid for separately by bin fees. Further, in still another staff report they warn us against contracting out services if it creates precarious work. Right now public employees who collect garbage have reasonably good pay and job security. Employees of private collectors have relatively low wages and benefits and no meaningful job security. This is the very definition of precarious work.
  1. Although not mentioned in his speech, I have reason to believe that the Mayor will support some changes to how we collect the Land Transfer Tax. If we harmonize our LTT to match the amounts collected by the Province we could increase our annual take by about $100 million/year. While this money may be best allocated to our capital budget, I’m assuming it will go to our operating budget where the crisis is more urgent.
  1. A plan to sell Toronto Hydro and/or the Toronto Parking Authority has been shelved. The Mayor and staff agree that this would be bad financial policy. This is by far the best news in the speech. BUT! the new plan is to have the City lend Toronto Hydro $200 million at a high interest rates. Some of this would come back immediately as dividends used to cut our operating budget deficit. Hydro would have to repay the loan at those high interest rates.

  This would mean that for years some of your Hydro bill will be used to keep property taxes down. Hydro bills are very regressive. Property tax is progressive. This means shifting costs down more heavily toward low income people. Inability to pay energy utility bills (Hydro, heat, gas) is the second most common cause of eviction after inability to pay rent.

  1. Thursday’s speech went to great lengths to rule out property tax increases and reinstating the Vehicles Registration Tax. A careful reading of staff advice shows that we desperately need both if we are going to avoid deep service cuts.

The Mayor said also that he will not support a new tax on parking lots. Staff agree here, showing that similar schemes in Montreal and Vancouver have failed.

  1. Not discussed were the two big ticket funding sources that many major cities rely on: a share of the sales tax and/or a municipal income tax. Given that the Thursday speech was billed as the Mayor’s plan for the future I have to assume that the silence was deliberate and he doesn’t support either. I would be shocked (in a good way) if he came forward to support them.
  1. There are assorted bits and pieces about efficiency. It’s all stuff we were planning to do anyway, and will require some up-front spending before yielding some minor savings down the road.
  1. Finally, when asked after his speech what he intended to do about the fact that his plan won’t meet the City’s overall budget needs, the Mayor replied that he would fight for additional funding from the provincial and federal governments. Staff have made it clear that any funding ask will fall on deaf ears if we keep our property taxes well below every other municipality in the Province. The Province believes that whenever they help us to fund something we take the money and use it to cut property taxes. It’s a fairly accurate conclusion

That’s the plan. A few overall points.

First, the plan leaves us well over $20 billion short on our capital budget. It means we could (almost) afford to fund one of SmartTrack, Rail Deck Park, or the Scarborough Subway, but only one of them. And, if we do one of those we will have next to nothing for the huge and urgent repair needs at TCHC. Nothing toward the $250 million we need for our homes the aged. We can’t build new daycare spaces. The $330 million we need for flood protection for the Lower Don River remains unfunded. As the Mayor said: “No flood proofing means no development, jobs and investment and that would be a massive lost opportunity.”

I could go on. Let’s just say that every public service you can think of has some long term capital need that we can’t meet.

Turning to the operating budget, the Mayor’s plan will eventually be worth about $140 million/year. First, let’s allocate $65 million to the TTC. That’s how much the TTC says they need to avoid deep service cuts even after they put in a fare increase. Next, we’ll give TCHC the remaining $75 million. That’s about how much they say they need just to avoid closing units and housing fewer people. (This is a separate issue from the capital repairs. Because so many TCHC residents are on disability or other social assistance programs, and the Provincial allowance is so low, we don’t get enough rent to cover the daily operation of the building they live in.)

What’s missing? The much-vaunted anti-poverty plan for one. Still another of Thursday’s staff reports states that we would need $48 million to provide the low income transit pass that the anti-poverty plan imagines. Also, TTC service will never improve. Despite the tens of thousands of people moving into Toronto every year, the Mayor’s plan makes no room for increased service. In fact, when the Eglinton Crosstown LRT line opens, we won’t have money to run it. Same with Finch, the Eglinton East and West extensions and the Waterfront LRT.

We won’t add any new daycare spots or daycare subsidies for low income families. No new housing for the tens of thousands on the affordable housing waiting list.

In a couple of weeks, we will see the cuts various departments are proposing to meet the Mayor’s property tax freeze-at-inflation. We won’t have the money to sustainably avoid those cuts. Nothing will get better and many things will get worse.

One last thing before turning to the staff plan. Staff have diligently reviewed all the possible tax and funding options. One thing they looked at was which of the measures are broadly progressive. There are three: property tax, sales tax and income tax. The Mayor’s plan doesn’t recommend any of them. That means that if it’s adopted, lower income people will pay more as percentage of their income than they currently do. Wealthy people will pay proportionately less.

As bad as all this sounds, there’s another wrinkle. In reviewing the Mayor’s plan I’ve treated his proposals as if the money arrives right away. With the exception of the changes to the Land Transfer Tax, each of his proposals will take considerable time to approve and establish. The toll proposal could take as much as seven years to get legislative approval, put out to tender, and construct. All that time we will be using temporary funding that will have to be paid back. More worrisome is there will be two municipal and two provincial elections in that time. Almost certainly there will be a new Mayor and Premier. In other words it will be someone else who had to take the heat.

As I said at the top, the tolls debate is a sideshow, a distraction. If we get mired in a debate about tolls we will miss the real issue. The Mayor’s plan won’t fix any of our underlying problems: better transit, getting people out of poverty, funding our huge capital backlog, or arriving at a sustainable funding model for the services we provide.

What to do? Five brief points.

  1. We follow our staff advice and ask the Province to consider giving us the legal right to implement the sales tax or the municipal income tax.
  1. We also follow our staff advice to immediately reinstate the vehicle registration tax.
  1. We take a cold hard look at the fact that our staff have told us we can either implement a multi-year plan to bring our property tax in line with the GTA average or we can make deep painful cuts to our public services. I know which side I’m on.
  1. We stop wasting time debating the merits of road tolls. We may need to come to a compromise that includes road tolls, but we must first have a real plan that makes Toronto a better place to live for everyone. The one the Mayor put in front of Toronto means a worse future.
  1. We get to work. Convincing people that we actually have to pay for a better City won’t be easy. It will be very difficult and will only happen if we speak out and organize.