A battle of wills over the Toronto budget, on the backs of the poor

Toronto’s budget for citizen support (emergency services, health & childcare, income & housing support) for the 2017 budget is about $4.6B, which works out to $1,628 on average for every man, woman and child in the City. Yet there are still far too many homeless people, there’s a waiting list of ~60,000 for housing, and chronic need for food banks and similar services for the poor, unemployed, disabled, and others continues. In fact as the chart below shows, income & housing support in particular has decreased dramatically since 2010 (these charts are adjusted for inflation, and pro-rated per person to factor out population growth).

Highlighted lines show reduction of citizen support services, led by income & housing support, since 2010. Source: budgetpedia.ca

Citizen support services as a proportion of the overall budget has decreased from 47% to 38% since 2003.

Source: budgetpedia.ca

One of the key factors in these cost pressures is the relatively low proportion of payments made toward various services by Ontario to Toronto. For example common assertions are that the province’s contributions to housing and TTC fall short of international standards, and that the Gardiner and Don Valley Parkway (which Toronto maintains) should be considered provincial roads.

In 2017, Toronto and Ontario paid the following amounts toward housing and the TTC (from Toronto budget analyst notes).

Amounts in $millions

In addition Toronto pays for maintenance of the Gardiner and the Don Valley Parkway (we’re estimating roughly $15oM per year — see here for reference to $75M per year for Gardiner; we assume a similar amount for the Don Valley).

To take a simple first pass approach to modelling a resolution of these circumstances, we’re assuming that current housing subsidies from Toronto property taxes could be reduced to 10% from 53%, comparable to Toronto’s contribution to Employment & Social Services; provincial contributions to TTC operations could lower the user fee (fare) contribution to operations to 50% from 69%, resulting in a lowering of fares by about 20%; the Gardiner and Don Valley costs could be uploaded back to the province.

These adjustments would result in Ontario contributing an additional $815M to Toronto per year.

If on the other hand Toronto were to increase property taxes in order to reduce transit fares and increase housing subsidies by comparable amounts (the Gardiner and Don Valley maintenance would stay the same), property taxes would have to be raised by about 16% (about $500 per year on average), still far below the GTA average.

From Toronto 2017 budget EX22.2

Mayor Tory (and the majority of Council) is adamant that property taxes should not subsidize social programs further, with the implication that this would be unfair, and in any case would be regressive. Instead, according to this reasoning, higher orders of government should rely on more progressive forms of taxation to pay for these services.

Others in the city (such as the minority of councillors) as well as the province, think that city property taxes should be raised to be more comparable to surrounding municipalities, before additional provincial subsidies are supplied. They point out that property tax reductions and deferrals could be applied to lower income house owners (such as retirees) to compensate for regressive effects.

From Toronto 2017 budget EX22.2

As the above chart shows, Toronto average household income is among the lowest in the GTA. Another consideration is that market valuation of housing, and therefore property tax rates, are artificially high in many prime real estate areas of Toronto.

Both sides have a point. Unfortunately this results in a standoff. Meanwhile, the level of social support services continues to be marginally degraded, at the expense of the services that our more vulnerable could use to improve their circumstances.

Henrik Bechmann is the project lead of budgetpedia.ca. The opinions expressed here are his own.

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