What about a road toll?
Municipal governments face numerous constraints when pursuing their policy agenda. In particular, fiscal constraints stem from municipal government budgets and their inability to run operating deficits. Municipal governments have limited discretion over expenditure costs which are mostly based on mandates that require local governments to meet provincial service standards. Additionally, it’s difficult to raise revenues and the main source, property taxes, are highly visible to homeowners, incentivizing politicians to keep this tax low. The public wants less congestion and better transit services but also lower taxes, creating a balancing act for municipal governments.
Municipal governments face numerous constraints when pursuing their policy agenda. In particular, fiscal constraints stem from municipal government budgets and their inability to run operating deficits. Municipal governments have limited discretion over expenditure costs which are mostly based on mandates that require local governments to meet provincial service standards. Additionally, it’s difficult to raise revenues and the main source, property taxes, are highly visible to homeowners, incentivizing politicians to keep this tax low. The public wants less congestion and better transit services but also lower taxes, creating a balancing act for municipal governments.
In order to respond to this demand, cities have come up with creative ways to raise revenues. In 2016, mayor John Tory proposed a road toll of $2 per vehicle on the Gardiner Expressway and Don Valley Parkway to raise revenues for the City of Toronto. The plan was projected to generate approximately $200 million annually for highway repairs and transit infrastructure projects. From a political perspective, the road tolls were an innovative way to keep property taxes low for residents while raising revenues by targeting suburban commuters using city-owned and maintained highways. With the majority of city council in favour of the road toll proposal, the last hurdle was gaining provincial approval.
Under the City of Toronto Act, Toronto was given broad authority to raise new taxes in order to meet its needs. However, Premier Wynned rejected the request from city council asserting the notion that municipal governments are merely at the political whims of the provincial government. The decision was made largely due to the pressure of an upcoming election and the need for critical votes in the 905. The decision showed the power of the province and the lack of control city council has over how services are delivered and funded.
As Toronto continues to grow in size, the demand for public services will also grow. The road tax could have been a step toward addressing challenges related to congestion, climate change, and improved transit services. Despite, John Tory’s campaign promise to keep property taxes at or below the rate of inflation, COVID-19 has increased the demand for public services in cities. Moving forward, how do municipal governments keep taxes low while continuing to meet the demand for essential city services? Will the province’s allow big cities to develop innovative solutions?
