Cuts to the Cities Budget

Today's Star Editorial with my comment below:

Aug 11, 2007 04:30 AM

Torontonians are understandably upset by a spate of municipal service cuts announced yesterday – some bitterly so. But pain is to be expected when $83 million is hacked from a city's yearly operations. The trimming of at least $9 million more is likely from the Toronto Transit Commission and police. And the bad news may not end there; far more drastic cuts loom next year unless councillors approve two proposed new taxes and the province starts paying some of the bills it has unfairly imposed on municipalities.

One clear lesson stands out in all this: Public services are not free. Failure to pay for them eventually means losing them. In Toronto's case, it now means no access to community centres on Mondays, sloppier parks, fewer pothole repairs, longer waits for licences and inspections, reduced health promotion efforts and libraries closed on Sundays. Although the cuts hurt, they could be worse. City staff should be commended for coming close to reaching a $100 million savings target without triggering crushing disruptions.

The current crisis is the direct result of city council's failure to approve two important new taxes last month. A proposed land transfer tax would have raised $300 million while a new motor vehicle registration levy would have generated $56 million. Instead of swiftly approving those measures, council delayed a decision until Oct. 22. Now, even if the taxes are approved on that date, council's dithering will have cost more than three months of lost revenue, rendering some service cuts unavoidable. Obviously, the land transfer tax and vehicle registration fee should be approved as quickly as possible.

Some councillors who unwisely voted for delay had urged the city to first cut its waste. There was an assumption that plenty of bureaucratic "fat" could be trimmed with little or no impact on the public. The result of city staff's effort to find $100 million in savings underlines the fallacy of that argument. Yes, in any organization with a $7.8 billion budget, and employing thousands of people, there are small perks and extravagances that should be trimmed. Planned renovations to Mayor David Miller's office and junkets to China and Los Angeles have been quite properly cancelled. But penny-pinching can't come close to generating $100 million, let alone cover the entire cost of Toronto's $575 million budget shortfall projected for next year.

In truth, to fully ease Toronto's budget crunch, it will take more than the overdue approval of two essential new taxes. Queen's Park will have to do its share by – finally – putting an end to years of unfair downloading. Ontario is the only province in Canada where social programs are funded through municipal property taxes.

In this year alone, Toronto's property taxpayers will have poured about $730 million of their local tax dollars into provincially mandated programs. A substantial share of that money must stay in the city's coffers if Toronto's budget is ever to be balanced without resorting to crushing new service cuts or overwhelming property tax increases.

Recently announced cuts are lamentably necessary due to council's failure to approve funding in a timely manner. But they must not become permanent losses. If Toronto is to thrive, it must build upon what it has, not shrink and retreat. Great cities demand new investment, not a draining away of services. New taxes are essential to win those gains, and so is the overdue easing of provincial downloading.

I only need to add:

I sat down to write you something after watching the real estate show on Citytv yesterday but this morning the Star editorial has covered it just about entirely. Set aside the childish behaviour of my "Male" colleagues yesterday. Boys will be boys. The Star's comments above reflect, quite accurately, what is going on.

The only thing left off their editorial piece is the fact that this failure to act on the powers bestowed on us by the City of Toronto Act, leaves us the laughing stock of every world Class City you can think of in North America.

Remember back to the sixties when news of imminent bankruptcy in New York City spread all over the World, without even the internet or satellites to help it along? Then, incredibly, it happened again in 1975. Remember when news that Chicago was falling apart at the seams, letting every child in poverty down and headed in the desperate direction of Detroit, or worse? Ask yourself why all talk of bankruptcy has ceased in those toddling towns for the last 20 years. Why are their real estate markets exploding and their businesses booming? In Chicago the economic strength spreads well out into Cook County, the equivalent of our GTA region.

The answer, whether you feel ready to accept it or not, is the very revenue tools being hotly debated in Toronto. These cities, and yes even the GTA-like Cook County, have stopped showing up in the headlines constantly at war with their State and Federal governments. They use revenue tools like land transfer, vehicle registration and sales tax to pay for services such as transit systems, police services, fire and ambulance services. They use income tax, arranged with their state governments to pay for income related services like welfare, housing, social programs and public health. Property tax now takes up only 20% or less of their operating budgets and funds property investment related features such as local roads, libraries, community recreation, local standards enforcement and planning. Cities over 2 million in population simply can't live thrive without such a formula. Scores of cities in this population bracket have followed the lead of Chicago and NYC. Observe the economic recovery of Miami, for a recent example.

The history of cities in North America, and indeed the world, has shown that Cities that achieve the mega city status that we have, but fail to make the leap to the necessary fiscal policies to support them, do not stay mega cities for long. Businesses leave in droves, residents follow them and those that stay on are left paying unreasonable property taxes to support a set of city services and infrastructure that quickly begins to crumble around them.

In the end, it is not about partisan politics. It can't be about bitterness between Mayor Miller and the various councillors who are still behaving like children four years after he won the Mayoralty away from the candidate they supported. John Tory has moved on. They would do well to do so as well. Get on with the business of reading your materials and researching essays on municipal fiscal policy. We are elected to create sound fiscal arrangements that protect our citizens from financial ruin.

Land Transfer tax taxes only those who can afford it, when they can afford it. Unless you have been very careless, virtually no one in Toronto who sells their home after 3 years or more, loses money. Land transfer tax is paid out of your capital gain when you sell your home on a one time basis. I don't know about you, but I know don't want to pay $2000 more every year in property taxes for the next 15 years when I have the choice of instead handing over $8000 once on the day when I just made a profit of $100,000.

Yesterday, on City TV, Real Estate salesmen were shown a tape of Adam Vaughn and Denzil Minnan-Wong duking it out over Land Tax. Ann Rohmer asked them, "So what about these taxes. Will the market in Toronto collapse?" Both agreed, the market is so strong in Toronto, and will remain strong due to intensification, that nothing can touch it for long. This is still, quite simply, the best real estate investment in Canada. The trick is to keep pace with the needs of the city so that it remains so.

So if these two specialists in the Real Estate field were so calm, how do we justify the fact that the Toronto Real Estate Board and other paid lobbyist groups like the Canadian Taxpayers Federation, the Canadian Federation of Independent Businesses and Councillors Minnan-Wong and Stintz spent three months in a lawyer's office executing a campaign of manipulation and misinformation to whip you into a frenzy? In the case of the lobbyist groups, the answer is simple. They know a good deal when they see one, for them that is. These lobbyist groups are all world travellers and they know how other Mega Cities are financed. Sticking to a formula of small town proportions that puts the burden squarely on the shoulders of the residential ratepayer and the property tax paying tenants of this city suits them just fine and lines their pockets.

In the case of Councillors Minnan-Wong and Councillor Stintz, who helped the lobbyists sway a coalition of 23 councillors, the answer is not clear. They put forth a public persona of defender of the property tax payer, they vote against every budget that includes a property tax increase. But this year they have demonstrated a work ethic that I've never before seen from either of them, to fight the revenue tools that are designed, over a reasonable amount of time, to reduce the City's reliance on your property tax bill.

The answer to this riddle is not my concern. You are, dear citizen of Toronto.