1. Toronto does not have a “spending problemâ€
Expenditures are roughly the same as they were a decade ago, when inflation and population growth are taken into account. But the spending mix has changed: transportation has increased as a share of City expenditures while social and family services have declined. The amount of services Toronto provides, and the costs, compare well with those of other cities in most areas. Recent studies suggest there is little room to find further “efficiencies†without reducing services.
2. Residential property taxes are low and have been growing slowly
Property taxes in Toronto have been growing at less than the rate of inflation. Toronto residents, on average, pay low property taxes compared with residents of other Ontario cities, in large part because the tax burden continues to
be higher on businesses. The City has also relied for funding on increased revenues from user fees and charges, the land transfer tax, and – most significantly – transfers from the provincial and federal governments. The provincial “uploading†of some social service costs has also helped.
3. The City cannot maintain the infrastructure it has or invest in what it needs without new revenues
Toronto’s funding shortfall for maintaining existing assets, such as transportation infrastructure, in a state of good repair will grow to nearly $2.5 billion by 2020. Toronto Community Housing alone reports an $860 million unfunded repair bill for social housing. There is no funding available for big new proposals, such as the much- talked-about transit investments. And there is little certainty about provincial and federal transfers, which represent a third of planned infrastructure spending.
4. Toronto’s debt is relatively modest and manageable for a growing city
With a strong economy, solid credit ratings, low interest rates, and a manageable debt load, Toronto is in relatively good shape. Council’s self-imposed debt ceiling could, however, limit the City’s flexibility to invest for the future.
Toronto’s fiscal condition can be likened to the health of an aging Maple Leafs defenceman: he may be a solid performer on the ice and well cared for by training staff, but he is increasingly expensive and in need of major knee surgery. In other words, the City’s fiscal health is sound by most measures, but it faces cost pressures and its aging infrastructure and investment needs present a huge financial challenge. This election is a critical opportunity to discuss the difficult choices that lie ahead.
