'The votes are there' for mayor's tax plan
JENNIFER LEWINGTON
CITY HALL BUREAU CHIEF with a report from Jeff Gray
October 22, 2007
In what would be a watershed moment for the city and Mayor David Miller, a majority of Toronto councillors appear set to approve two new taxes today.
"We have turned the corner and the votes are there," deputy mayor Joe Pantalone declared yesterday.
His optimism stems from a series of signals that momentum is building for the mayor - the latest coming yesterday as a key councillor moved to endorse a compromise tax package that on Friday won crucial backing from the Toronto Board of Trade and 10 prominent developers.
"It isn't an easy decision, but it appears reasonable to me," said Councillor Suzan Hall of the package circulated late Friday after intense negotiations between the board, the developers and Mr. Miller.
Ms. Hall's declaration that she plans to vote in favour of a new land transfer tax and a motor vehicle registration fee is a turning point. In July, Ms. Hall (Ward 1, Etobicoke North) led a successful charge to defer, by a one-vote margin, any decision on the contentious tax measures until today. The rebuff stunned the mayor, and led to increasing questions about his leadership.
Despite the building momentum in favour of the mayor's position, council insiders expect a dramatic session today, with a crammed public gallery at city hall.
The stakes for the city, mired in a divisive debate on taxes since the summer and faced with a $414-million budget shortfall in 2008, are high.
If approved, a land transfer tax of up to 2 per cent and a $60 fee for motor vehicle registration would mark Toronto's first use of "revenue tools" under self-government powers granted by the province earlier this year.
But even if adopted, the new taxes might only initially raise $180-million to $200-million for 2008, less than earlier annual estimates of $356-million, because of revisions to the original proposal and a slower than expected timetable for implementation.
Even with the new taxes, city finance officials say they still need a property tax hike next year (Mr. Miller says he wants to keep it close to 3 per cent) and a pledge of transit operating funds from the province.
Today's vote - no matter what the result - will also mark a turning point for the mayor, as he tries to shore up his leadership and re-establish his political clout for a term that lasts to 2010.
"He could not survive a defeat," said Councillor Adam Vaughan (Ward 20, Trinity-Spadina), who supports Mr. Miller's tax plan. "It is a confidence vote, essentially."
Mr. Miller's staunchest critics on council refused to concede defeat yesterday.
"I hope it will be close," said Councillor Denzil Minnan-Wong (Ward 34, Don Valley East), who charges that the mayor "deceived" voters by making no explicit mention of new taxes in his 2006 re-election campaign platform.
But even some of the mayor's opponents were quietly conceding that the tax plan appeared ready to win approval, particularly after the 11th-hour support from the Toronto Board of Trade and prominent city developers last Friday.
Key to that compromise was an amendment to the land transfer tax, providing full rebates to first-time buyers of homes up to $400,000 in value and a 1-per-cent cap (down from 1.5 per cent) on the tax on homes and commercial property valued between $55,000 and $400,000. As well, the tax will not apply to existing agreements of purchase and sale made before Dec. 31.
The fast-breaking developments won over Ms. Hall, but as of yesterday had not convinced another undecided councillor. Peter Milczyn (Ward 5, Etobicoke-Lakeshore) said he plans to vote for the motor vehicle tax but would have "difficulty supporting" the land transfer tax. His beef is that the city did too little to rein in spending, such as cutting merit pay for non-union staff, before imposing new taxes.
The councillor said yesterday he was still talking to the mayor about specific commitments to cut costs. At best, these measures would go to the city's budget committee for consideration in 2008, without being tied to today's vote.
Understanding the debate
City Council is debating two controversial taxes proposed by Mayor David Miller. One is a land transfer tax of up to 2 per cent of the price of the property, charged to home buyers, similar to the existing provincial tax. The other is an added $60 fee on motor vehicle registrations.
Why would they do
such a thing?
The mayor says the city, which cannot run a deficit, faces a projected $414-million shortfall in 2008.
Mr. Miller says all of the reserve funds the city has raided in the past to make ends meet have been exhausted.
After lengthy negotiations with city hall, the province gave the city the power to raise some of its own taxes in the City of Toronto Act, which came into effect last January.
Why are the city's books
so hard to balance?
Even the mayor's staunchest opponents agree that the city's financial problems are largely driven by the $729-million in social services and other shared costs that the province forces Toronto's property taxpayers to pick up. A provincial panel is due to report on that problem in February - likely too late to help the 2008 budget.
But opposition councillors claim Mr. Miller has refused to look at serious efforts to reduce costs or to contract out more city services. The mayor has appointed a blue-ribbon panel of local business and community leaders to look for savings.What effect will the
taxes have?
The Toronto Real Estate Board, which plans to pack the council chamber today with real estate agents, says the land transfer tax will damage the city's real estate market. It would prompt buyers to look for homes outside the city, where they would not have to pay the tax, the board says, and it could hasten the bursting of the real estate bubble, especially if the currently hot market begins to cool for other reasons.
What's the bottom line?
According to the latest version of the land transfer tax, modified last week, buyers of a $400,000 house would pay $3,725, on top of the current provincial land transfer tax of $4,475. First-time buyers of properties worth $400,000 and under would be exempt.
The vehicle-registration tax would add $60 to the province's current $74 annual bill for renewals, for drivers with Toronto addresses.Why not just raise
property taxes?
To fill the entire $414-million gap with a property-tax increase would require an increase of 20 per cent, or a $437 added cost for an average Toronto home, valued at $369,000.
The mayor argues that hiking property taxes is regressive.
Even if the mayor's new taxes pass, rough math suggests the city could still be looking at a 5.6-per-cent residential property tax hike.
Jeff Gray