The Simple Truth

For the second time in about five years, the audit/advisory/consultant thingie, KPMG, was asked to answer the burning question: Does Toronto have a spending or revenue problem? tellmewhatiwanttohearFor the second time in five years, KPMG has reported back: All things considered, there’s more of a revenue problem at work than spending. The city’s pretty tightly run. To avoid seriously cutting essential and even mandated services and programs, City Hall should look at accessing increased revenues.

Oddly though, what many of our elected local representatives, including Mayor John Tory have heard and concluded is: Right. Just like I thought. We need to cut spending. Tighten our belts. To the efficiency-mobile, Batman!

Some urban legends die hard, it seems, if at all, when they run contrary to the political ideology of right wing, small government politicians. There is always more fat to be trimmed, gravy to be drained, excess to excise before we can start talking about revenue. We must learn to live within our means. There’s always money in the banana stand.

This sentiment is so strong with enough of our city council that it’s more than a little surprising that KPMG was called upon to deliver a revenue tools report at all.deaf It was and it did, the City of Toronto Revenue Options Study coming out earlier this week. A boatload of suggestions for raising revenue, some immediately in the city’s purview, others it would have to get provincial permission to implement.

I want to focus on one section of the report, 17, pages 165-170. (A PDF I cannot figure out for the life of me how to load up on this page here, so you’ll just have to follow along via this link). Property Tax Analysis.

This is another shibboleth our mayor and his council allies, and the administration before it, and pretty much every small-minded member of council since at least amalgamation, has taken and spouted as gospel truth. We pay too much in property taxes, dammit! Homeowners (as if it’s just those owning their homes pay property taxes) are already stretched to the max. They cannot afford any more hikes in their property taxes. Seniors will be chased out into the streets…

Similarly, the information presented above suggests that residential property tax rates levied by the City of Toronto and the implied burden on households, expressed both in dollar terms and as a percentage of household income, are lower than those in the majority of other GTHA municipalities. This indicates that there may be an opportunity to increase property tax rates and still maintain burdens that are below the average of the municipalities reviewed, while also considering that Toronto is the only city in the sample that also applies MLTT.

What’s that, you say? By almost any measure, Toronto’s property tax rates “are lower than those in the majority of other GTHA municipalities”? That simply can’t be. If it were, our local politicians wouldn’t be pretending otherwise. “This indicates that there may be an opportunity to increase property tax rates and still maintain burdens that are below the average of the municipalities…” youdontsay1So, why all this ‘at or below the rate of inflation’ insistence Mayor Tory’s pursuing?

Now, I get all the property tax caveats. It’s not a tax that accurately reflects or benefits from current economic realities. The city is too dependent on it and needs to diversify its revenue sources more. There are people who are house rich but cash poor, and property tax increases could jeopardize their ability to own. Toronto does have access to another form of property taxation, the Municipal Land Transfer tax, that other municipalities don’t.

All these can be addressed but the point I’m trying to make here is this determined pursuit of at or below the rate of inflation property tax rate increase simply does not measure up to reality. parrotToronto property tax payers are not already overburdened like the mayor claims, just like his predecessor had trumpeted. As Matt Elliott pointed out last month after City Manager Peter Wallace’s Long Term Financial Report came out, “Since 2010, when adjusted for inflation, the city’s overall take from property taxes has gone down by 4.8%. Homeowners have gotten a break.”

Property taxes have contributed less to the city’s budget over the past 6 years, and even keeping rate hikes at the rate of inflation will further reduce them since costs will inevitably rise higher than that. 5%, I believe the city manager told the budget committee yesterday in its initial meeting about the 2017 budget. If so, other sources of revenue will be needed to help balance the operating budget or further cuts to spending which is already down in terms of per capita numbers since 2010, as Elliott also pointed out.

Arrows heading in a different direction than the one Mayor Tory wants us to believe.

There will be new revenue tools introduced, though very likely not in time for the 2017 budget. texaschainsawmassacreThe mayor, however, has made a point of saying for capital spending which explains his spate of transit announcements this week. Softening the public up for new taxes or fees, dedicated to building all this new stuff the city wants and needs while the operating budget will continue to be squeezed.

Or, as Councillor Mike Layton quoted the city manager telling the budget committee, heading toward “direct austerity” and “smaller government”.

As the KPMG revenue options study suggests, that will be a choice Mayor Tory and his council allies will make not one made out of necessity.

factually submitted by Cityslikr

Predetermining Outcomes

It has been my experience that someone who attempts to frame an opposing view in a dishonest, distorted manner has no intention of engaging in an honest, informative debate.

Exhibit A:

Mayor John Tory’s opening statement at yesterday’s city council meeting on Toronto’s long-term fiscal plan of action.

There are people who will say that we don’t have any problem with respect to expenditures, and my answer to that would only be to say that anybody who’s part of any multi-billion dollar organization that says they’ve found every single efficiency that there is to be found is either ill-informed or is trying to mislead.

The thing is, I’ve never heard anybody, inside or outside of the multi-billion dollar organization that is the city of Toronto, say anything remotely like that. How could they with a straight face? A quick glance in any direction will turn up misspent money and cost overruns. Renovations of Union Station, Nathan Phillips Square. The Yonge-University-Spadina subway extension. The **cough, cough** Scarborough subway extension. Bunny suits and retirement parties. Remember those? Oldies but goodies.

It would be foolish to suggest none of that matters. That’s why very few people I know have ever said such a thing. texaschainsawmassacreThat’s not what this debate is about, no matter how much the mayor would like you to think it is.

What this city manager has been telling Mayor Tory, like the city manager before him said, like the KPMG report back in 2012 concluded, all of them, is that the city is pretty tightly run already, and much more cutting of budgets finding efficiencies will begin to negatively impact the delivery of services and programs. More to this particular aspect of the debate, City Manager Peter Wallace has been emphasizing the point that no amount of further efficiencies or selling off of city assets alone will generate the necessary revenue to a) continue funding the day-to-day operating budget, and b) or be enough to build the new infrastructure we want/require and rebuild the state of good repair of infrastructure we already have. We have to have the revenue tools discussion, boys and girls.

What the mayor heard, however, came straight out of a game of broken telephone. What do you mean there’s no more efficiencies to be found? (That’s not what I said.) What do you mean selling off city owned assets won’t generate revenue? (Again, that’s not what I said. Nowhere in my report did I write that.)

Mayor Tory has acknowledged that we will have to have an “honest” discussion about revenue tools. “I’m glad revenue tools are on the table,” admitted his budget chief, Councillor Gary Crawford. But…But…

The city must maintain a fundamental focus on responsible and effect expense management…We must continue to explore efficiencies and cost reduction in order to create resources for other investment opportunities…Once we get those correct, once we look at those, I think we can have the discussion on revenues.

To suggest that we have found everything is absolutely not responsible.

Again, nobody has ever suggested such a thing. Mayor Tory and his council allies are determined to distort the terms of this debate while at the same time attempting to establish impossible to meet standards in order to put off any sort of serious discussion about revenue tools. actingNo stone will be left unturned! No efficiency unwrung! This city must be a perfectly oiled, flawlessly operating machine. Until such a time – “Once we get those correct,” in the words of the budget chief – there will be no talk of new revenue tools.

At least, no serious discussion. We’ll get the pretense of a serious discussion, the theatre of an informed, honest debate. Mayor Tory will give the impression of earnestly grappling with our fiscal future. It’ll be just an act, though. Talk of good intentions masking no intention whatsoever to move beyond his preconceived, ideologically hidebound notions of how government should work. His own political rigidity reflected in how he’s attempting to paint opposing views in stark, rigid terms.

predictingly submitted by Cityslikr

Toronto’s Taxing Problem, Part Infinity

I was in New York City earlier this week when this city’s City Manager, Peter Wallace, read the fiscal riot act to city council via Mayor John Tory and his Executive Committee in the boldest terms an unelected official could to his elected colleagues at City Hall. readtheriotact(Could I use the word ‘city’ and any of its derivations more times in one sentence? Probably. But, you know, overkill.)

What the mayor was told was the same thing the mayor and his predecessor have been told for pretty much 5 years now. Yes, there are probably more efficiencies to be found in the budget, efficiencies are always being found. Yes, the city can look at selling off monetizing some of its assets for a one time, payday infusion of cash. Yes, of course but… None of it will come close to narrowing the widening gap between the money coming in and money going out to pay for the services, programs and capital needs Toronto is responsible for. Not even close.

Mayor Tory was told all that but what he heard Jonathan Goldsbie highlights here in NOW. Essentially, the mayor heard what he wanted to hear. He heard what every self-serving, small-minded, pandering local politician hears when it comes to the city’s finances. Taxes bad. We already pay too much. Stretched to the limit. Hardworking homeowners. whatthecathearsNickel and dimed to death. Get off our lawns. Plow our streets.

A few years back, during a similar if not exact budget and fiscal discussion, I remember coming across a page listing the taxes and fees residents of other big cities throughout the world pay. For the life of me, I can’t find it now, and I’m too lazy and inept to actually track it down on the internetz but it did get me to thinking about a comparison I could probably present in a reasonable fashion. New York and Toronto.

I found this from 2009, a study of New York City’s taxation policy, funded by the Solomon Foundation, an off-shoot of the Solomon Company, a fairly substantial investment firm. Now, I offer it up with all the usual caveats. No comparison between cities is perfect, especially cities in different country and jurisdictions. This was from 7 years ago, so things might’ve changed. Moreover, I’m not much of numbers guy, my financial comprehension should be considered suspect and I am easily distracted.

That said…

Consider page 12, Exhibit 1, New York City Taxes and Other Revenue Sources.

NYCTaxes2009

Check out what I think could be called a laundry list of revenue sources the city taps into, taxes making up about 59% of all revenues. Personal income taxes, business taxes, sales tax, hotel tax, cigarette tax, beer, wine and liquor tax, horserace admission tax, vehicle tax, taxi tax. That’s before we even get to property taxes.

No wonder the city never sleeps! Everybody’s working 24/7 to pay all those taxes.

Now, look at this page [page 29], a pie chart from Toronto’s 2016 operating budget.

2016TOBudgetFinal

46% of our city’s revenues come from taxation, at least in name. Property tax, Land Transfer tax and something called “Supplementary Taxation”. Toronto already taxes residents and visitors to this city 13% less than New York did in 2009. So how is it that we’re overtaxed and “stretched to the limit” as the mayor claims we are, we being that mysterious group of “homeowners”?

And this is New York City we’re talking about here, not some zany, left-wing, socialist Scandinavian city. imbalanceThe Home of the Brave, Land of the Free, Tax Hating U.S. of A.

Mayor Tory and his allies do have a point, if they are trying to make a valid point that the city coffers are too dependent on property taxes to help pay the bills. Throwing in the Land Transfer tax, 44% of Toronto’s annual revenues come from property taxes. In 2009, “Real Estate Related Taxes” made up just 26.6% of New York’s revenues, 23.6% of that from straight up property taxes. So yes, especially given how we assess property taxes here, we probably rely too much on them to generate revenue.

So, let’s look for other sources of revenue then, shall we? Not just by selling off assets or ferreting out further efficiencies. The city manager, like the city manager before him, said that’s not going to do the trick.

We need to talk about revenue tools, taxes if you prefer. That’s not a bad word. notlisteningAt least, it isn’t in places that realize you have to pay for the things you want and need. Torontonians want, need and expect the city to provide these things. Somehow, if the words and deeds of many of the people we elect to represent us are any indication, we except to get all these things at impossibly low costs to us. Somebody else pay because I’m already paying too much!

It’s a tired line of argument, one with almost no factual merit. You get the kind of city you pay for. The bottom line is, we’re not paying for the city we say we want.

repeatedly submitted by Cityslikr