Thursday, June 5, 2008

Hopeful signs from the Mayor

The one year report

It is comforting to see that Mayor Miller has realized just how large and widespread of an impact Toronto's current tax climate has had. I am delighted to see that this report does not candy coat the impact of the current climate. Now with this realization lets hope that this new found urgency will translate into action and put Toronto back on track.

quotes from the report........

It started as a whisper, “Did you hear, that multi-national software company just announced a major investment”– but it wasn’t in Toronto. We shrugged and life went on. Next, there was an occasional article in the daily paper, “Major corporations merge to expand market-share” – but it wasn’t in Toronto. We shrugged and life went on. Until, finally, the whispers became a roar and suddenly everyone was talking about employment sprawl, traffic congestion, and under-employment in Toronto. If we continue to shrug and ignore these warning signs of economic decline, we do so at our peril. As members of the Mayor’s Economic Competitiveness Advisory Committee, we, like many other Torontonians, are noticing some disturbing trends in our city. The economic success that characterized Toronto during the latter half of the twentieth century has become a historical fact rather than a constant characteristic of our city. We’ve seen other cities that years ago were playing catch up to our lead, surpass us in terms of economic growth.

Without continued economic growth, no city can maintain and attract investment, including highly mobile capital and labour. The worst thing we can do is to do nothing. If the status quo continues, we risk being caught in a downward economic spiral of higher taxes, declining services, loss of jobs and less prosperity.

The bad news is that the job growth is happening in the region surrounding Toronto, not in the city itself. This means that while more and more people live in Toronto, increasingly, they must travel, usually by car, to jobs outside the city. And, it shouldn’t come as a surprise then that because of the employment boom outside of Toronto, that median household income in the Toronto region is higher than within the City of Toronto itself, where over the twenty year period of 1980 to 2000 the number of low-income households increased from 18 per cent to 22 per cent of all households in the city.

Employment growth within the city is important for fiscal, social and environmental reasons. A shrinking business and property tax base diminishes Toronto’s ability to adequately provide the social services and other public amenities that are the hallmark of a just and caring society.

Environmental Impacts of Office Location
Annual Impact Downtown Toronto Surrounding Regions
Transit trips 634,800 57,363
Auto kms. 3,259,300 11,153,700
Fuel use (l.) 291,025 995,925
Emissions (kg.) 940,800 3,129,500

Then, there are the personal stresses of long commutes stuck in traffic gridlock to drive to a job that go hand in hand with increased fuel consumption and increased emissions that contribute to environmental stress. It also means that people who do not have access to a car have reduced access to job opportunities. Toronto runs the risk of becoming a “bedroom community” if we don’t take action now.

So there you have it. Toronto's over taxation of non residential properties admittedly only provided a short term means to keep residential taxes artificially low. Now that the effects are becoming undeniable, shrinking assessment base, poverty pollution and a negative effect on quality of life the city is starting to act.


Anonymous said...

So what's the solution you envision?

There's a variance between revenues/expenditures already. If revenues can't be increased further in the form of property taxes, where do the expenditure cuts come from?

Glen M said...

I never suggested that Toronto could solve its problems by expenditure cuts. Though I do believe that there is a lot that could be trimmed.

What I have suggested is that Toronto re-balances the property tax burden. This would spur much needed commercial development and create jobs in the city. Those 800,00 jobs created in the 905 over the last twenty years are not really serviceable by public transit. Toronto needs to move quickly and decisively after a generation of stagnation.

Residential property tax in Toronto is far to low. In Toronto it is far less than in most other cities in Ontario. All those new condos being built will not produce enough tax revenue to cover the expenses that the city will incur servicing them. That is why the city needs to restore the balance between taxes and development.

What I would do is implement a program over five years that moved Toronto's non residential tax rate to the 905 average.

This would not cost as much, or might not even have a cost associated with it. The high taxes in these classes have depressed values. A move towards a lower tax rate would restore a large part of the value that has been capitalized.

Go to and compare properties. I did a comparison of industrial properties in Toronto vs. Vaughan between 25,000 and 50,000 sq ft. The first three of each city worked out to $60, 39, 55 per sq ft (building) for Toronto, $117, 134, 111 per sq foot in Vaughan. If you average in land areas the picture gets far worse.

Just like some of the samples I have elsewhere on this blog, despite Toronto's tax rate being twice of what of Vaughan's, the values are half as much. The net revenue is about equal. Toronto's higher tax rate did not produce extra revenue, all it did was make new development unfeasible.

Anonymous said...

Thanks. That makes sense.

"A move towards a lower tax rate would restore a large part of the value that has been capitalized."
I couldn't find support for this, or at least not for the magnitude of change that's required. I believe you, mind.

This was useful, as our own (non-Toronto) town is doing something similar, and it's nice to have some examples to show the assembly members.

Silver said...

Discussed with our local assembly members.
They're clueless.
Although this is a much, much smaller community, the problem is along the same lines.

I can drive 2 miles fewer to work and practice outside city limits, and my office overhead will go down by about 20%. Or I can drive 10 miles further to work in Town2 - which charges minimal business property tax - and my overhead will go down by 35%.

Sigh. So I used some of the types of comparisons you show in here. The Town1 business tax base is indeed declining when you look at number of business licenses, addresses, etc. Thus far, the apparent loss in value looks to be secondary to the overall real estate market - it is keeping pace with other semi-rural regions, including Town2. The assembly can't look past that, apparently. I don't know how bad it has to get before the business property start to lose value.

Anyway, thanks for the material in the site. It's been useful, and I'm sure I'll mine it for ideas before the next assembly meeting. Perhaps I should avoid politics and stick with the relatively simple tasks I have now.

By the way, the idea of matching the Town2 mill rate over time: yeah, that completely mystified the assembly. Remarkable.