Five things to keep in mind during this week’s city budget debates

Five things to keep in mind during this week’s city budget debates

(Image: The City of Toronto)

Right now, at 12:15 p.m. on January 29, city council is settling into one of its most harrowing annual rituals: deciding how much money the city should spend over the next year, and what to spend it on, and where to get it from. Money issues—and particularly taxes—are Rob Ford’s main preoccupation, and so budget season has been an especially angst-ridden time ever since he was elected mayor. This year is no exception. Here are some things to keep in mind as we wait for the politicians to cast their votes.

1. Rob Ford isn’t totally crazy to suggest that this year’s budget is a little out of whack

City council voted away most of Rob Ford’s mayoral powers in November as a result of his crack scandal, and he has spent the past couple months complaining bitterly about the fact that this year’s budget represents a return to the “old ways” of budgeting, whatever that means. In fact, the budget that goes before city council today is substantially the same as the one crafted by city staff before Ford’s demotion—but there is an important difference. Last week, Ford’s executive committee voted to balance the 2014 budget by increasing a staff estimate of the likely yield of the Land Transfer Tax. The move would enable the city to forestall an increase in property taxes, but it’s a risky idea.

Because the Land Transfer Tax is a levy on property sales, the city has no way of knowing in advance how much money it will generate in any given year. The amount depends on how many people sell real estate, and for how much—hence the need for an estimate. The executive committee’s decision to hike the estimate by $11.8 million is essentially a gamble. If, by chance, city staff underestimated the yield by at least that much (and, to be fair, they do tend to underestimate Land Transfer Tax revenues) then everything will be fine. But if Toronto’s real-estate market is sluggish this year, the city could find itself struggling to cover a sudden shortfall.

The good news is that nobody seems happy with this state of affairs, and it’s likely that council will deal with the situation—probably by raising taxes.

2. The Land Transfer Tax is going nowhere

Another thing to bear in mind about the Land Transfer Tax is that it’s here to stay, no matter what anyone says. Rob Ford campaigned on eliminating it (because realtors and homebuyers dislike it), but it has been a decisive factor in balancing every one of his budgets. This year, city budget chief Frank DiGiorgio proposed funding a reduction in the Land Transfer Tax rate by nixing a rebate for first-time homebuyers, but the idea died in committee and seems unlikely to resurface. In any case, getting rid of such a great source of revenue would almost certainly mean raising property taxes—a move that would be even less politically viable than keeping the Land Transfer Tax around.

3. There are no magic savings

Rob Ford claims to have found $60 million in savings this year. He says the money could be used to help keep property taxes down. Meanwhile, Ford’s budget chief, Frank DiGiorgio, says that many of the mayor’s ideas—which include putting unpaid library fines on residents’ property-tax bills—had already been considered and rejected. If Ford’s proposals are voted down, as they deserve to be, he’ll almost certainly spend the next nine months until the mayoral election trying to use the incident as evidence that he’s the only one at city hall who cares about taxpayer money. If past experience is anything to go by, 20 to 30 per cent of the city will believe him.

4. If we want a Scarborough subway extension, we’re going to have to pay for it

One of the reasons the city is facing a higher property-tax increase this year than Ford would prefer is that the Scarborough subway extension—a project he championed against expert advice and then claimed credit for—needs to be funded. .5 per cent of this year’s tax hike will be earmarked for the subway.

5. The city is on the hook for storm cleanup

Another complicating factor in this year’s budget process is the fact that the city is responsible for storm-related cleanup, not only from December’s ice storm, but from the floods in July. City staff estimate the total costs at more than $171 million, and so far other levels of government haven’t offered to foot the bill. (Not that city council hasn’t asked.) The extra costs will be passed along to residents, one way or another.