Toronto council backs study of new taxes and fees to address fiscal woes

Toronto city council voted overwhelmingly Tuesday to study new taxes and fees as a way to address its mounting fiscal challenges.

Councillors adopted a motion from Mayor John Tory calling for a deep dive into the options, including a possible parking lot tax, alcohol tax and vehicle registration fee. But the lone politician to vote against the resolution — which passed 25-1 — warned that the vote opens the door to new taxes and will make life in the city more expensive.

"I'm not sure that that vote reflects what the citizens of Toronto are thinking, and my message for them is 'hang on to your wallets,'" Coun. Stephen Holyday said. 

Tory's motion to city council asked staff to update their estimates of the amount of money the taxes and fees could raise and what they'd cost to administer. The motion also calls on staff to assess how such taxes and fees have been used in other cities. 

Staff will now look at the options and could report back as soon as this summer. 

The mayor has estimated the city's current spending gap amounts to over $1.5 billion related to costs from 2022 and 2023. He blames the city's "COVID hangover" for much of the problem and says Ottawa and the province must address it.

The province has committed to cover some costs related to pandemic measures for 2022, but thus far the federal government has not. 

Toronto writing cheques 'it can't cash': Holyday

The debate occurs in the backdrop of a proposed seven per cent tax increase this year — 5.5 per cent for property taxes and a 1.5 per cent city building levy.

Council will meet next week to discuss those increases included in the city budget.

Holyday said the city is already doing too much and is writing "cheques that it can't cash" when it comes to service delivery.

"I can't treat the citizens of the city like walking ATMs," Holyday said.

But Coun. Alejandra Bravo fired back at Holyday during the debate, telling him that if the city ignores its obligations on social programs, it pays more downstream.

"When we take care of each other, we don't pay for the unintended consequences of inequality, poverty, increased health-care costs, policing costs, criminal justice costs," she said.

"Those are incredibly expensive."

No 'gravy' in city finances, says Bravo

Bravo said she was encouraged to see the tone of the debate around the city's finances has changed over the years. Councillors seem to no longer believe that the city can slash its budget and still deliver the same level of service, she said.

"We've heard in this chamber that there was a river of gravy flowing through all of the city's operations," she said. "And we know that that was a figment of the imagination. And I'm really happy to see the growing consensus that in fact Toronto does have this revenue problem."

Tory said the study will help him make the case to upper levels of government that the city needs a new "fiscal framework." The city can't afford to pay for the wide array of services it is now expected to deliver, he said.

But the city also can't appear as if it's not trying to take care of its own financial problems, he added.

"I think the first thing we have to do is look at our own situation, what we can do here, as we always do," he said. "Then we'll have a platform in which to even better advocate for the remainder that will come from, and should come, from other governments."

In 2016, Toronto hired consultants KPMG to study an array of taxes and fees it could charge. A year later, the mayor attempted to toll the Gardiner Expressway and Don Valley Parkway to raise $200 million annually for the city, but the plan was rejected by the Liberal government of then-premier Kathleen Wynne.

The city has implemented some measures from the KPMG report, including Toronto's hotel tax, which is set to increase by two per cent in the 2023 budget.

CafeTO made permanent

Meanwhile, council also voted Tuesday to make the CafeTO program permanent.

CaféTO allows restaurants and bars to open expanded outdoor spaces on sidewalks and in curb lanes from spring to fall. It was introduced in 2020 as the COVID-19 pandemic led to restrictions on indoor dining.

Councillors adopted a phased-in fee schedule that will see costs gradually increase over a three-year period. Council has also asked city staff to evaluate and report back in December on the program after the 2023 season.

The vote comes a week after Tory's executive committee sent an earlier report back to staff, asking that they consider a way to address what the mayor called the "sticker shock" of the new fees.

They proposed a phase-in of costs over one year, but council voted for the longer-term arrangement.

"I think this is a sweet spot," Tory said. "It is saying we're going to stick with the principle of having fees and recovering some costs."

Last month, the city announced it was recommending that the program become a permanent fixture on boulevards throughout the city, but that eateries would have to pay thousands of dollars to participate.

Coun. Paula Fletcher said the permanent program will ensure that it makes CafeTO affordable for restaurants, but cuts out those that said they'd participate in the program when it was free but did not put up a structure.

"This is a lifeline," she said. "So, let's make sure we do continue a lifeline for these folks."

Holyday expressed concerns that taxpayers are being asked to subsidize businesses in some parts of the city and not others. He also feared the patio structures will narrow streets, cause congestion and make it more difficult to drive into downtown.

"I don't want the downtown to become a curiosity, or a visiting place, for people that live in the suburbs because it's so hard to get to," he said.

Tory sparred with Holyday as the votes were tallied.

"How can you oppose this; it's keeping these businesses alive," Tory asked Holyday across the council floor.

The resolution passed 24-1, with Holyday the lone councillor voting against the CafeTO plan.