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As of today, a new city tax takes effect for Toronto residents who own or lease a car or motorbike.
The charge of $60 a year for a car and $30 for a motorbike or moped will be added to the bill when residents apply to the province to renew their vehicle plates. Those who live outside the city do not pay the fee.
The new tax has flown under the radar, compared with the noisy political debate last October when Mayor David Miller coaxed a badly divided council to approve a new land-transfer tax that kicked in last February.
Still, to some, the $60 car tax rankles as a needless cash grab by the city.
"My complaint is not about the amount, it's about the concept and its fairness," says Shahin Alizadeh, who owns three car dealerships in the city and is a member of the Toronto Automobile Dealers Association, which opposed the tax.
"We can downplay it by saying it's not a lot of money, but what if it were a $600 tax? " he asks. "Would that be okay?"
City budget chief Shelley Carroll is quick to assure the public that there are no plans to raise the personal-vehicle fee, which will not be fully phased in for a couple of years. That's because vehicle owners who renewed their plates before Sept. 1 for a two-year period will not have to pay the new fee until the next renewal date in 2010.
She says the new taxes are essential building blocks to balance the near-$8-billion operating budget for 2009.
"It's the city attempting to increase the number of revenue sources it has," she says. "It increases our ability to focus funding directly on the kind of municipal things that affect the car driver," she adds, pointing to road repairs and other car-related city services.
But given the city's perennial financial pressures - and a legal obligation to present a balanced budget - at least some of the new tax revenue will be used to wipe out any potential deficit.
"I can't today guarantee the transportation budget would go up by $60-million," she said, but pledged that the "goal, ultimately," is to direct the funds to car-related city services.
This year, city officials expect to raise $20-million from the vehicle registration tax, revenue that will rise to between $50-million and $60-million on an annual basis.
By contrast, the land-transfer tax of up to 2 per cent on sales of properties is expected to generate $155-million this year, an estimate that is still on track despite a softening of the real estate market, according to officials. In late September, the budget committee expects to receive a report on the first five months' revenue from the land-transfer tax.
After various exemptions are phased out, the land-transfer tax is expected to generate about $240-million a year for the city when it is fully phased in after three years.
The two taxes - among new powers of self-government granted by the province under the 2006 City of Toronto Act - gives the city new sources of revenue beyond its traditional dependence on property taxes to fund services.
In contrast to the new taxes whose revenues fluctuate with the economy, city property taxes are relatively stagnant. A one-percentage-point rise in property taxes raises $20-million a year from residents and business.
Even with the new taxes, Ms. Carroll says a key question looms for the 2009 budget: Will there be permanent new funds for the city from ongoing negotiations with the province on uploading of social services?
The talks were supposed to wrap up last February, then by June, but may not conclude until later this year, according to provincial officials.
Even under the most optimistic scenario, the city could be back to seeking one-time transit funds from Queen's Park later this year.
