As Toronto considers new taxes on parking spots, booze or hotel rooms, its top civil servants say any new revenues should be dedicated to "visible" capital projects, such as public transit, to avoid a "backlash."
The advice comes as city staff on Tuesday unveiled a much-anticipated KPMG study of a list of new taxes – most of which have been talked about for years – that Toronto could implement to deal with its chronic budget problems.
It comes as critics say Mayor John Tory's insistence on keeping property taxes at or below inflation means the city will have trouble balancing its books next year without slashing services.
City manager Peter Wallace, who has warned that the city can no longer rely on windfall land-transfer tax revenues from a hot real estate market, says Toronto faces a $582-million operating shortfall next year. He said last week the city will have to make 2.6- to 5-per-cent cuts from this year's budget level. But Mr. Tory said on Monday he is only asking city departments to keep budget increases to zero.
The KPMG report looks at a range of new levies that could bring in hundreds of millions of dollars. But many would take as long as two years to implement and require talks or legislative changes at Queen's Park or Ottawa, meaning even if they could be brought in, they could not help as the city faces a cash crunch in 2017.
Ones to watch
- Hotel tax: Vancouver, Halifax, Winnipeg and Quebec City charge per-room taxes on hotels. To bring in such a tax here, Toronto would need the province to amend the City of Toronto Act to allow it – something Mr. Tory has brought up in meetings at Queen’s Park. Many Toronto hotels already pay a similar but voluntary fee for Tourism Toronto promotions, although they would fight the imposition of a new tax. KPMG estimates that a 5-per-cent rate on hotel rooms would bring in $54.5-million. And, as far as political considerations go, barely any Toronto voters would ever have to pay it, making it especially attractive to politicians.
- Parking space levy: Other cities, including Vancouver, Los Angeles, Miami, Pittsburgh and Seattle, tax either parking spots or parking revenues. Current legislation would only allow Toronto to levy a per-spot tax on landowners. A $1-a-day per-spot tax could bring in $383-million a year, according to KPMG’s estimates. A 5-per-cent parking sales tax, if Toronto was given the green light to bring one in, could bring in $32.8-million.
- Booze tax: While other cities, including Philadelphia, Washington, D.C., and Chicago, have taxes on alcohol, the KPMG report says implementing one here would involve “administrative complexity.” It might also see some consumers buy more booze outside city borders to avoid the tax. Set at 2 per cent, it would cost an extra 63 cents on a case of beer, and bring in $43.6-million a year for the city. KPMG warns that setting it at 5 per cent would mean that “public opposition and avoidance are likely to be more sustained.”
- Entertainment and amusement tax: Special taxes applied to movie theatres, live performance and sports venues are common in other cities, including in Regina, Saskatoon, Winnipeg, Phoenix, Pittsburgh and Chicago. KPMG estimates that a 10-per-cent tax would bring in $39.1-million, but warns that movie theatres could hurt, as more Torontonians might choose Netflix or a cinema in the 905.
Don't hold your breath
A 1-per-cent municipal personal income tax would bring in as much as $926-million, but would require "extensive negotiation" with the federal and provincial governments, the KPMG report says, as would municipal business income taxes, or a sales tax. Special development levies on developers seeking building permits are also not allowed and fraught with potential problems. A tobacco tax would require "significant administrative effort."
And Mr. Tory has shown a distaste for road tolls or a London-style "congestion charge." Council might also think twice before reversing its reversal of the motor-vehicle registration fee under mayor Rob Ford in 2011.