Toronto City Hall was a place of unusual amity on Tuesday. Mayor John Tory's first budget seems to have pleased just about everybody.
"This budget is about investing in better transit, better housing, more jobs and an end to the gridlock that is choking our streets – all while maintaining property taxes below the rate of inflation," Mr. Tory crowed in a statement.
How did he achieve this minor miracle: low tax increases and millions in investment at the same time? If you believe the mayor and the officials who surrounded him, prudent budgeting and hard work did the trick.
But user fees helped, too. While keeping increases in the high-profile property tax fairly low, the city has been steadily raising the rates that Torontonians pay for things such as facility rentals, recreation fees and even the fresh water that comes through the pipes.
Since a user-fee review in 2011, it has operated on the principle that it should charge full cost, without subsidy, for any service that delivers a direct benefit to individuals. In other words, user pays.
But it has not exactly shouted it from the rooftops. Little mention was made on Tuesday of the inconvenient fact that fees for renting ice rinks or some sports fields will jump.
Water and garbage fees, too, are going up, up, up. Toronto Water, which gets almost all its revenue directly from ratepayers through their water bills, raised fees by a staggering 9 per cent a year for nine years to pay for maintenance and upgrades to its pipes and other infrastructure. The big hikes were to end in 2014, but the city quietly extended the policy and now rates are to rise again: by 8 per cent in 2015 (starting in April), 8 per cent in 2016, 5 per cent in 2017 and 5 per cent in 2018, declining afterward to 3 per cent.
The city's garbage-collection service is heading the same way, toward a system where residents cover the full cost of picking up the trash directly through the fees they pay for bins. Bin fees are going up as much as $126.39 (for an extra-large garbage bin) in this year's budget.
While property taxes get the most attention, says a recent report by the University of Toronto's Institute on Municipal Finance and Governance, "user charges and fees have been an important and growing source of Toronto's revenues. The City has more than 3,000 different types of user charges, ranging from TTC fares and admissions to the Toronto Zoo to fees for fitness classes at municipal recreation centres."
The institute calculates that an average household paid nearly $2,000 a year in user fees and service charges as of 2012, up from about $1,600 in 2000. Altogether, the city collects about $1.67-billion in user fees and $1.5-billion in rates for things such as water and garbage collection. Revenue from user fees and rate programs amounts to 28 per cent of the city's revenue take, compared with 34 per cent for property taxes. The user-pay system has its benefits. Higher water charges encourage residents to use less water and higher garbage fees should encourage them to put out less trash. Many other cities have been moving to cost-recovery for such services and Toronto argues its fees are comparatively low.
The city says on its website that "User fees can help the city keep the cost of property taxes down by making sure that services which only a few people choose to use are not paid for by everyone."
But user-pay still takes money out of taxpayers' pockets and, when you take user fees into account, the burden on residents has been rising faster than city hall would have you believe.