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Toronto should rely more on new revenue tools, less on property taxes for money: experts

Municipal experts Enid Slack and Harry Kitchen look at ways to fill Toronto's piggy bank.

Mayor John Tory promised during his campaign the city's property tax rate would remain at or below inflation, but needs a new way to raise funds at city hall.

Torstar news service file photo / Torstar news service Order this photo

Mayor John Tory promised during his campaign the city's property tax rate would remain at or below inflation, but needs a new way to raise funds at city hall.

From repairing cracks in the Gardiner to building new transit lines, the city has a long laundry list of projects.

But the perennial question is, how to pay for it?

As council’s executive committee meets to discuss possible revenue tools Tuesday, two municipal experts have released a new paper exploring different options for raising money.

The paper, authored by Enid Slack and Harry Kitchen of the Institute on Municipal Finance and Governance at the University of Toronto, argues Toronto and other big cities should rely more on revenue tools and less on property taxes.

“Other cities around the world use a wider range of tax choices, including income, sales, fuel, and other vehicle taxes. It is time for Canadian cities to have access to some of those choices as well,” they write.

Here are some of the options the report suggests to help fill Toronto’s piggy bank.

Road pricing

The authors argue toll roads can reduce congestion and pollution and raise funds for public transit.

What it could mean for Toronto:

Estimates suggest tolling the Don Valley Parkway and the Gardiner could bring in as much as $120 million a year.

Parking charges

Slack and Kitchen suggest parking taxes can help ease congestion and the cost of traffic enforcement for cities.

What it could mean for Toronto:

Coun. Joe Mihevc has said a dollar-a-day levy on commercial parking spaces could bring in $500 million annually.

Personal income taxes

In Canada, only the federal and provincial governments levy income tax. However, other cities, including New York, take a share of residents’ earnings.

What it could mean for Toronto:

Depending on the structure, the income tax could be deducted from everyone who lives in the city, or it could be collected by employers, thereby affecting those who work in the city.

Municipal sales tax

Adding a tax to local purchases affects both residents and visitors in town to do some shopping. Studies from the U.S. show that if all cities within a region impose this tax it doesn’t have a negative affect on any one city’s economy.

What it could mean for Toronto:

Coun. Shelley Carroll estimates adding one per cent to the HST on all local purchases would raise $500 million every year.

Fuel Tax:

A tax on fuel provides an incentive for people to switch to more efficient cars or use public transit, say Slack and Kitchen. But they conclude that a fuel tax is not beneficial in the long term, as millennials are driving less than their parents.

What it could mean for Toronto:

The province currently shares two cents per litre of its gas tax revenues with municipalities. However, cities like Calgary and Edmonton get as much as 4.5 cents per litre.

Vehicle registration fee:

This would introduce a fixed fee for owning a vehicle in the city.

Toronto introduced a $60 levy on passenger and light commercial vehicles on September 1, 2008, but scrapped it in January 2011.

What it could mean for Toronto:

Toronto’s former vehicle registration tax raised $64 million annually, according to the city.

Hotel and motel tax

This would add a fee for tourists and business travellers staying in the city’s hotels. Slack and Kitchen say it’s unclear whether the tax deters tourists from visiting the city.

What it could mean for Toronto:

It’s something Mayor John Tory is interested in exploring. It’s also one of the more politically palatable revenue tools, as it’s not paid by those living in the city.

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