Wednesday, February 11, 2009

4% tax hike? It's 10%, Miller's critics charge


February 11, 2009
Vanessa Lu

Toronto Mayor David Miller unveiled a budget yesterday that will hike homeowner taxes by 4 per cent. But the impact of hidden increases more than doubles the pain, say opposition councillors.

"We believe the tax increase is 10 per cent, and that's what we should be talking about," Councillor Denzil Minnan-Wong told reporters. "Those are the fees and charges that we've been seeing charged to the taxpayers and families across the city."

The budget doesn't acknowledge the rise in water bills, for example – they're going up 9 per cent this year – and the new vehicle registration and garbage collection fees are also starting to bite, he said.

"We would like the mayor and the budget committee to admit that, and to tell the public that it is a 10 per cent tax increase," said Minnan-Wong (Ward 34, Don Valley East).

The city's $8.7 billion operating budget – up $500 million from a year ago – was unveiled by Miller and budget chief Shelley Carroll. It offers only modest increases to some programs but promises there won't be any major service cuts.

On an average home assessed at $387,000, the hike translates into an $89 increase in the tax bill – which the mayor says works out to about a quarter a day.

Pressures caused by the recession – including higher welfare rates and lower revenues from a tumbling housing market – mean this year's budget is focused on maintaining the status quo.

Although the federal government has promised tax breaks to voters as a way to stimulate the economy, the city has few such tools available, given that it can't run a deficit.

But it must deal with economic fallout anyway: It's setting an extra $32 million to cover its 20 per cent share of rising welfare costs. The projected monthly caseload this year is 90,000, up from last year's 76,000. Things are already looking grim: the number was 81,000 in January, expected to grow to 90,000 by June and 100,000 by the end of the year.

The budget doesn't offer any relief to residents who may have suddenly lost a job.

But low-income seniors and disabled residents whose income falls below a certain threshold might qualify for a cancellation or deferral of the property tax hike.

"We're asking people who are in a different position, who are employed, to pay around 25 cents a day to make sure that we freeze TTC fares, that we build a great city, and that we help the most vulnerable," Miller told reporters yesterday.

"The worst thing we could possibly do is to start cutting city services," he said, arguing that people depend on public services like libraries.

"If you start cutting city services because of an overreaction to a recession, you make things far worse."

Opposition councillors, and vocal citizen critics like Kevin Gaudet of the Canadian Taxpayers Federation weren't mollified.

At one point after the budget release, Councillor Adam Vaughan got into a shouting match with Gaudet, who'd called him an overpaid "fat cat" out of touch with the pain the tax hike will inflict.

Vaughan shot back during the 20-minute exchange that Gaudet speaks for only a small interest group and gets his numbers wrong.

Councillor Karen Stintz (Ward 16, Eglinton-Lawrence) insisted that the "cumulative impacts of the increases of this administration this year alone are in fact $395 on the average home." Here's her breakdown of the increase:

* Water rate increase $47.
* Vehicle tax (assuming 1.5 cars) $90.
* Garbage fees (medium bin) $133.
* Pet licence for a cat or dog, $25.
* Shift in tax burden from business to residential, $11.
* Property tax increase, $89.

City officials found $102 million in savings this year, mostly from not filling vacant positions. A $238 million windfall from the province – a one-time transfer for infrastructure investment gleaned from last year's Ontario surplus – is balancing much of the budget. But there will be no such cheque next year.

As in past years, the city is raiding its reserves – this time to the tune of $43 million – and hiking user fees to generate $6.6 million.

Residents will be hit with an across-the-board 3.7 per cent hike on recreation fees, from swimming lessons to ice rink time. Parking permits are expected to rise more than 12 per cent.

Even admission to the Toronto Zoo is going up nearly 7 per cent to $21 for adults, $15 for seniors and $13 for children ages 4 to 12.

While residents are facing a 4 per cent property tax hike, businesses will only pay one-third of that, because of a long-term policy of easing commercial property tax rates. Overall, the city will generate an extra $83 million.

Some residents will be hit with a double whammy because of property reassessment. Under current value assessment, if their property value has increased faster than the city's average, they will face a bigger hike. Those below the average may get a tax break.

In any case, the city gets no additional revenue from assessment changes – and final numbers are not expected until next week.

The worsening real estate market hurts the city's books, since it was counting on the controversial land transfer tax to deliver steady revenues. City manager Joe Pennachetti said only $160 million is expected this year, down significantly from initial projections of $240 million.

Revenues from the city's vehicle registration fee are also forecast to drop to $46 million this year, down from original estimates of $56 million.

The city ended 2008 with net outstanding debt of about $2.3 billion, projected to grow to about $3 billion by 2013. Debt repayments this year will be $438 million.

One bright spot in the city's books is growth in new buildings, expected to generate $40 million in extra property taxes. One-third of that is from commercial buildings.

Police services is the largest single item in the budget, at $855 million. That's up nearly $33 million from last year, mostly to cover the recent settlement reached through arbitration. Officers will receive a 10 per cent hike over the three-year deal.

Given that salaries and benefits make up nearly half of the budget, the city will also be under pressure this year as negotiations get underway with two main unions, locals 79 and 416 of the Canadian Union of Public Employees.

Miller refused to say what sort of pay increase city workers should expect, but said some money has been set aside.

All departments were ordered to come in with no increases to their budgets. Some met the mayor's request, while others did not, especially in such divisions as Toronto Fire and Toronto EMS that deliver round-the-clock services.

The legal department has slashed its budget by $500,000, or 2.4 per cent, this year, which Pennachetti attributed in part to cutting back on high-priced outside lawyers.

"We're even looking at where it costs $500 an hour to hire external lawyers," he said. "What (the city solicitor) is doing now is hiring somebody for a lot less, and you see savings."

The budget will be considered in the coming weeks, with time set aside for public input, and a final vote by city council on March 31 and April 1.

With files from John Spears, Paul Moloney and Donovan Vincent

Read more about the tax hike here and here.

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