Tembo Financial November 30, 2020 No Comments

Torontonians continue to pay some of the lowest proportional property tax rates in Ontario, despite an above inflation increase that was passed by City Council earlier this year. Today Torontonians pay 0.6% of their home values in property taxes compared to 1.77% in Windsor, the highest in the province, and 1.5% in Thunder Bay. The average property tax bill in Toronto ranges from $3,000 – $5,000 a year, depending on home values. $740 of that bill goes to fund Toronto’s $1.1B a year police force, $540 goes to fund the TTC, and $400 goes to pay for long term capital projects. The GTA generally has much lower property taxes than rural and outlying regions of the province. 

We will see how COVID will affect these rates, given that Toronto is now looking at at least a $1.5B financial shortfall from the impact of the pandemic. The worst case financial hit to Toronto could be nearly $3B. The City has a GDP, or economic output of $250B, so it has the economic base to support going into debt to manage the difficulties of COVID. However, due to provincial rules and laws, the city has considerable limits on how much it can borrow. Those rules could be changed or loosened up for the city in lieu of a provincial bailout – which not only would be extremely expensive but would be looked upon with anger by other cities who are also facing serious financial and economic problems. One bailout to one city will lead to other cities asking for the same. Toronto has been leaning on debt and green bonds to patch up the city’s huge infrastructure, transit, and capital repairs backlogs that total many billions of dollars. This dependence on debt and debt servicing will only grow. 

Toronto’s growing tech. and financial sectors have helped the city enjoy significant prosperity (and high housing costs) prior to COVID, and will be counted on to support recovery from the pandemic. The city’s politicians have pointed to the strength of these sectors are reasons to bailout the city – claiming that its economy is interconnected to the rest of the country and a key driver of revenue for provincial and federal governments. Mayor Tory has repeatedly spelled out that deep cuts to services will have to go ahead if the City does not receive a bailout (firing police officers, gutting bus routes, and cutting down road funding – but not lowering the high salaries of senior bureaucrats or reducing the city’s 55,000 bureaucrat payroll through attrition). 

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