with many Ontario With municipalities eyeing property tax increases, experts say landlords across the province can expect to see higher tax bills this year due to inflation, the cost of the pandemic and recent provincial changes to development fees.
The proposed hike would be another hit on the wallets of consumers, who are feeling the pinch of inflation in several cost-of-living areas such as groceries, gas and mortgage rates.
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in toronto, homeowners can expect to see a 5.5 percent increase in property taxes — an average increase of $183 before accounting for other increases set out in the budget proposal. This is in line with other projected bumps in Hamilton, Thunder Bay and Waterloo.
Enid Slack, director of the University of Toronto’s Institute on Municipal Finance and Governance, says cities and consumers are facing the same problem.
“Inflation is affecting all our expenses and it affects (cities’) expenses as well,” she said.
Unveiling his proposed budget this week, Toronto Mayor John Tory acknowledged the tax hike came at an inappropriate time as residents face rising costs of living in the increasingly unaffordable city. But he said it was still below the city’s inflation rate of 6.6 percent.
“I wish it could be less, because right now any increased cost is too much for people to bear,” he said. “We have worked to keep those increases as low as possible.”
Inflation is hitting city budget line items ranging from debt financing to construction costs. Hamilton budget documents indicate the city expects to increase its annual fuel budget by about 50 percent, while the Tories have said the increase in fuel costs alone has added $46 million to Toronto’s proposed budget.
Slack said the ongoing effects from COVID-19 are another factor, as municipalities see decreased revenue — especially from transit — while spending on social services, public health and shelter costs related to the pandemic continues.
In Toronto’s case, the cost of the pandemic has left a $1.4 billion hole and relief is expected to trickle down to other levels of government.
“It is not clear that the money is coming for 2023. There are still losses resulting from COVID. There is still pressure to invest in infrastructure. And so the property tax increase has to be viewed in that context,” Slack said.
David Amborski, a professor at Toronto Metropolitan University’s School of Urban and Regional Planning, said the impact of the pandemic on city budgets has been “significant.”
“You have to think about everything in that context,” he said. “It forces you to think very carefully about the delivery of services.”
A 2019 study by Toronto Metropolitan University found that Toronto had the lowest property tax rates in Southern Ontario as a measure of both property value and household income. It suggested the city could raise its property tax rate by 20 per cent and still be in the middle range of those imposed by municipalities in the Greater Toronto and Hamilton region.
Meanwhile, some municipalities in the province have instructed staff to implement smaller increases.
Sudbury has asked staff to draft a budget with no more than a 3.7 percent tax increase, while Peel Region has proposed a 2.8 percent increase. And Ottawa, following a campaign pledge from newly elected Mayor Mark Sutcliffe, instructed city staff to increase property taxes by 2.5 per cent.
Amborsky cautioned municipalities that are seeking to keep property taxes below the rate of inflation.
“It makes little sense because one of the major expenses is wages and salaries,” he said.
“You have to at least keep close to the rate of inflation, so you’re not holding back in terms of your service level, in terms of quality or expanding the range of services to the public or what they want.”
Some municipalities have also argued that the changes made by the Ontario government to freeze, reduce and waive fees paid by developers to build affordable housing, non-profit housing and certain rental units Will lead to higher property taxes. Those fees go to municipalities to pay for services to support the new homes, such as roads and community centres.
“A number of municipalities, certainly in the Greater Toronto and Hamilton area, have said they will lose some significant revenue and raise property taxes as a result,” Slack said.
It’s not just Ontario’s cities that are considering raising property taxes. Others across Canada are following suit – Edmonton has proposed a 4.96 per cent increase while Vancouver is eyeing a five per cent increase.
Slack said there is a more fundamental problem with municipal finances that predates recent inflation and pressures related to the pandemic. Municipalities are tasked with providing a wide range of services with limited ways to raise revenue, and city infrastructure has paid its price.
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Unless cities set aside more money, the backlog in maintenance costs for aging infrastructure — known as “state of good repair” — will skyrocket, she said. This is already the case in Toronto, where those costs are projected to nearly double over the next decade.
“I think instead of asking the federal, provincial governments for money all the time, they should be asking about other ways to raise revenue, like access to income and sales taxes,” Slack said. “So that’s how we solve a long-term structural problem.”
Speaking at an unrelated news conference on Wednesday, Ontario Premier Doug Ford said municipalities do not need to raise taxes and should instead “increase efficiency.”
“Government as a whole, municipal, provincial, federal, they don’t have an income problem,” he said in Toronto.
“They have a spending problem. If every government ran it, like in a business … If you all know, run it the way (Chairman) Jeff (Leger) runs Shoppers Drug Mart, we’re going to run things.” run more efficiently.