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From the Globe, Toronto Section
VOTESMART: PROPERTY TAXES
Brace yourself: Your bill's on the rise
Sure, you already think you're paying too much. But at least you don't live in Ajax. In the first of a series on election issues, ANTHONY REINHART examines the GTA tax gap
ANTHONY REINHART
A question begs an answer on a street called Borrows, just north of Steeles.
Mike Lee wonders why his property taxes are higher in Vaughan than they would be in Toronto, just a stone's throw to the south, for a home of the same value. He will pay $4,073 this year for his home, which has been assessed at $415,000. If he lived in Toronto, he would pay $3,448.
"It's a little hard paying four grand for property tax," Mr. Lee said, standing in the driveway of his 2,400-square-foot suburban home. "In a way, it bothers me."
The answer is simple: The Toronto tax system greatly favours homeowners at the expense of businesses. While business owners in the 905 suburbs pay 2½ times the residential tax rates in their communities, Toronto businesses pay four times the residential rate, absorbing more of the tax burden.
To a savvy Toronto politician hoping for re-election on Nov. 13, this disparity would seem a situation worth preserving. After all, businesses don't vote, but homeowners do -- and they are not likely to be receptive to arguments that their taxes are too low, when all they seem to do is leap higher with each new provincial assessment or city budget.
But, in a 27-15 vote last year, Toronto councillors approved a plan to transfer more of the burden onto homeowners -- albeit ever so slowly, over 15 years -- and reduce the tax pressure on businesses in an effort to stem a years-long exodus of jobs out of the city and into the suburbs. Businesses and homeowners alike will still face annual tax increases at budget time, but the homeowners will face larger hikes than the businesses, so that when the 15 years is up, Toronto's business taxes will align, more or less, with those in the 905.
This shift is supported by Mayor David Miller and seems antithetical to his left-leaning supporters downtown, who don't mind higher tax rates for business -- especially if it means lower rates on their own homes.
But not even Mr. Miller could deny that a relatively sweet deal for residential taxpayers has a distinctly sour side -- the erosion of the business tax base, which, in turn, puts upward pressure on homeowners' taxes to make up the losses and preserve cherished city services. "It will be a lot worse for residents if they have to pay for these without a good employment base in this city," Mr. Miller said after the vote last October. "We have to address the imbalance between the 416 and the 905."
Councillor and current mayoral challenger Jane Pitfield also supported the move, but has since pledged to shorten the transition to five years from 15, with a major caveat aimed at averting the wrath of homeowners: that the business tax rate cut be funded without shifting the burden onto the residential taxpayer.
Ms. Pitfield has so far been unclear how she would cover the loss of business taxes -- by her estimates about $290-million a year once the transition to Greater Toronto Area levels is complete.
More clear are the signs that the ratio of employers to residents is changing in Toronto. Most of the many construction cranes operating in the city have been building condominiums, not office buildings. So while the city's population continues to grow, the number of jobs has been dropping by about 1 per cent each year for several years.
The Toronto Office Coalition says the job market has shed 100,000 positions since 1990, while the 905 has gained 800,000 jobs in the same period. Pointing to ever-increasing outbound traffic during the morning rush hours, business groups have been warning loudly that the city is becoming a bedroom of the suburbs, in a stark reversal of the conventional pattern.
Property-tax rates are just one factor among many that business people weigh when deciding where to locate, but it's clear that Toronto's distorted business-to-residential ratio does not help. (Adding insult to injury, Toronto businesses are also charged a disproportionate amount of education taxes by the province, an imbalance that costs them $120-million annually.) Last year, Schawk Canada, a graphics firm that serves the packaging and advertising industries, consolidated its three Toronto locations into one 50,000-square-foot facility in Mississauga. It had been in Toronto for 35 years. "There was everything right about our decision," said Bob Cockerill, the company's president, citing Mississauga's lower property taxes as a key benefit to moving out of Toronto.
"There's no way of getting around the fact that the [residential] tax rate in Toronto is lower" than in the suburbs, said Enid Slack, director of the Institute on Municipal Finance and Governance at the University of Toronto's Munk Centre for International Studies. "People need jobs, and if businesses are leaving, are we benefiting the residential taxpayer in the long run?"
In her idea of a perfect world, each class of taxpayer would pay an amount equal to the cost of the city services it consumes. If city councillors were to adopt that position, however, it would mean businesses would pay substantially less than homeowners, not more -- and certainly not four times more.
So how did things get so out of whack?
Before 1998, residential tax rates in Ontario municipalities had to equal 85 per cent of the non-residential rate. But everything changed that year, when the province moved to market-value assessment, and all properties in Ontario were to be evaluated based on their market value as of June, 1996.
The trouble was, Toronto had neglected to update its assessments since the late 1940s, which effectively shielded pre-1940s downtown homes from major tax increases, while saddling owners of newer homes outside the core with comparatively higher taxes based on their values when built.
Over those 50 years, residential property increased in value much more quickly than non-residential property, so when the province introduced the current system, reassessments caused downtown taxes to soar.
Since this new regime allowed municipalities to shift the overall tax burden among various classes of taxpayers, Toronto politicians opted to soothe sticker-shocked, voting homeowners at the expense of businesses. Still, controversy dogs the new provincial system, which attracts frequent complaints of inaccurate assessments. In June, the Ontario government suspended new assessments for two years, pending changes recommended by the provincial ombudsman.
Ms. Slack believes that Toronto's 15-year plan to bring more balance to its tax regime is a positive step. "I might say, 'Go faster,' " she said, "but I would say, 'You're on the right track.' "
In campaigning on a pledge to go faster, Ms. Pitfield has clearly seized on the tax imbalance as an urgent issue, though her parallel promise -- to accomplish this without raising residential rates -- leaves questions about where the money will come from. She has suggested that Queen's Park could soon take back full responsibility for social programs, which now cost Toronto $250-million a year for subsidized housing alone, plus more than $200-million in welfare spending.
This summer, Premier Dalton McGuinty launched a review of municipal programs the province should fund, but the results aren't due until 2008, and even then, nothing is guaranteed.
Another cause of irritation in 905 is that, in the late 1990s, the Conservative government downloaded 20 per cent of social housing and welfare costs to municipalities. Since Toronto is home to most of the region's subsidized housing stock and social service agencies, it draws residents from beyond city boundaries who need those services. To ease Toronto's disproportionate burden, the Harris government in 1998 ordered that the costs be pooled across the region.
Since then, York, Peel, Halton and Durham have forked over an estimated $1.6-billion in transfers to the city -- York alone expects to pay just over $90-million this year -- all the while having to fund an increasing array of services in their own fast-growing communities.
"We're not blaming Toronto, but having said that, the money is flowing south in a very big way for us," said Bill Fisch, chairman of York Region. "We're the largest payer, and it's the second-largest item on our budget . . . and we have no control over the money that's being spent in any way" once it reaches Toronto.
Mr. Fisch agrees that the solution lies with Ontario -- the only province in Canada that still makes municipalities fund social programs through property taxes. But, in light of the ongoing pooling charges, it is all the more grating to 905 ears when Toronto asks Queen's Park for extra money at budget time.
Critics in the 905 say these so-called bailouts have enabled Toronto to hold residential property tax increases to 3 per cent, while many 905 homeowners have seen hikes in the 5-per-cent range. Since Toronto's residential rates are already lower than those in the 905, some in the suburbs resent what looks to them like another subsidy for pampered Torontonians, disregarding mitigating circumstances such as Toronto's greater density, which allows for more efficient delivery of municipal services.
"It does provide a lot of angst for people outside the Toronto area that feel that maybe that isn't the right way to do your business," Mr. Fisch said.
He conceded that the tax imbalance means business is certainly booming in York. Vaughan, which lies within York, now brings in more workers from Toronto each day than it sends the other way.
Still, Mr. Fisch said Toronto's distorted tax structure "isn't good for anybody" because all that commuting puts a strain on roads and increases demand for costly transit expansion.
Toronto's tax imbalance with 905 and its side effects ultimately point to the need for all politicians "to really see the Toronto area for what it is: a single, massive, sprawling, integrated urban region," said Myer Siemiatycki, chairman of Ryerson University's politics and public administration faculty.
Further amalgamation, after the province's unpopular forced marriage of the six Metro Toronto boroughs in 1998, would admittedly "be a dangerous path for politicians," Dr. Siemiatycki said. "But the reality is, for the social and economic strength of the Toronto area, it's looking at the whole urban area as a single integrated region that I think is the future of Toronto."
While property taxes have continued to rise along with complaints about declining city services since amalgamation, a more united Greater Toronto would be in a better position to wrest more taxing power from the province, and get Queen's Park to take back housing and welfare costs.
"There's the diminishing pie that everyone's sort of struggling over," Dr. Siemiatycki said, "and I think that the optimal response is to challenge that state of affairs. At a certain point, you have to frame it as, 'We deserve better, and we deserve better because somehow there is something special, distinct, important happening here.'
"But the 'here' doesn't end at Steeles Avenue."
The numbers game
Residential Ontario tax rates (as percentages):
Oshawa: 1.652
Brock 1.476
Clarington 1.334
Whitby 1.327
Ajax 1.324
Barrie 1.315
Pickering 1.293
Scugog 1.284
Georgina 1.281
Uxbridge 1.187
Brampton 1.145
Aurora 1.083
Newmarket 1.082
East Gwillimbury 1.078
King 1.034
Burlington 1.033
Whitchurch-Stouffville 0.999
Halton Hills 0.997
Markham 0.988
Oakville 0.987
Richmond Hill 0.986
Vaughan 0.982
Mississauga 0.972
Caledon 0.936
Milton 0.900
Toronto 0.831
Another reason not to move
to Oshawa
How much do property taxes vary across the GTA? Here's what you'll pay for a home assessed at$450,000 in:
Oshawa: $7,435
Brampton: $5,154
Markham: $4,446
Mississauga: $4,376
Toronto: $3,739
AoD
VOTESMART: PROPERTY TAXES
Brace yourself: Your bill's on the rise
Sure, you already think you're paying too much. But at least you don't live in Ajax. In the first of a series on election issues, ANTHONY REINHART examines the GTA tax gap
ANTHONY REINHART
A question begs an answer on a street called Borrows, just north of Steeles.
Mike Lee wonders why his property taxes are higher in Vaughan than they would be in Toronto, just a stone's throw to the south, for a home of the same value. He will pay $4,073 this year for his home, which has been assessed at $415,000. If he lived in Toronto, he would pay $3,448.
"It's a little hard paying four grand for property tax," Mr. Lee said, standing in the driveway of his 2,400-square-foot suburban home. "In a way, it bothers me."
The answer is simple: The Toronto tax system greatly favours homeowners at the expense of businesses. While business owners in the 905 suburbs pay 2½ times the residential tax rates in their communities, Toronto businesses pay four times the residential rate, absorbing more of the tax burden.
To a savvy Toronto politician hoping for re-election on Nov. 13, this disparity would seem a situation worth preserving. After all, businesses don't vote, but homeowners do -- and they are not likely to be receptive to arguments that their taxes are too low, when all they seem to do is leap higher with each new provincial assessment or city budget.
But, in a 27-15 vote last year, Toronto councillors approved a plan to transfer more of the burden onto homeowners -- albeit ever so slowly, over 15 years -- and reduce the tax pressure on businesses in an effort to stem a years-long exodus of jobs out of the city and into the suburbs. Businesses and homeowners alike will still face annual tax increases at budget time, but the homeowners will face larger hikes than the businesses, so that when the 15 years is up, Toronto's business taxes will align, more or less, with those in the 905.
This shift is supported by Mayor David Miller and seems antithetical to his left-leaning supporters downtown, who don't mind higher tax rates for business -- especially if it means lower rates on their own homes.
But not even Mr. Miller could deny that a relatively sweet deal for residential taxpayers has a distinctly sour side -- the erosion of the business tax base, which, in turn, puts upward pressure on homeowners' taxes to make up the losses and preserve cherished city services. "It will be a lot worse for residents if they have to pay for these without a good employment base in this city," Mr. Miller said after the vote last October. "We have to address the imbalance between the 416 and the 905."
Councillor and current mayoral challenger Jane Pitfield also supported the move, but has since pledged to shorten the transition to five years from 15, with a major caveat aimed at averting the wrath of homeowners: that the business tax rate cut be funded without shifting the burden onto the residential taxpayer.
Ms. Pitfield has so far been unclear how she would cover the loss of business taxes -- by her estimates about $290-million a year once the transition to Greater Toronto Area levels is complete.
More clear are the signs that the ratio of employers to residents is changing in Toronto. Most of the many construction cranes operating in the city have been building condominiums, not office buildings. So while the city's population continues to grow, the number of jobs has been dropping by about 1 per cent each year for several years.
The Toronto Office Coalition says the job market has shed 100,000 positions since 1990, while the 905 has gained 800,000 jobs in the same period. Pointing to ever-increasing outbound traffic during the morning rush hours, business groups have been warning loudly that the city is becoming a bedroom of the suburbs, in a stark reversal of the conventional pattern.
Property-tax rates are just one factor among many that business people weigh when deciding where to locate, but it's clear that Toronto's distorted business-to-residential ratio does not help. (Adding insult to injury, Toronto businesses are also charged a disproportionate amount of education taxes by the province, an imbalance that costs them $120-million annually.) Last year, Schawk Canada, a graphics firm that serves the packaging and advertising industries, consolidated its three Toronto locations into one 50,000-square-foot facility in Mississauga. It had been in Toronto for 35 years. "There was everything right about our decision," said Bob Cockerill, the company's president, citing Mississauga's lower property taxes as a key benefit to moving out of Toronto.
"There's no way of getting around the fact that the [residential] tax rate in Toronto is lower" than in the suburbs, said Enid Slack, director of the Institute on Municipal Finance and Governance at the University of Toronto's Munk Centre for International Studies. "People need jobs, and if businesses are leaving, are we benefiting the residential taxpayer in the long run?"
In her idea of a perfect world, each class of taxpayer would pay an amount equal to the cost of the city services it consumes. If city councillors were to adopt that position, however, it would mean businesses would pay substantially less than homeowners, not more -- and certainly not four times more.
So how did things get so out of whack?
Before 1998, residential tax rates in Ontario municipalities had to equal 85 per cent of the non-residential rate. But everything changed that year, when the province moved to market-value assessment, and all properties in Ontario were to be evaluated based on their market value as of June, 1996.
The trouble was, Toronto had neglected to update its assessments since the late 1940s, which effectively shielded pre-1940s downtown homes from major tax increases, while saddling owners of newer homes outside the core with comparatively higher taxes based on their values when built.
Over those 50 years, residential property increased in value much more quickly than non-residential property, so when the province introduced the current system, reassessments caused downtown taxes to soar.
Since this new regime allowed municipalities to shift the overall tax burden among various classes of taxpayers, Toronto politicians opted to soothe sticker-shocked, voting homeowners at the expense of businesses. Still, controversy dogs the new provincial system, which attracts frequent complaints of inaccurate assessments. In June, the Ontario government suspended new assessments for two years, pending changes recommended by the provincial ombudsman.
Ms. Slack believes that Toronto's 15-year plan to bring more balance to its tax regime is a positive step. "I might say, 'Go faster,' " she said, "but I would say, 'You're on the right track.' "
In campaigning on a pledge to go faster, Ms. Pitfield has clearly seized on the tax imbalance as an urgent issue, though her parallel promise -- to accomplish this without raising residential rates -- leaves questions about where the money will come from. She has suggested that Queen's Park could soon take back full responsibility for social programs, which now cost Toronto $250-million a year for subsidized housing alone, plus more than $200-million in welfare spending.
This summer, Premier Dalton McGuinty launched a review of municipal programs the province should fund, but the results aren't due until 2008, and even then, nothing is guaranteed.
Another cause of irritation in 905 is that, in the late 1990s, the Conservative government downloaded 20 per cent of social housing and welfare costs to municipalities. Since Toronto is home to most of the region's subsidized housing stock and social service agencies, it draws residents from beyond city boundaries who need those services. To ease Toronto's disproportionate burden, the Harris government in 1998 ordered that the costs be pooled across the region.
Since then, York, Peel, Halton and Durham have forked over an estimated $1.6-billion in transfers to the city -- York alone expects to pay just over $90-million this year -- all the while having to fund an increasing array of services in their own fast-growing communities.
"We're not blaming Toronto, but having said that, the money is flowing south in a very big way for us," said Bill Fisch, chairman of York Region. "We're the largest payer, and it's the second-largest item on our budget . . . and we have no control over the money that's being spent in any way" once it reaches Toronto.
Mr. Fisch agrees that the solution lies with Ontario -- the only province in Canada that still makes municipalities fund social programs through property taxes. But, in light of the ongoing pooling charges, it is all the more grating to 905 ears when Toronto asks Queen's Park for extra money at budget time.
Critics in the 905 say these so-called bailouts have enabled Toronto to hold residential property tax increases to 3 per cent, while many 905 homeowners have seen hikes in the 5-per-cent range. Since Toronto's residential rates are already lower than those in the 905, some in the suburbs resent what looks to them like another subsidy for pampered Torontonians, disregarding mitigating circumstances such as Toronto's greater density, which allows for more efficient delivery of municipal services.
"It does provide a lot of angst for people outside the Toronto area that feel that maybe that isn't the right way to do your business," Mr. Fisch said.
He conceded that the tax imbalance means business is certainly booming in York. Vaughan, which lies within York, now brings in more workers from Toronto each day than it sends the other way.
Still, Mr. Fisch said Toronto's distorted tax structure "isn't good for anybody" because all that commuting puts a strain on roads and increases demand for costly transit expansion.
Toronto's tax imbalance with 905 and its side effects ultimately point to the need for all politicians "to really see the Toronto area for what it is: a single, massive, sprawling, integrated urban region," said Myer Siemiatycki, chairman of Ryerson University's politics and public administration faculty.
Further amalgamation, after the province's unpopular forced marriage of the six Metro Toronto boroughs in 1998, would admittedly "be a dangerous path for politicians," Dr. Siemiatycki said. "But the reality is, for the social and economic strength of the Toronto area, it's looking at the whole urban area as a single integrated region that I think is the future of Toronto."
While property taxes have continued to rise along with complaints about declining city services since amalgamation, a more united Greater Toronto would be in a better position to wrest more taxing power from the province, and get Queen's Park to take back housing and welfare costs.
"There's the diminishing pie that everyone's sort of struggling over," Dr. Siemiatycki said, "and I think that the optimal response is to challenge that state of affairs. At a certain point, you have to frame it as, 'We deserve better, and we deserve better because somehow there is something special, distinct, important happening here.'
"But the 'here' doesn't end at Steeles Avenue."
The numbers game
Residential Ontario tax rates (as percentages):
Oshawa: 1.652
Brock 1.476
Clarington 1.334
Whitby 1.327
Ajax 1.324
Barrie 1.315
Pickering 1.293
Scugog 1.284
Georgina 1.281
Uxbridge 1.187
Brampton 1.145
Aurora 1.083
Newmarket 1.082
East Gwillimbury 1.078
King 1.034
Burlington 1.033
Whitchurch-Stouffville 0.999
Halton Hills 0.997
Markham 0.988
Oakville 0.987
Richmond Hill 0.986
Vaughan 0.982
Mississauga 0.972
Caledon 0.936
Milton 0.900
Toronto 0.831
Another reason not to move
to Oshawa
How much do property taxes vary across the GTA? Here's what you'll pay for a home assessed at$450,000 in:
Oshawa: $7,435
Brampton: $5,154
Markham: $4,446
Mississauga: $4,376
Toronto: $3,739
AoD