Addressing the City of Toronto's flawed funding structure


Anne Golden
President and CEO,
The Conference Board of Canada

Remarks
Measuring Toronto's Fiscal Capacity: An Executive Summary
June 7, 2005

Thank you for the opportunity to speak today. I'm pleased that the City of Toronto asked the Conference Board to conduct this study and happy to be here with Mayor David Miller for its release.

• Toronto will have an annual shortfall of about $1.1 billion, starting in 2006 (when the infrastructure program starts) through to 2025.
• Our assumptions throughout are very, very conservative. For instance, our model assumes that the cap on the business property taxes is removed. Otherwise, given that the residential assessment base will slow in growth over the next two decades because of demographics, without removing this cap, the deficit would grow more dramatically than we have predicted here.
• Ottawa and Queen's Park have begun to respond to Toronto's fiscal crunch, but committed funding to date is not enough to sustain adequate service levels and address the infrastructure gap. For example, even with the share of the gas tax, this new source of revenue will grow by just 1.6 per cent annually between 2008 and 2025 (by comparison, both sales tax and income tax revenue are expected average growth of 4 per cent annually). If the Jack Layton amendment to the federal budget is implemented, this could mean an extra $200 million over two years for Toronto.
• Our assumption on the infrastructure gap is also conservative - based on $60 billion for Canada as a whole. We use, as the city's share, a per-capita formula, i.e. $7.2 billion.
• This study combines deficits related to both operating and capital spending. Normally, one doesn't combine both for business strategy because they are financed differently. But because this study focuses on Toronto's fiscal capacity relative to total fiscal obligations, it's valid.
• Another assumption is "business as usual". Of course, things can and will change, e.g. user fees, grants, etc.
• Our conclusion is clear: without significant uploading or access to growth taxes, the fiscal situation for Toronto is unhealthy and out of hand. That is, the annual deficit is unsupportable. The operating deficit will exceed a billion by 2015 and the debt service will consume close to 40 per cent of property tax revenues-way above the City of Toronto's benchmark (25 per cent). ¹

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