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East York people, places, events & insights

EAST YORK ADVOCATE #027: 2017 budget debunks claims of tax savings from amalgamation

At the beginning of 2017, after deciding to aim for increasing our property taxes 2% to keep pace with inflation, our Toronto City Council was faced with a $91 million deficit between its proposed spending and its expected revenue.

Now as you may know, a municipality, unlike the federal and provincial governments, is legally required to balance its operating budget each and every year. Toronto can borrow money for capital projects by issuing bonds or debentures, but it is legally forbidden to pay for its annual operating expenditures in this fashion.

Historically municipalities paid only for “hard” services such as garbage collection, roads, sidewalks, sewers, fire, police protection etc. from property taxes, while the senior levels of government paid for income redistributing “soft” services from graduated income taxes geared to income. Today Toronto is required legally to pay for both soft services as well as hard services from the property tax and user fees, neither of which is geared to income. Although the city council continues to add additional soft services to the budget, ($40.4 million in new or improved services this year) much of the deficit problem has resulted from federal and provincial downloading and from amalgamation.

In 1995, federal Liberal Finance Minister Paul Martin reduced federal transfer payments to the provinces for health care, post-secondary education and welfare by 40% as well as freezing funding for assisted housing in order to balance the federal budget. Shortly after that, the Progressive Conservative provincial government of Mike Harris downloaded assisted housing, welfare and other soft services to the Ontario municipalities in order to help balance the provincial budget.

At the same time the provincial government created our present megacity of Toronto by amalgamating East York and the other 5 municipalities that previously made up what was known as The Municipality of Metropolitan Toronto. In order to justify the amalgamation that was opposed by 80% of the residents according to plebiscites conducted within their respective borders by each of the Metro municipalities, the Province commissioned the consulting firm of KPMG to produce a report to show what the savings would be, giving them only 30 days to do so.

The KPMG Report concluded that the provincial downloading was revenue neutral and that amalgamation would result in property tax savings of $535-865 million over 3 years. Despite the savings forecast in the KPMG report, Toronto actually had to borrow $200 million from the Province in order to balance its budget in its first year as an amalgamated city. Not only were there no savings from the Toronto amalgamation, but a recent report by the Fraser Institute concluded that no municipal amalgamation has ever resulted in tax savings.

In the four years prior to amalgamation East York had no increase in its property tax bill, despite the fact that unlike our megacity it was paying for its capital acquisitions from current revenue; it would have been virtually debt free in two years time but for amalgamation.
Now our city Council is engaged in turning Toronto into a “World Class” city rather than a liveable city as it was before amalgamation.

Hey Listen Up!