Looking Forward: Municipal Property Taxes Need Revision

by Markus O’Brien Fehr, Chief of Staff

It’s never the best week when the property tax bill arrives. Along with many of you, I received my interim bill this week. As Council also prepares for its budget debate, the big question that always comes up is: “Why do I keep paying more and seem to get less in return?” The answer: Because it’s true.

In the years since amalgamation, property taxes have been frozen by City Council in four of those years – and increased by the rate of inflation in the others. This has meant over time, the City’s buying power has decreased, resulting in cuts to service levels in many areas.

But our taxes have gone up much more than that. Why? Because the value of property in Willowdale has increased more than the average of the rest of the city.

Under Ontario law, a city is required to establish a budget it needs to pay for services in that year, but it’s actually your property value, compared to all other properties in the City, that determines what portion of the City’s total budget you pay.

Every four years you receive a property assessment from the provincial agency MPAC. If your property value has increased more than the city average, this will result in a larger amount owing on your tax bill. As an example, if the average property in Toronto has increased 10%, and yours increased 30%, your tax bill will see a 20% increase phased in over the four year cycle.

This doesn’t mean that the City is taking in more money due to property values. Properties increasing at only the average rate will see no increase to their tax bill from their MPAC assessment. Properties increasing in value, but more slowly than the average will actually see a tax cut! That’s been pretty unusual in Willowdale over the past two decades, but it’s happening in other parts of Toronto. The net benefit to the City is always zero.

A family of four living in a 3-bedroom Willowdale bungalow uses the same municipal services as an identical family in an identical house in Scarborough. However, the Willowdale family will pay much higher taxes simply because the real estate values have risen faster in one community than another. The same is true of a 600 sq. ft. condo.

The fairness of this system assumes that a homeowner could afford to buy their home today based on the current market rate. For two Willowdale seniors living on fixed incomes that bought their home 40 years ago, this probably isn’t true. They may be forced to go into debt to afford their taxes or move out of their neighbourhood altogether.

When Council looks at its budget, it has a fundamental responsibility to continue to identify cost efficiencies that would improve services for less cost. But this alone is never going to be enough to make up the difference between declining revenue and increased program demands. The City needs to reduce its reliance on property taxes, and look for a broader set of revenue tools or user fees. Having a separate bill for garbage and water for example, may feel like getting double charged, but in these cases Willowdale residents are paying the same amount for the same services, and can also control costs based on usage.

We should also insist that the Province of Ontario reviews its municipal tax policies to improve the fairness of the system. The Province can also do a better job of shouldering the burden of regional costs, such as transit and affordable housing, that shouldn’t be the sole responsibility of Toronto taxpayers.