Monday, April 05, 2004

Property tax hikes and urban fiscal sustainability

Back on Friday, David Lewis Stein wrote a column in the Star that contained what appeared to be a rather detailed analysis of how much property tax homeowners in the GTA pay. He noted that, for a house valued at $260,000, a Toronto homeowner would pay $2,500 in property taxes, and then proceeded to show how that Toronto homeowner is actually getting a bargain (the headline, "Stop whining: Toronto gets off lightly in taxes," pretty much sums it up). According to Stein's calculations, a $260,000 home elsewhere in the GTA (i.e., the 905) would work out to anywhere between $2,730 (in Milton) and $4,400 (in Oshawa).

Maybe it helps that I've been eyeing the Toronto housing market somewhat lately, but it seemed to me that Stein's detailed analysis had conveniently neglected one key detail: how much house that $260,000 will buy in Toronto, and how much it will buy in Oshawa. A week and a half ago, I noticed a small house in the Beach that was bargain priced, because there was some foundation damage that was causing "slopage" and the house would require some pretty hefty work. That bargain price? Coincidentally, almost exactly $260,000. Head out to Oshawa, and for that price you can find some pretty decent houses (and I'd wager above average). Indeed, here's a quick search (don't know how link will work after a couple of days, but it's a search for anything in Oshawa under $275,000).

Turns out I wasn't the only one to call Stein on that one.

(UPDATE, Tuesday, April 6: Here we have the other side — a 905'er quickly reading the numbers without questioning them. Guess Stein's article was more dangerous than I thought...)

It turns out, though, that Toronto's not alone in the GTA in facing a nice property tax hike. Toronto is in the unfortunate position of having an aging infrastructure that's now needing replacement, and it's having to fund the replacement with property taxes. Hamilton's in a similar predicament (one of the major arguments people, and some councillors, have been making against the Red Hill Creek Expressway, which is adding another burden to an already weak fiscal situation). Conversely, for years Mississauga had 0% tax increases, partly due to Mayor Hazel McCallion's "pay-as-you-go" philosophy, but mostly because most of its infrastructure construction was financed through development charges — the basic concept being that land developers would pay a chunk of the cost of servicing undeveloped land, with the assumption that the future owners of that land would pay for the infrastructure later on through their taxes (a luxury that Toronto doesn't really have anymore, even though the GTA as a whole is growing). Now that Mississauga's greenfields are nearly fully developed, the development charges are drying up at the same time as Mississauga's oldest infrastructure is starting to need replacement, and Mississauga taxpayers are starting to get used to an annual Toronto ritual: waiting to see what their spring tax hike will be.

Well, I was rather surprised this morning to read that, even with the boon of development charges, the still-growing Town of Oakville is looking at a 5.4% residential tax increase. The first three paragraphs in particular are illustrative:

Growth is pushing up Oakville property taxes, the town's budget chief said after council approved a 5.4 per cent increase for this year.

"If we continue to grow, we're going to have to get used to increases in this range," Councillor Allan Elgar said in an interview. "We're looking at increases in the 6 to 7 per cent range over the next two years. Development does not pay for itself."

That rate of growth is not sustainable over the long term without funding help from the provincial and federal governments, he said.

I don't think it should take me by surprise to hear that sprawl doesn't pay for itself. What does surprise me is to hear it from a town councillor and the town's budget chief. Although I believe they have yet to fully embrace smart growth principles (e.g., the paradoxical juxtaposition of new urbanist residential with suburban big-box commercial), it sounds as though Oakville may be starting to get religion; hopefully it's not too late.


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