The ongoing debate about trasnsit funding produced a few rather strange proposals recently.
On April 1, writing in Metro, John Sewell suggested that the “crybabies on Council” who think Transit City is so important should just raise property taxes by $500 per house to generate $400-million/year. This is a ridiculous proposal for many reasons, notably that a jump of that magnitude would not be politically saleable to anyone on Council. This year’s increase is far, far lower, and even that produced howls of outrage from those who claim the city taxes too much already.
If taxes were raised enough across the board to generate $400m, that would be a 14% increase. I can hear the Board of Trade screaming now about how uncompetitive Toronto would be. If the whole load goes on the backs of the residential taxpayers, the percentage increase would be much higher.
Sewell, of course, is setting up a phony argument here by saying Toronto taxes are so low relative to those in the GTA, and if only we would raise them to the average, we would have all the money we need. Does he honestly think voters would tolerate such a change? If he were still mayor, would he run on that platform?
Meanwhile, over at The Star, Royson James writes about the shortcomings, as he sees them, and suggests a $100m/year subway building program. Once upon a time, spending at that rate would give us something we could actually ride fairly soon, but with subways now coming in at $300m/km and climbing, we would wait a very, very long time before we actually ride anything. The Spadina extension to Vaughan would have taken a quarter-century to complete. The Eglinton subway would be at least four decades in the making — the central 12km alone would take 36 years to build. The downtown relief line would ease the pain of commuting for children, no, grandchildren of today’s riders.
The key line in James’ article is:
… our political leaders are not bold enough to tax us to generate the funds or innovative enough to seek other funding options with the private sector.
I think we know why our political leaders are not bold enough to tax us. He need only read his own newspaper and those of his colleagues who rail against high taxes and wasted spending.
As for the private sector, they are strangely absent in the discussion. “Alternative financing” is a favourite catchphrase at Queen’s Park, but we tend to see it only for relatively simple, smaller projects like the construction of hospitals or office buildings, things the development industry knows about.
Both the Scarborough RT and the Finch LRT were originally mooted as private sector projects, and yet there is no sign of this in the recent budget cuts or the plans to stretch out delivery of the Metrolinx Big Move. If the private sector were sitting ready with piles of cash to invest in transit, why is the province acting as if the entire burden is on their own books? Could it be that the numbers for “alternative financing” didn’t look quite as rosy as they hoped? Could it be that investors want to take their money elsewhere for a better return?
Another “alternate” scheme proposed by some involves development charges and/or tax increment financing. These represent either up front charges against developments to finance public works, or dedicated tax increases to pay down debt on, say, a new transit line serving buildings on a route. These both run aground for a few important reasons.
Developers are inherently looking to build for as little as possible, and don’t want to pay a premium for their new building that older nearby buildings didn’t pay. Everyone would benefit from a new transit line, but new developments don’t want to be alone in footing the bill. We were supposed to have development charges to pay for the Sheppard Subway, but they were cleverly implemented after, not before, developments along that line were approved.
Tax increments sound good in theory, but they have to generate a lot of revenue, and that revenue will not flow until the new developments are in place. This may take decades (as one can see with the Sheppard and Spadina lines), or may never happen (for lines passing through stable neighbourhoods).
Taxes are also supposed to fund a host of other municipal services, and any transit tax must be a surcharge. People often talk of the benefits of development as tax generators, but this has to be real, new revenue to support a broad range of city programs, not just to service the debt on a nearby subway line.
Again, some context is needed. If we build a line for $4b and finance the lion’s share to be paid back from taxes, we are probably looking at annual carrying costs of around $200m (give or take depending on interest rates). That’s half of the $400m needed just to keep the TTC in a reasonable state of repair, let alone expand the system. If the private sector has so much money to throw around that we might finance a line from nearby development, how does this square with the constant complaints that businesses are already overtaxed?
Finally, Richard Gilbert, also writing in The Star, rails against spending on transit lines that do not serve areas of strong and growing ridership. He has little use for recent transit projects.
The lamentable record began with the decision in the early 1970s to route the Spadina subway line through a low-density residential area that has still not been redeveloped to justify a high-capacity transit service. The result is a hugely underused resource.
Other examples of ineptitude are failure to provide for sufficient development at stations along the Bloor-Danforth subway line; construction of costly, unnecessary streetcar tunnels at Union Station, Bloor and Spadina, and Bathurst and St. Clair; and installation of the absurdly expensive and soon-to-be-replaced Scarborough RT line.
The worst example has been the billion dollars spent on the Sheppard subway line, which has done nothing to increase ridership along that corridor. The $2.6 billion being spent on extending the Spadina subway line could be almost as wasteful, chiefly because there is no plan for high-density redevelopment at its stations to provide ridership sufficient to justify the extension.
Taking his argument back to the 1960s when the BD subway was opened, Gilbert seems to argue that every subway should be built for the sole purpose of redeveloping the neighbourhoods through which it passes. Try telling that to any established community who are about to gain a new subway station.
The streetcar tunnels at Union, Spadina and St. Clair West Stations are not, by any stretch, “unnecessary”. If anything, the connection at Union is far too small, and the TTC has proposed substantial expansion to handle the growing demand new waterfront transit lines will bring. Spadina Station is a major transfer point between the subway and surface network, and again, if anything is too small, but it was shoehorned into available space. St. Clair West Station loop handles a large amount of bus and streetcar traffic, and its underground location freed surface lands for commercial development that would otherwise be impossible.
Gilbert argues that redevelopment of the Eglinton corridor could raise its demand to subway levels and, thereby, justify the cost of underground construction. He completely misses the point that subway lines do not draw their primary demand from “walk in” trade, but from a large network of feeder buses. One need only visit Finch, Kennedy and Kipling just for starters, not to mention many more-central stations like Eglinton, Dufferin and Pape to see where the riders come from. At my home station, Broadview, there is walk-in trade, but the vast majority of riders getting off the subway trains head for the bus and streetcar platforms, not for Broadview Avenue.
As almost a throwaway, Gilbert argues that we should convert Eglinton to a trolleybus line using new vehicles such as are now in Vancouver. He misses his own point that this is already a corridor with streetcar-level demand, and that trolleybuses would limit the capacity for growth while adding the infrastructure needed for a new mode on Eglinton.
A common thread in all of these positions is that there is some magical way to get new money for transit, and it won’t hurt a bit. No. It will hurt a lot, especially if the property tax base is the only way we have to raise revenues.
Oddly enough, nobody talks about the regional context. When will the 905 municipalities step forward with transit funding? York Region doesn’t even want to contribute to the operating costs of the Spadina subway even though Toronto taxpayers will subsidize York’s riders with a single TTC fare all the way to downtown.
A transit network serves the region, as we are so often told by those who want fast routes with widely spaced stations. Funding for that network must also be regional, but it’s a hard sell to 905ers that they should fund construction and operation of a subway on Eglinton, let alone a “downtown relief line”.
Queen’s Park does not want to hear the word “tax” or “user fee” or “toll” until well after the election in 2011. However, if we’re going to have a big shiny new transit network, somehow we have to pay for it.
Yes, the answer in a way is “just raise taxes”, but this must come in a positive, forward-looking context, not as a continued electoral campaign against the Miller regime or claims that somehow we can have a big transit network without somebody to pay for it.
Steve, you have pointed out several times that Transit City and LRT in general is suffering because of their being espoused by David Miller whose popularity has plummeted precipitously since the last election.
I very much agree with you. Indeed it is arguable that were David Miller more popular Dalton McGuinty would not have cut back the Transit City funding.
So why have the mayor’s fortunes dropped so precipitously? He is a second term mayor and in the last election after three years of his being mayor he was re-elected easily. Why the sudden change over the past year? I have my theories but I can’t account for all of it There is more than a drop in popularity here. There seems to be a real hate on for the mayor. Tied in with this is the real animus toward the TTC which we witnessed this past winter. Talk about the winter of our discontent!
I’ve never seen such a violent turn-around. What is your take as to how this came about?
Steve: There has been an anti-Miller political movement growing for some time, and even before the civic workers’ strike last summer, it was clear that someone would challenge Miller’s attempt for a third term. The strike triggered a shift in the political outlook, and CUPE has to take the blame in part for Miller’s abrupt fall. This event, coupled with many problems at the TTC, gave the media all they needed to launch a string of negative articles. It did not matter that the city wrested a 2% increase from CUPE when everyone else was getting 3%, and put an end to the banking of sick time. The big story was the mountains of garbage and the us-vs-them union-public relations.
Then Miller decided not to run, and the heir apparent, Adam Giambrone, flamed out in less than two weeks. TTC riders and operators actually talk to each other now (many already did, but their is a marked improvement on that front), and stories about Miller are not as strident as they once were. There’s an election on, and some candidates persist in running against Miller even though he’s not on the ballot. Somehow, they will have to differentiate themselves and explain what they will do for Toronto beyond just not being David Miller.
Increasing car taxes to pay for transit isn’t the ideal, reducing the subsidy on cars is the key. We all know that cities get very little money for operating road networks, they get some money for building road networks, but not for maintaining them.
This means that cities directly subsidize automobiles, because many roads that could handle all the truck and bus traffic on 2 lanes, end up being 4,6 or 8 lanes wide, to handle the car traffic. It costs a lot more to maintain a 8 lane road then a 2 lane road.
Steve, you really should read more carefully. While I may have omitted the word inflation, it was certainly implied and then qualified by the next sentence…….
“Could he have gotten elected if he stated “we are going to increase spending and taxes at three times the rate of inflation”, No.”
First you accuse me of misrepresenting information in the Price Water-House report, without having read it yourself. Now this. I think that you have so closely aligned yourself with TC that when any of its supporters come under criticism you lose objectivity.
Steve: Sorry if I misread your text. I read it as stating that the budget had gone up by 3x. All the same, I return to the issue that spending does not just rise due to inflationary pressure, but due to additional services and population growth. Your analysis is simplistic. As for losing objectivity, there are many things about TC I would change, and have written to that effect. If anything, the lack of adjustment to TC by its proponents undermines its credibility and provides weak points of easy attack that should have been corrected a long time ago.
In reference to Michael Greason’s “politics of resentment” comment:
Whether it’s a house or city infrastructure I think it is inevitable that as time goes by maintenance expenses will increase to a point over a long period of time. Judging by the condition of some of the roads (Warden south of 401 is one good example) and the number of sinkholes (one city engineer told me that East York was floating on top of sewage from collapsed pipes underground) is it not reasonable to question that more needs to be spent and hence taxes need to be higher? Whatever the rate is relative to other municipalities is irrelevant.
A couple of clarifications. The average tax burden is considerably less in Toronto. The average household in Vaughan pays nearly $1,000 more per year. The education rate is the same for all residential across the province. In addition, the notion, repeated elsewhere, that Cities, with a denser, more compact population, are cheaper to service than inefficient suburbs is conjecture. It is hard to reconcile the arguments that Toronto should have lower taxes because it is more efficient, via density, yet at the same time argue for non residents to pay for a vital service that allows density in the first place. If large cities need PT to support density, but PT requires subsidy, then the beneficiaries should be the ones to pay. One can’t pick and choose when the apply the benefit principal of taxation.
WRT to renters paying higher taxes, that is not necessarily so. Yes the rate is much higher than residential, but the average assessment is much lower. When the city of London (Ont) looked at the tax implications of re assessing multi residential as residential, they found only a small difference. When they looked at doing such conversions in Toronto, they concluded that the city would receive more revenue. The assessment values would increase at a higher percentage than the tax rate would fall. The fact that Toronto is unaware of the relations between taxes and revenues, is indefensible and has been very detrimental to the city.
Steve: For the benefit of readers, Ontario Regulation 92/09 prescribes the levies for education taxes for 2009. It contains a table of rates for non-residential properties in which the much lower rate for 905 municipalities (Peel, York, Durham) compared with Toronto can be seen. Commercial property in Toronto pays at a rate nearly 29% higher than properties in Peel, York and Durham.
The city presents a comparison of tax rates consolidating both the municipal and the education levies on its website. Multiple residential properties are taxed at 2.2839% while single residential properties are taxed at .8548%. You imply that this inbalance (which will settle eventually at a ratio of 2.5) would be more than made up for by changes in assessed value of apartment buildings. What is your source for this claim? Who is the “they” who studied this issue?
Steve, in academic research the issue is referred to the capitalization of taxes. In essence it explains the nature of the tax:assessment value relationship. Simply put, value determines tax and tax influences value.
In Toronto, the city has been operating on the simple, and incorrect, assumption that a doubling of the property tax rate will produce twice the revenue. This is emphatically incorrect. The evidence points to Toronto’s high rates producing a small short term gain in revenue (a fraction of what the tax rate differential suggest) and a large long term decline in revenue. Nobel laureate James McGill Buchanan demonstrated that a high property tax rate will initially produce higher revenue, but in the long term it will not. On top of this, the tax climate of high non residential and low residential taxes encourages residential development which consumes more in services than does it supply in revenues.
As far as what the high tax rate on multi-residential being capitalized, compare the average unit value between the multi-residential and the new multi residential class (which is taxed the same as residential). IN a report to London city council on the topic of converting apartments to condominiums was this comment:
Look at the commercial/industrial assessment base growth in Toronto. Relative to the residential base, it has shrunk. The only period of growth occured during 1998 and 2000, a period when assessments were frozen. The Business Education Tax rate in Toronto fell about 10 per cent — equivalent to a 5-per-cent cut in overall business taxes. But when Ontario properties were revalued in 2001, it turned out that commercial assessments in Toronto had increased by about 40 per cent. By comparison, commercial assessments in the rest of Ontario, without the benefit of steep BET cuts, only increased 14 per cent over the same time period.
This demonstrates that Toronto’s high taxes have been fully capitalized into assessment values. Increasing taxes further just reduces the assessment/market values. Conversely reduced taxes increases values and produce more revenue.
Between 1986 and 2005 industrial land prices, on average increased by 400% in Mississauga and only 80% in Toronto (Hemson Consulting on behalf of the City of Toronto). Despite having a tax rate close to double that of Mississauga, it does not return extra revenue to the city, it is fully capitalized. One paper, “The incidence of differential commercial property taxes: empirical evidence”, clearly demonstrates and provides evidence that shows even when the ratio of residential to non residential rates do not exceed 2.2x the incidence is captured in the reduced values. In the study it was found that 70% of the burden was borne by the property owner in the form of reduced value. The higher rates get capitalized and produce little, and sometimes negative, extra revenue. In Toronto, where the ratio is even more skewed the burden would be more. Once assessment latencies are accounted for, Toronto’s rates become capitalized and no longer produce the expected (by the city) revenue.
Here are some links and quotes from some research papers……..
I believe the most relevant, by means of establishing an actual formula based on industry capitalization rates, capital mobility and demand elasticities, is the paper from John F. McDonald, Dr. McDonald might be the foremost expert in this area. Previously I discussed this issue with him and he informed by that the Chicago CMA is similar to Toronto, with both inter and intra jurisdictional differences. His conclusion has been that in the case of Cook County IL. (like that of Toronto) it’s tax rates are not in its best interests.
Maximization of Non-Residential Property Tax Revenue by a Local Government
Estimating property tax base elasticity over time: Evidence on the revenue maximizing politician
The Laffer curve analysis suggests a possible conflict between short-run revenue maximization and long-run fiscal health. This paper estimates short-run and long-run property tax base elasticity in order to test whether such a conflict exists for the property tax in central cities. A stock adjustment model is used and separate time-series estimates for four New York State central cities lend empirical support to such a conflict. The results show that while disincentive effects associated with property tax rate increases are not strong enough to reduce property tax revenue in the short-run, they are substantial enough to reduce long-run revenue in all but one city. The paper also tests for asymmetric response to property tax rate changes and finds significant results for only one city.
The incidence of differential commercial property taxes: empirical evidence
National Tax Journal, Dec, 1995 by Joyce Y. Man
By examining the commercial real estate market in the Phoenix metropolitan area, I find that over 70 percent of interjurisdictional differences and about 60 percent of intrajurisdictional differences on commercial property taxes are borne by property owners, either capital or land owners, instead of consumers as Mieszkowski suggested. It implies that the spatial demand for commercial real estate is highly price elastic in metropolitan Phoenix and differences in commercial property taxes largely caused by errors in the assessment practice may have significant resource allocation effects.
Adam Smith: High taxes, sometimes by diminishing consumption of the taxed commodities, and sometimes by encouraging smuggling, frequently afford a smaller revenue to government than what might be drawn from more moderate taxes. (From Adam Smith, The Wealth of Nations, book V, Chapter II.)
Alexander Hamilton: It is a signal advantage of taxes on articles of consumption that they contain in their own nature a security against excess. . . . If duties are too high, they lessen the consumption; the collection is eluded; and the product to the treasury is not so great as when they are confined within proper and moderate bounds. (From “Further Defects of the Present Constitution,” Federalist Papers, No. 21.)
Jules Dupuit: If a tax is gradually increased from zero up to the point where it becomes prohibitive, its yield is at first nil, then increase by small stages until it reaches a maximum,after which it gradually declines until it becomes zero again. (From Jules Dupuit, “On the Measurement of Utility from Public Works,” reprinted, in K. Arrow and Tibor Scitovsky(1969), Readings in Welfare Economics, Homewood, Il: Richard D. Irwin.)
John Maynard Keynes: Nor should the argument seem strange that taxation may be so high as to defeat its object, and that, given sufficient time to gather the fruits, a reduction of taxation will run a better chance than increase of balancing the budget. (From John Maynard Keynes, Collected Works of John Maynard Keynes, St. Martin’s Press, p. 338.)
Steve: Thanks for all of the citations. I believe that this is the first time Adam Smith & co. have been used within this blog.
Three points by way of quasi-reply. First, I have not had a chance to read the works cited yet except for the brief report from London. I am attempting to obtain confirming or refuting data from Toronto to elevate this from the level of “we have heard” to a definitive statement.
Second, if anything, your position suggests that tax increment financing (and variations on this theme) may be counterproductive. This would mean that proponents of such schemes may overstate the revenue available from them.
Third, the value of a property as an investment is affected both by the ongoing cost of ownership (maintenance, taxes, ongoing operation) and by that most important of real estate attributes, location. There are benefits to being in place “X” rather than place “Y” including proximity to other related developments (eg offices downtown), social benefits (nearby cultural and recreational facilities) and simply the cachet of location (Rosedale). The curve mapping the relationship between tax levels and total revenue will have its inflection point in various places depending on, in effect, “what the market will bear”. At some point, the higher taxes cannot be justified by the “value” attributed to the location, and the tax becomes the deciding factor both in value and in a buyer’s decision to locate elsewhere.
Where this point lies for various parts of Toronto, and how close we might be to it, I don’t know, and even that likely varies with which part of Toronto we are looking at and where in the ebb and flow of economic cycles we might be.
What happened to my post?
If you don’t want to publish it, that is your decision. I did spend some time compiling it though (the London ONT. was moved and was difficult to find). You you at least be so kind as to email it back to me for my keeping?
Steve: Sorry, but while I was editing it, the spam filter ate it, and in the process locked me out. Fixed now.
The reason was that certain combinations of words or fragments are telltales for spam. They can get through, but only if the pieces of interest are not in the same transmitted block of text (the filter does not try to reassemble long posts). You were probably able to file the post because this happened, but I edited and added text to it which would change the relative position of your parts. No, I won’t tell you what it didn’t like, but it wasn’t Adam Smith.
For the record, I think we can all agree that “steve” of April 9, 2010 is a troll, whereas Glen most emphatically is not. You can tell by how Glen takes so much time to cite his sources, even if it is to express disagreement, and I would like to thank Glen for his thoughtful analysis, and thank Steve Munro for allowing this sort of discussion to continue.
As for the troll, I wish he’d give his head a shake. This is a place for constructive (if sometimes heated) discussion here. How is what he said in any way constructive?
Many thanks to you, Steve, and to the others who commented on my Toronto Star piece about Transit City.
I remain an advocate of ALL forms of electrified, grid-connected transit. I prefer that they be installed according to ridership or potential ridership: subways where it is high, and streetcars or trolleybuses where it is not, according to circumstances and available resources.
I prefer a transit system that requires many fewer transfers than Toronto’s system. I believe ridership should be driven for the most part by activities within a transit stop’s vicinity rather than by transfers, although this should not be a hard and fast rule. Transfers can be a pain in the transit user’s neck, including those made necessary by installation of a subway line. Before the Bloor subways was installed, there was a direct streetcar route from Lansdowne and Dupont to downtown. Now, this journey requires two transfers. Similarly, the existence of the the Sheppard subway forces transfers at Don Mills and Sheppard stations when before such journeys could be made with a transfer only at Sheppard.
It’s possible to be part of a governing body and not be responsible for what is decided. I was on Metro Council in the 1980s when the decision was made to spend $140 million on the Spadina tunnel at Bloor. I felt a surface connection would be better for riders and less costly and I voted against the proposal. (The main reason given for the proposal was that streetcars crossing Bloor would impede car traffic.) I also felt that the TTC/City Council/Metro Council should have fostered massive development at Spadina and Bloor (close to where I live, now and then) — the only place in Toronto served by intersecting subway lines and a streetcar line. I achieved little support for this proposal.
I have changed my position about some things over the years — and not only because consistency has been said to be the refuge of small minds. I would like to feel warmer towards Transit City rather than regard it as one of the several urban calamities initiated during the Miller era (two others being the redevelopment of Union Station and the waste collection system). Should you be inclined, Steve, you might begin to make me feel warmer by providing a better justification than seems to be available of the proposal to spend about $300 million per kilometre to install a tunnelled streetcar service along Eglinton.
Steve: (This comment was added on April 14, 2010.) I have now checked my files, and find that the total project cost for the Spadina LRT was $140m, and that the loop construction contract was just over $16m. Richard Gilbert is off by an order of magnitude in his claim of the cost for this option.
Actually I liked your points. Yes TEIG, is not all that is cracked up to be. I will spare you the links though. Lastly, WRT influences on value, when the tax burden exceeds the benefits of the services it provides (directly and indirectly) it will reduce value. A net lease amount encompasses all the factors. The tax rate, if it exceeds the direct and indirect benefits, will then be an encumbrance on the other factors.
Glen uses the usual neo con tactic of coupling actual facts – often taken out of context – with unsupported geralisations and by sneaking in the odd outright falsehood.
Let’s start with the word “average”. What exactly does that mean. Who says, and by what method of study, that the “average” house in Vaughan has $1,000 more in property taxes than a similar “average” house in Toronto. Vaughan and Toronto are very different places with very different residential makeups. Glen then goes on to say that the “savings” that are evident due to the (sensible) denser structure of Toronto are paid for from the “subsidies” that Toronto gets from others. What others might those be. Even right wing commentators (such as John Tory) suggest that many billions of dollars are transferred from Toronto to elsewhere – not the other way round. When the Province spends provincial tax revenue in Toronto – on Transit City or any other project – that money was originally collected here in Toronto. It is Provincial money, but it is not money raised in North Bay or Vaughan. Toronto is not being subsidised. Rather, the Province is being kind enough to spend some of our money on our infrastructure.
The fact that the Provincial education tax multiplier (residential) is equal across the Province is not an example of fairness. It is in fact the very essence of the unfairness. As I pointed out at length in my original post, Education Tax is a service tax and not a wealth tax. When the multiplier is the same in a high property value jurisdiction as it is in jurisdictions with bigger properties, but with lower values, there is a built in inequity. The fact that Ontario raises more taxes in Toronto for education than it spends here, and less tax revenue in other municipalities than it spends there, is the heart of the inequity.
Income tax is actually a wealth tax. Toronto, and even more so the GTA, has more wealthy people. More income tax is raised in the GTA than elsewhere and spent elsewhere to provide a fair standard of services across the Province. This is part of the social contract that we as a society have broadly agreed to. However, distorting a service tax to punish Toronto is not fair. Income is easily measurable on a yearly basis. If one makes $200,000 it is easy to see how a greater proportion of that income should go to common good than for those who make $20,000. (Of course this applies to those of us who buy into a progressive tax system. Those who don’t are free to have their opinions, but they need to defend their alternative based on their own sense of fairness.) However, the fact that a person who happens to own a home with high assessment should subsidise the education costs for other parts of the province based on the resale value of their house is in my opinion patently unfair. (I do understand that even within a smaller community, such as Toronto, property taxes are somewhat unfair because there is a “wealth” component. It is fair that a four bedroom house should pay more than a one bedroom condo, but it is not fair that a $2,000,000 four bedroom house in Rosedale should pay 4 times as much as a $500,000 four bedroom house on a similar lot in the suburbs. If it was up to me, Property Taxes would be eliminated or radically altered to be a poll tax. Ask Margaret Thatcher how popular the latter idea might be.)
I am certainly not a neo-con.
The average tax burden is just that. It does not matter that the ‘average home’ may be different between Vaughan and Toronto. The average house is different in the Keele / Finch area than in Hogg’s Hollow. You don’t seem to have an issue with that. The very fact that you bring up this issue is telling. You come across as a progressive, yet when an imperfect tax (property tax being a capital tax) is somewhat progressive, you find fault.
You say “Property Taxes within each community reflect the services provided to the taxpaying residents on a (reasonably) equitable basis.” then ignore that in Toronto’s case property taxes only pay a fraction of per household municipal spending. Using 2006 data from the Municipal Performance Measurement Program it shows that Toronto spent $8,422 per household in 2006. On the other hand Mississauga and the region of Peel combined, spent $3,848.29 per household. So the average household in Mississauga pays more than $500 per year in property tax than the average household in Toronto and gets $4,573.71 less in services.
So much for taxes reflecting services.
I have a question for you Michael, on what did you base your point;
Looking at the MPMP, that does not seem to be the case. Here is another paper on the subject (with lots of good references).
Steve: I suspect there are too many variables to be able to make this statement an absolute on one side or the other of the argument. For example, in the Megacity, many services were already provided by the upper tier and purported savings could not be achieved because the services were already amalgamated (e.g. police), and other services (e.g. fire) don’t really scale at the granularity of the old cities and the megacity. Some regional amalgamations pulled huge tracts of rural land into a “municipal” government. Whether this is an effective way to deliver services to these areas is a matter for some debate.
Steve: Your patience in allowing Glen and me to “debate” on your site is appreciated. I promise this is my last post on this topic, but since Glen asked a question I will answer it. My comment refers to compact urban form when compared to suburban sprawl. I was not referring to the governance of an urban region. I was strongly opposed to the Megacity – as were bout three quarters of my fellow Torontonians (across Metro – not just in the old City.)
One of the flaws with a larger city government is that the skew in Property tax between being a service tax vs. a wealth tax is exacerbated. That is why, as far back as the middle of the last Century, areas such as Swansea, Forest Hill and Rosedale were opposed to the original Metro Government. Those communities feared that they would be subsidising other areas and, at least after CVA – their fears have proved to be correct.
Another Megacity factor is that Mr. Harris failed to understand that it is difficult to bully unions. It is no surprise to me, though apparently it was to Mr. Harris, that when six jurisdictions merged their labour rates we ended up with the highest previous rate applying to all.
Finally I admit a certain bias. I like dense urban form. I like transit. I don’t like suburbs and I don’t like mobility being entirely dependent on the car. It is largely my opinion, though I hope and believe it to be informed opinion, that City’s are more efficient at delivering services than suburban sprawl.
Toronto might be a poor example. The city of Toronto got less dense with amalgamation. The article and references though, do suggest that the assumption that density automatically produces economies of scale is false. Sometimes yes, sometimes no. Either way the difference will be small.
Steve, if you feel this is too off topic, feel free to can this post, or perhaps move it elsewhere. Maybe you need a decoy post to shovel all of the fantasy comments in there. 🙂
But I wanted to comment on M. Briganti’s comment about the effectiveness of the Spadina subway as built. As I recall, in spite of the obvious need the Spadina subway serves as an interceptor of rides coming in from the west end, the fact that it runs up the middle of an expressway forces walk-in traffic to confront a very pedestrian-hostile environment, so perhaps the Spadina line isn’t living up to its potential as a result.
But could the Spadina line have been built if it hadn’t been routed up the middle of the Spadina expressway? Leaving aside the desire of North York planners and politicians to greenwash the expressway as part of their hopes to drive the thing downtown, how much more expensive would the thing have been to build if, instead of going under Cedervale Ravine and the middle of the expressway, we’d cut-and-covered the thing beneath Vaughan Road and Dufferin Street to Wilson?
Much as one would like to imagine a Spadina subway altering the character of Dufferin Street in this fashion, could the new price tag have been so much higher that the line would have lost all political support? If we’re engaging in what-if’s, here, could political support have swung towards building the Queen subway instead?
But I do know that by the late 1970s, the TTC and Metro were growing leery of the cost of new subway construction. The Kipling and Kennedy extensions were celebrated (celebrated!) as “the last extensions of the subway network in a while”. At the time, TTC literature was pumping up ICTS as a cheaper, more effective means of serving the suburbs in the near future. Of course, by 1984, new subways were in vogue again.
In an earlier comment, Richard Gilbert claimed that the cost of the loop at Spadina Station was $140m. I have now checked my files, and find that the total project cost for the Spadina LRT was $140m, and that the loop construction contract was just over $16m.
Regarding what James Bow said about the Spadina line, I read many years ago that there were about 22 different alignments studied before what we now know was decided upon. I also remember an idea for running express streetcars down the expressway. One thing I’ve never understood about the Spadina subway is why it wasn’t built through the ravine out in the open rather than putting it underground, especially when the was supposed to be on the surface through there with the subway in the middle. that could have saved quite a wad of cash.
Steve: That ravine was saved from destruction by the Spadina Expressway. The last thing we needed was a subway running down the middle of it.
Regarding Steve Munro’s correction of my statement about the cost of the tunnelled loop for the Spadina streetcar: I was certainly wrong to rely on increasingly defective memory and thereby to suggest that it cost $140 million. That could well have been the cost of the whole line, from Bloor to Queen’s Quay.
However, the final cost of the loop may have been much higher than the $16 million Steve suggested. An article by Maureen Murray in the Toronto Star on July 21, 1997, indicated that the cost of the loop was $48 million. If this is true, and she was also right about the cost of the line (she said $105 million) and her lengths are right, the cost of the 187-metre tunnel — 5% of the length of the line — was about 45% of the cost of the project.
There are some discrepancies here that could be worth clearing up because of the lessons that experience may have for projects proposed today.
Steve, you know your way around TTC records much better than I do. If you were to be able to provide a definitive statement about the final costs of the loop and of the whole line I for one would be very grateful.
Steve: I will dig in my archives.
Michael, here is another look at your contention : “I hope and believe it to be informed opinion, that City’s are more efficient at delivering services than suburban sprawl.”
Steve: I attended the presentation of this paper by Adam Found at the Munk Centre last week. Several of us in the audience raised a number of issues with the methodology of the study while applauding the general need for this type of research.
First, there is no sense of the confidence interval around the curves. In one case of a proposed de-amalgamation, Found claimed that his model showed there would be a 2% saving from splitting one existing city of about 20k into two 10k municipalities. However, given the many assumptions and variables involved in the model, 2% must fall within the margin of error. Moreover, any one-time expenses of deamalgamation would have to be funded out of that ongoing 2% saving, if it was actually achieved. Found claimed that he was confident in his model, but it’s not the sort of ringing endorsement I would want to fight a political battle for.
The question of Metro/Toronto amalgamation was on everyone’s mind, but it is such an outlier relative to all other cities and regions in Ontario that there is no comparable data. The model suggests that an optimal city size is somewhere around 70-100k, and this would roughly translate to a Balkanized Toronto with each existing ward, or possibly pair of wards, becoming a city in its own right. What the study completely misses is the distinction between free-standing municipalities that have an urban area surrounded by (mainly) farmland, and an agglomeration of smaller cities where economies of scale really can work.
Found did come to the interesting conclusion when he took apart his data series into their components. Some services do scale linearly with city size or may even be more effectively (read “cheaply”) provided by larger areas. However, this runs into distinctions between places that are large enough to have functional groups that provide services on an ongoing basis vs those where the small population (and hence frequency of demand for some services) means that ad hoc contracting, or even “fractional” departments may be more appropriate. The variation in cost may also be a factor of service quality provided in larger cities relative to small ones. There was a lot of debate on that thread.
Of course, in Metro’s case, there was a totally biased (or incompetent if you prefer) study done by KPMG that claimed all sorts of savings from amalgamated services, but totally missed the fact that many of the biggies like police were already centralized at the regional level. My opinion of KPMG and of management consultants in generally fell even lower than it already was.
One important comment touched on the way Found determined a municipality’s size. His study uses households rather than population because (a) Found feels this is more representative, but more importantly (b) houses are counted every year for assessment purposes, but people are only counted every five years. Therefore, a fine-grained population series that could be co-related (or not) with annual municipal spending did not exist. However, the density of people per household is greater in the large cities, and therefore the “diseconomy of scale” may be diminished if the data are stated relative to population rather than to households. Why he didn’t just calculate a density factor for each municipality and convert his household counts to populations I do not know.
Finally, Found places his data on a logarithmic scale. This has the effect of compressing the upper end of the population range and making the rise with size look steeper than the curve actually is for nearby values. This is a clear case of selective representation to suit the thesis of the author.
I believe that, sadly, this is an example of someone who became too focussed on the mathematics of economic analysis and allowed a desire to get a working model to take precedence over credible, defensible analysis.
Thanks for the synopsis. I can’t argue with your reservations, and agree that there is much to be suspicious of. What surprises me is that determinations are made with respect to city size, yet the issue of vicinity is ignored. Dividing Toronto up into a a series of smaller cities is not the same comparing typical small city. Conversely conjoining neighboring cities is not really making a larger city. Once the built up area become contiguous, divisions along man made boundaries are academic and do not make for a good comparison. The other studies I mentioned before do a better job in comparing expenses.
John Sewell is not who he portrays himself as you only have to look at this critique of John Sewell.
Richard Gilbert was interviewed on Metromorning this morning. A couple of thoughts come to mind:
-He’s ranting about how the Eglinton LRT would cost more than as a subway without explaining. I honestly fail to see the validity in his argument
-Also says Transit City does so little. Little in terms of what? Development? Improving Capacity?
-He’s suggesting we can replace a few Transit City lines with Trolleybuses. But trolleybuses are not as effective at revitalizing neighbourhoods and affecting land use patterns, no?
Steve: See my reply to an earlier comment on this topic.