February 13, 2015 1:20 pm
Updated: February 13, 2015 10:38 pm

City manager suggests Toronto might need sales tax to fund services

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WATCH: The discussion around balancing the budget quickly turns to the need for Toronto to start using revenue tools to raise cash. Dave Trafford has the details.

TORONTO – While city councillors try to figure out the best way to fill an $86 million funding gap, the city manager says city politicians might want to look at implementing a sales or income tax in the coming years.

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Toronto Mayor John Tory proposed borrowing $60 million from the reserves on Thursday to help cover part of the loss of $86 million in provincial funding — the other $26 million is expected to come from efficiencies.

City Manager Joe Pennachetti said Friday that borrowing allows the city to forego a tax increase to cover the gap. A tax increase is being suggested by some councillors opposed to the idea but would work out to an approximate increase of 6.15 per cent.

“We’ve had direction already they wanted to keep the tax increase, and I understand it, to inflation or less,” Pennachetti told reporters.

“So the direction we had from budget committee was basically to come back with how we would deal with this and spread it over time.”

But the city will have to fund affordable housing once provincial funding dries up. City Manager Joe Pennachetti suggested Friday the city may have to look at implementing a sales tax to fund services.

“We are probably the only city of 3 million residents and more in the world that funds all of its services from property taxes. There’s no sales taxes, no income taxes, et cetra,” he said.

“There has to be change at some point in time in order to get through all of the growing pressures that we have from transit to housing to all of the social services that we now have to fund from property taxes.”

WATCH: Gord Perks isn’t a fan of John Tory’s idea but fumbled and swore on live television while explaining the math. 

Councillor Gary Crawford however said he doesn’t support a sales tax or income tax. He said councillors have to deal with a shortfall each year but still manage to keep tax increases at a reasonable rate.

“I’m quite confident that we’ll be able to continue to do that in the future,” he said.

Tory says the $86 million hole is a direct result of the province phasing out the Toronto Pooling Compensation fund which helped pay for the city’s affordable housing commitments.

Tory wants the city to borrow from itself to make up the difference by diverting $130 million from the capital budget over three years.

The shortfall is the exact amount of money the federal government offered on Friday to help fight homelessness in the city.

A city report to be presented at the budget committee meeting suggests cuts to the 2015 “Staff Recommended Operating Budget” for programs and agencies such as Toronto Employment Services, Children’s Services and Fire Services.

Follow along live at Global News’ reporter Dave Trafford tweets from city hall:

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