This week City Council in their 2024 budget meeting proposed a Toronto property-tax rate jump to 10.5%, the largest single-year increase since amalgamation in 1998. If the city doesn't receive $250 million in funding from the federal government an additional 6% increase could be added, resulting in a total tax hike of 16.5%.
That would amount to roughly an additional $31 per month for the average Toronto home, or just over $370 more per year, according to the city.
Toronto is facing an $1.8 billion shortfall in its operating budget, largely due to transit and shelter costs that have increased due to the pandemic and immigration.
The city lists rising inflation, increased interest rates, cost escalations, pandemic impacts, rising shelter costs and delivery of provincial and federal services as some of the contributors to its budgetary challenges. The city remains largely reliant on property taxes.
The costs to run the city are paid for by residential property taxes and commercial taxes, with some funding from provincial and federal governments and other streams.
Property taxes are the taxes homeowners in Canada pay on the assessed value of their home. The money is paid to the city or municipality that they live in, acting as revenue. They currently vary from 0.5 per cent to 2.5 per cent of a home’s assessed value.
The Municipal Property Assessment Corporation (MPAC) in Ontario determines the assessed value of properties every four years. The last province wide update took place in 2016. Because of the COVID-19 pandemic, the scheduled 2020 update was postponed, and in 2021, the province postponed the assessment once more, deciding that property assessments for the 2023 and 2024 years would continue to be based on the 2016 value. This means that property tax rates for this year continue to be assessed at the home’s 2016 value.
Because municipalities are not allowed to run deficits in their operating budgets, the residential tax rate is one of the only ways they can address their spending needs.
But what exactly is the property-tax rate, how is it calculated and what is it for? The property-tax rate is a proportion of the assessed value of a home that is paid to the city or municipality annually. The rate is set yearly, based on the estimated cost of the operating and capital budgets required to run a municipality, and voted on by elected officials. The rate is not always the same for every homeowner in a municipality. Toronto’s tax rate for 2023 was 0.66 per cent, which included the city’s tax rate and building fund, and 1.5 per cent for the education tax rate.
What do property taxes pay for? Property taxes pay for services offered by municipalities. This includes but is not limited to policing, firefighting, parks and recreation, libraries, road infrastructure (fixing potholes, replacing sidewalks, installing bike lanes), water services, waste collection and snow clearing. In Toronto, large added costs to its operating budget are transit and shelter services. Other governments also contribute to these.
Cities also have capital spending for large projects such as new buildings, substantial road or transit infrastructure or significant upkeep of older buildings.
How is my property tax bill calculated? In Toronto, property-tax bills are calculated by multiplying the total tax rate by a property’s assessed value. The total tax rate includes the city rate, the city building fund levy and the education tax rate, which is set by the provincial government.
This is the first time in 15 years that public consultations will be held before the rate is decided.
The final budget will be released on Feb. 1 and brought to City Council for approval on Feb. 14.
