City Manager Peter Wallace tried again, in vain, to alert members of city council to the threat posed by hedging the city’s budget against the apparent unrelenting strength of Toronto’s real estate market. The city has enjoyed explosive growth in revenue from the land transfer tax over the last ten years, and projections for next year suggest that Toronto will get $808 million, four times what it got when the tax was first introduced.

Wallace is concerned that the city’s bureaucracy has grown too dependent on a revenue stream that is as unpredictable as real estate values, and at a preliminary budget presentation at city hall said “recurring expenses continue to be matched with potentially cyclical revenue sources, as in prior years”. To put this in perspective, the entire budget for the fire department, paramedics, the planning department, and municipal licensing and standards could be funded by this sum of money.

This kind of tax, explains Wallace, is “cyclical”. It rides the wave of home prices. If they fall precipitously, so does the city’s revenue stream But if the city has assumed “recurring” expenses then it is stuck with the fixed costs but will have no means to fund them.

—Brian Burchell, Gleaner News