Mississauga Land Transfer Tax Stalled Temporarily - GTA Taxes to Go Up
December 5, 2012 - Updated: December 14, 2012
Over the past few years, the City of Mississauga has been leading the conversation and raising awareness about the need for Ontario’s municipalities to obtain additional funding for infrastructure. They have called on the Federal and Provincial Government to create a National and Provincial plan that would address long term sustainable funding for infrastructure; however, their call seems to have fallen on deaf ears. The GTA needs funding to maintain its infrastructure in good repair and to build a quick and effective intercity transportation system. Until a strong plan for a national transportation framework is in place with sustainable funding, municipalities cannot effectively plan their spending on infrastructure.
In recent years there has been a considerable amount of construction in Mississauga. It has caused a considerable strain on the City's budget – one that the current property tax cannot sustain. It has led to a continually growing infrastructure deficit of $75 million to $80 million every year. Without any additional funding, Mississauga’s infrastructure deficit will total $1.5 billion over the next 20 years. Mississauga currently owns and must maintain $8 billion in capital assets, and has to plan for future growth. In the next 20 years, Mississauga’s population is expected to grow by 70,000 people creating an additional 50,000 jobs. It also wants to decrease congestion and increase environmentally friendly travel behaviour by increasing public transit ridership from 11 per cent to 22 per cent.
Municipalities across the country receive an extremely disproportionate amount of funds to service the infrastructure they own. Municipalities receive less than 10 cents from every tax dollar collected from Canadians, yet own and maintain 65 per cent of infrastructure. With the Federal and Provincial governments ignoring cities’ cry for help, Municipalities are beginning to demand their own tools for taxation so that they can have control of a predictable and sustainable flow of funding. With the Toronto Land Transfer Tax already introduced, the City of Mississauga has been entertaining the idea as well. On December 3rd the Mississauga Real Estate Board confronted City Council in regards to the potential implementation of the new tax.
The City of Mississauga, forecasts that over the next
10 years it will undertake $432 million in new capital projects and infrastructure replacements, which currently remain unfunded. Metrolinx, the body responsible for GTA’s Regional Transportation Plan –The Big Move, currently identifies nearly all of its planned projects for Mississauga as unfunded. Metrolinx is to prepare an Investment Strategy, to determine how to best provide stable and long term funding for its projects. The investment plan is expected to be prepared by June 2013.
Share of Responsibility
Fifty years ago infrastructure ownership was spread equally amongst all three levels of government. Today the Provincial Government still owns one-third of the infrastructure, while the Federal Government only owns 3 per cent, meaning that cities like Mississauga, have to maintain and replace 65 per cent of the infrastructure. Naturally one would believe that tax dollars would be redistributed taking this into consideration, but this is not the case. For every tax dollar collected, cities only receive 9 cents while the Federal Government takes away 55 cents. Councillor Jim Tovey emphasises “If they are going to bankrupt municipalities, the country won’t be in good shape” A great number of services are provided at the municipal level; however, after expenditures on infrastructure, such a small amount of funding restricts their city’s capacity to offer quality services to its residents.
Councillor George Carlson pointed out that Ontario’s municipal governments have been too lenient on both the Federal and Provincial Government. We need the Federal Government to recognize its share of responsibilities for the upkeep of the country’s infrastructure. A study performed by the Federation of Canadian Municipalities indicated that 96 per cent of Canadians want the Government to maintain or increase spending on infrastructure investments. This issue was second only to health care in terms of importance. It is the citizens’ priority and the Federal Government should make it their priority and provide a sustainable stream of funding. Canada still remains the only OECD country not to have a national public transit framework. It is far behind the US and Europe in recognizing the infrastructural needs of its cities’ citizens.
The Federal Government rightfully distributes national income to provinces through equalization payments. However, standard equalization payments are too broad. Funds need to be distributed to those who need them most – on a more personal level to help create social equality. A great number of public transit riders use the system due to financial struggles they are faced with. Others may not have the convenience of owning more than one car, while others do not need a car daily, and can’t afford maintenance costs and high insurance rates. For those who are privileged to own a car, a 15 minute car ride translates into a 1 hour 20 minute bus ride. Inefficient transportation systems rob citizens of the time they should be spending with their family. Mississauga’s city manager Janice Baker emphasized “We used to get a fairly significant subsidy for public transit; those subsidies pretty much have all disappeared – so I think that’s the dilemma.” Federal equalization payments should focus on bringing about social equality amongst citizens not only amongst provinces.
To ensure a brighter future not just for Mississauga, but all of the cities in the nation, the Federal Government must adapt a new long-term infrastructure investment and reparation strategy with sustainable funding to benefit its citizens. The Federal Government needs to take the issue of national municipal importance seriously. If the federal government wants a prosperous country, it needs to ensure that its cities prosper first – not go bankrupt.
Desperate for a Sustainable Source of Funding
Mississauga City Council is fed up after many years of crying out for sustainable infrastructure funding with little result. Mayor Hazel McCallion knows that in order to relieve the congestion in Mississauga and the GTA that affects residents daily, there needs to be additional funding. Based on historical data, Mississauga needs an additional $77 million annually to reduce the $1.5 billion deficit it will be facing over the next 20 years. Mayor McCallion states that, “We can’t operate our cities on the property tax and user fees alone. We’ve got to have other sources of income.”
The city manager underlined that, “Ontario municipalities are probably the most restricted in terms of having access to revenue tools” and with a growing infrastructure deficit, the City of Mississauga is desperate. This is why City Council has entertained the idea of introducing the Mississauga Land Transfer Tax along with other tax tools. McCallion wants to give the city greater authority to impose taxes as the city can’t sustain itself any more with municipal property tax. "Its really about just getting more tools in the tool box" McCallion says.
Councillor Nando Iannicca is dead-set against the Mississauga Land Transfer Tax and criticizes higher levels of government, “What we have is bad public policy… The model is broken, but why create more bad public policy, to fix bad public policy.” The only reason why the Mississauga Land Transfer Tax was put on the table in the first place is because the city is in a desperate situation for funding. Councillor Iannicca makes an analogy to the City’s situation using the proverb “a drowning man, or woman, will even reach for the tip of a sword”
Councillor Iannicca goes on to say that with a Municipal Land Transfer Tax “we are taxing you with no good reason at all… I have no understanding of the logic, so why would I expect you to pay?” Referring to the tax he says “It is illogical. It is unethical. It is immoral.” When Councillor Chris Fonseca visited Parliament Hill, she spoke with 12 Members of Parliament. To her it seemed that “There is an assumption built into the model by higher levels of government that we can just continue to put a burden on the property tax” more than half of the MPs said “‘If you have an expense, just put it on the property tax bill.’ – and that’s not an accountable way to deal with the infrastructure issues that we’re facing right now. It’s not an accountable way to build and maintain a livable city for the future.” Municipalities get a very disproportionate amount of funds in terms of what they own.
Unfairness of a Municipal Land Transfer Tax
Putting the burden of infrastructure funding on the shoulders of home buyers is unfair. Mirroring the Toronto Land Transfer Tax, the average home buyer of a detached home would be burdened by paying $10,000 extra, paid in full and up front. People do not only move because it is their lifestyle choice, often they move out of necessity. Common examples are listed below:
· Seniors, who are downsizing, rely on their home’s equity to have a decent standard of living.
· Young, growing families on a tight budget often look for adequate space to house their families.
· Home owners experiencing financial hardship often due to unemployment or disability, needing to move to a different property.
Home buyers do not receive any services from their municipality for paying a Land Transfer Tax, but rather obtain the same level of services obtained by other residents. Infrastructure should not only be the responsibility of home buyers, but all residents and all levels of government.
Inefficiency of a Land Transfer Tax
Implementing certain taxes such as a road toll tax have high administration costs greatly reducing the net amount of taxes collected. The inefficiency of a Land Transfers Tax’s lies in property values. It comes down to simple supply and demand. As with the case in Toronto, the volume of sales is 16 per cent lower than it would naturally be. Lower demand normally translates into a detrimental effect on the product being sold – our homes. It can reduce the value of our greatest investment, which many of us have been saving for all our lives. We will all be “taxed equally” in the form of a reduction in the value of our property while bringing zero revenue to any level of government.
Mississauga Real Estate Board’s (MREB) President Fawzi Mattar, along with the Government Relations Chair Linda Pinnizzotto, presented the views of Realtors as citizens of Mississauga. “We are here to communicate the MREB’s opposition to the city’s attempt to obtain the right to implement a municipal land transfer tax. MREB and the city’s citizens understand that taxation is necessary for quality services, but it is imperative that such taxes are fair and equitable… It is our recommendation that the city explores other alternatives to financing our city”
Needs of the People
The residents of Mississauga continually remind City Council that safe, reliable, and efficient public transit is one of their greatest needs and priorities. Transportation is rated as a number one priority by residents. They demand that congestion problems be addressed and want an enhanced, multimodal transit system. Improved travel times will give residents more time to spend how they choose, providing for a higher quality of life. With an inefficient road and transit system residents enjoy less time spend with family and friends. With public transit making up more than 40 percent of the capital budget, Mississauga needs help to provide a quality transit system that residents will be happy with.
What to Do to Get the Funding?
Mayor Hazel McCallion says, "It is no secret; municipalities across Canada are struggling with funding for the critical infrastructure that residents rely on every day." Municipalities manage two-thirds of the country’s infrastructure yet receive less than 10 per cent of every tax dollar collected. It is not enough to repair and grow Mississauga’s much needed infrastructure. This year the City of Mississauga collected $27.6 through property taxes for the reparation costs of aging infrastructure. This falls short of the $100 million needed to manage the Mississauga’s capital assets.
City manager, Janice Baker, said that the Land transfer tax could bring in up to $75 Million which would close the funding gap. The revenue brought in by the Mississauga Land Transfer Tax would be equivalent to a 25 per cent increase in property tax. Councillor Katie Mahoney and other councillors cannot wrap their head around the rationale of the tax, and why Mississauga would be entitled to receive a tax since no tangible service is being offered. The tax won’t help the municipality in any way, other than financially. Council prefers a rational, direct taxation model.
Mississauga and other municipalities in Ontario want revenue tools that they can control themselves, allowing for a sustainable and predictable flow of funds. Funds from higher levels of government are extremely important; however handouts from higher levels of government are volatile and can be taken away at any time as has happened in the past. The City of Mississauga does not want to be in the position, where revenue from the Provincial and Federal Government is taken away. Municipalities have been too easy on higher levels of government and will be lobbying to the provincial government for greater authority to obtain revenues. All of Mississauga City Councillors agree that they do not have enough tools to sustain stable funding for projects and services, making it difficult to plan for the future.
Hazel McCallion says that the Provincial Government needs to give municipalities “authority to be able to add taxes, because we can’t operate on the property tax anymore.” Referring to different tax options she says, “I think the fairest one to cover everybody would be a sales tax, because a sales tax everybody pays.” Hazel McCallion goes further to say that “The Mississauga Land Transfer Tax would be punitive to people buying homes or selling homes in Mississauga… We would never bring in a tax without doing our home work.” At this point in time, Mississauga does not have any authority to implement a tax. “If there is any authority given, it will be to all the other municipalities in Ontario” says the Mayor.
Currently, the only option municipalities have at obtaining tax revenue directly is though property tax and user fees. All other forms of taxation are legislatively prohibited. Ontario’s 444 municipalities would need to lobby to the Provincial Government to amend the Municipal Act during its upcoming review, to provide municipalities the tools to obtain additional tax revenues. The Large Urban Mayors’ Caucus of Ontario wants to prepare and present a report to the Provincial Government on what sustainable tax authorities municipalities should have. The Land Transfer Tax and the vehicle registration tax in Toronto were exclusively introduced as a pilot project. The Province will evaluate the effectiveness of Toronto’s pilot project and examine if a province wide implementation of such taxes is a viable solution.
One also needs to be critical. Having more taxation tools also means that when Municipal Governments lobby higher levels of government for additional funding, they will turn to them and respond “but we have already given you the tools you wanted to obtain additional funding – You have the Municipal Land Transfer Tax! You asked for it, and we have given it to you, so leave us alone!”
Councillor Frank Dale voiced his opposition to a Mississauga Land Transfer Tax stating, “I don’t think that anyone who invests in our city or reinvests in our city, should be imposed such a tax and hardship.” He goes on further saying “Young families are already struggling with coming up with a down payment.” Councillor Nando Iannicca was also against the tax saying that “It’s a tax on a lifestyle choice, the desire or need to move. It’s regressive and unfair.” He then went on to introduce a motion, “That city staff ceases review of the Land Transfer Tax as an option to achieve additional revenues.” His motion was stopped by Councillor Pat Saito as she would like City Council to entertain the idea of implementing the land transfer tax after the homework around the tax has been done and council has been provided with more information. It was then suggested that Mississauga city staff should cease review of the Land Transfer Tax, until a study had been conducted and detailed report was received in regards to the Tax from the Large Urban Mayors – of which Mayor Hazel McCallion is Chair.
Mississauga City Council wants to do its homework and possibly look into charging a smaller land transfer tax. But how small would it be? What would be fair? With a City desperate for funding, it can be a slippery slope, when determining “how much is fair?”. This is dangerous territory that can have an adverse effect on the real estate market. One thing is certain, additional tax revenue is needed and municipalities are looking to add tools to their revenue tool box. It is up to the citizens to make sure that unfair tools are not chosen that will detrimentally affect the value of their greatest investment – their home. More importantly, citizens need to lobby their Provincial and Federal Government to get their priorities straight and take greater responsibility for the infrastructure of Canada’s cities. All levels of government need to be involved as an underdeveloped infrastructure impedes on our country’s success. Thriving cities means a thriving Canada.
Feel free to re-post a copy of this atricle on your website or blog, whether in whole or in part. Please make sure to include the citation with the link below in the format provided - Thank You!
Grewal, San. "Toronto Star Interviews Hazel McCallion about the Land Transfer Tax (also Pat Saito and Jim Tovey)." Mississauga Power Plants, Dalton McGuinty, Charles Sousa, Bonnie Crombie’s “Friends of Hazel”, MYTHissauga Summit, Land Transfer Tax…. : MississaugaWatch. MississaugaWatch, 14 Nov. 2012. Web. 30 Nov. 2012. <http://www.mississaugawatch.ca/blog/?p=14925>.
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Posted by: Hani Sarhan December 14, 2012 @ 6:08 am
I am a citizen of Mississauga since over 21 years now. I own a property which is my only home and investment. My wife and I are in our 50's, so we are getting closer to our retirement ages than when we first came to this city. The cost of living is so high now that both of our children cannot afford living on their own. We hope they can do that sooner than later, so we can downsize to reduce our mortgage and have some additional funds to allow ourselves a decent retirement life. This is the time to do so. A land transfer tax will inhibit us from doing so, will discourage our children to move out and others to afford buying our property. Hence if you consider my model across the whole city, I suspect such tax will put the economy to a critical hold and will have a detrimental effect to any further growth of this city. Therefore, I am fully against applying such a tax and penalize the citizens for the unfair fiscal handling of the three government levels. Instead, I encourage our mayor and councils to make this issue more public and have the citizen to lobby with you putting pressure on the provincial and federal governments to rectify the funding to the municipality allowing a fair portion of funds back.
Posted by: Ewa Lizon December 6, 2012 @ 11:10 pm
I am against introduction of additional tax.People pay enough taxes.City should find different way to spend and save money, not penalizing people for moving.