During the the last election for Mayor in Toronto I wrote some threads criticizing the Smart Track plan put forward by John Tory, which is his plan to
carry the development of the city's transit system forward. I wasn't criticizing it as a transit plan, per se
, but rather as a financial plan.
Transit expansion, according to Mr. Tory, could be payed for by Tax Increment Financing
(TIF), in which tax revenue increases flowing from
carried on by private developers along the routes of expanded transit paths would be used to pay off the very large loans the city
would have to take out to get construction under way.
I wasn't the only critic of this idea. In practice, when tried elsewhere on the scale that Mr. Tory is considering, the plan has failed to deliver
revenue streams comensurate with amounts needed to pay down the debts incurred in the course of project construction. In some cases, on a much smaller
scale than the one envisaged in Toronto, TIF has succeeded in delivering expected revenues, but in the most noteworthy large scale application of the
plan, in New York City, TIF has been applied to interest charges on loans without making a dent in the principal.
That's the kind of plan your credit card company loves.
In addition to the difficulties posed by a plan based on Tax Increment Financing, there is the question of the way that tax dollars are apportioned in
Canada. Toronto collects only a very small percentage of the tax dollars paid in the city. A report published by the government of Canada,
lauding the success of the Toronto Waterfront Revitalization Initiative as a jobs
producer and as a tax revenue generator, made it crystal clear, in an unprecedented way for a government document
, that the City of Toronto
would only receive between 5 and 6 cents of every tax increment dollar that accrued as a result of that project and 95 cents would flow to the
Province of Ontario and to the Government of Canada.
The result of this situation, in political terms, is the appearance of bottles of "Snake Oil" on the counter, during elections in this city. Snake Oil
like Tax Increment Financing.
The Federation of Canadian Municipalities has published reports saying that municipalities see only about 8 cents out of every tax dollar collected
from municipalities. This situation makes John Tory's TIF plan look even more unlikely as a vehicle guaranteed to deliver Toronto from the large debts
it will incur. Mr. Tory may very well have had faith in "snake oil" during the election, but having been elected, he will now have to face financial
and political reality in order to cope with Toronto's transit and other problems.
I don't think Tory is an evil man. I think he is going to do his darnedest to pull the city through this situation without placing an undue burden
upon the city's taxpayers. Sincere as he undoubtedly is, he will fail in this , absent a concerted effort from the federal and provincial
Of course, expecting such an effort would be to ignore the zeitgeist
in upper levels of government, where downloading costs to the
municipalities is all the rage.
This leads to consideration of another result of the bizarre way that tax dollars are divided in our country, that is, the myth of "sad sack"
Toronto, always whining about money and always going, cap in hand, to the back door at Queen's Park, pestering the provincial government for yet
another handout to help this poor, hard up, mixed up municipality pay for a lavish subway system or some other extravagant infrastructure project,
when, up in Bear Paw, they can't even get a small hockey arena built.
This kind of mythology is dangerous to our country, but it is a symptom of a much deeper problem.
During the election campaign here in Toronto, as I pulled my hair out, thread after thread, trying to get the Ford brothers elected (herding cats), I
decided that what I really needed to do was to try to come to some understanding of the country's financial position.
I don't even understand my own financial position.
I reasoned that seeing the big picture would help me to understand why Toronto was having so much trouble keeping pace with other major cities around
the world in providing adequate transit service, that is, adequate to the demands of a city which is the "engine" of the national economy. The
Federation of Canadian Municipalities reckons that hundreds of millions of dollars in tax revenue are lost each year in this city, lost to the city,
lost to the province and lost to the national government, simply because the transit system is not able to meet the demands made on it by actual and
potential economic activity.
The federal government publishes huge amounts of financial information but the information is presented in a way that makes it impossible for the
average citizen to get a clear picture of the balance sheet. Currently the country is in debt and that dept is increasing. The province is also in
debt and that debt is increasing. The City of Toronto is also in debt and that debt is increasing.
The Holy Grail of all three of these levels of government is not to pay off debt, but rather, to stop debt from increasing.
They call it, "balancing the budget", as opposed to what, "balancing the books", i.e., equalizing assets and liabilities? To balance the budget,
expenditures must not exceed revenues in any given year. In Toronto, the Ford brothers were all about this. When you, the taxpayer, are paying large
debt servicing charges (interest on loans), you are pouring money down the drain, basically enriching bankers, because you couldn't pay cash for what
you have already bought on credit.
This is somewhat of an artificial situation in Toronto, because Toronto and Torontonians have paid in cash for their infrastructure projects,
including transit, many times over.
I know I am simplifying the situation vastly. A tax return filed in Toronto doesn't mean, absolutely, that the
money being taxed was actually earned here within the city limits. Very large corporations headquartered in the city operate nationwide. Their money
is earned all over the country, through the efforts of Canadians, all over the country.
A modern state like Canada needs a national government. It needs provincial governments. it needs municipal governments. There is a hierarchy of
command among these governments. The national government calls the most important shots.
These various governments are like hockey referees, making sure the game goes according to the rules of the country. In hockey, in the NHL
under the four official
system, officials make up 25% of the people on the ice most of the time. In Ontario, people who are publicly
, i.e., working for the government in one form or another, make up roughly 20% of all people employed in the province. Indeed, in the
country as a whole, from 2009 to 2014, public sector employment increases were at 20% of total employment increases, which is in line with the numbers
Without tracking the numbers down specifically, I feel confident that public sector employment in Canada would be close to 20% of total employment.
edit on 13-2-2015 by ipsedixit because: (no reason given)
edit on 13-2-2015 by ipsedixit because: (no reason given)