Ontario must rescue Toronto from itself

Lawrence Solomon
National Post
October 20, 2006

Montreal was once Canada’s great financial centre. Then politics made Montreal unwelcoming to business and, over time, Toronto took over. Now Toronto has become hostile to business and companies are relocating outside the city and to more business-friendly Calgary. If Toronto remains hostile, Calgary will continue to outpace Toronto and could replace Toronto as the country’s business and financial capital.

This warning, the latest in a string of alarms over the diminishing standing of Toronto’s central business district, was delivered earlier this week to the Economic Club of Toronto by Juri Pill, the chairman of the Toronto Office Coalition. To address the decline, Pill asked for reforms, but not from the City of Toronto, the chief perpetrators of the damage. Pill – a man with a long and distinguished career with various arms of City of Toronto government – sensibly aimed his requests at jurisdictions elsewhere. The sad truth is that Toronto’s salvation is least likely to come from any action taken by the city government itself.

Pill’s organization is concerned about the sky-high property taxes levied on Toronto office towers, which pay two to three times more than businesses in the neighbouring 905 jurisdictions (so-named after their 905 telephone area code). Not surprisingly, Toronto businesses have been fleeing the city to avoid the tax grabs, taking jobs with them. As a result, the City of Toronto has 100,000 fewer jobs today than it did in 1990. The neighbouring 905 jurisdictions, in contrast, added 800,000 jobs.

Head office jobs, meanwhile, are moving to Calgary. Since 1999, although Toronto vastly expanded its reach by amalgamating with its immediate suburbs, Calgary has added more than twice as many new head office jobs as Toronto. Even Toronto’s suburban 905 area attracts 50% more new head office jobs than Toronto’s once-gleaming glass towers.

To arrest the property-tax-propelled job expulsions, Pill wants to level the playing field, starting close to home. He estimates Toronto businesses were overtaxed on their property by $935-million in 2005 compared with their neighbours, with city coffers receiving an excess $643-million and the provincial treasury $292-million. Pill, a pragmatist, makes no attempt to whittle away at the excesses grabbed by the apparatus of the city government he knows so well – the only level of government that he doesn’t expect to lift a finger to help. He focuses entirely on senior levels of government, and chiefly on the province of Ontario, which he hopes to convince to remove the inequity in the provincial property tax on businesses.

Far from expecting the city to take any constructive action to protect its downtown core, Pill fears the opposite: that the city will seize for itself any reductions in the provincial property tax. He thus also asks the province to strip the city of some of its powers, to limit the harm that it might otherwise inflict on itself.

It is a great fallacy to think that Toronto is ready to fully govern itself. The city is made up of a series of local fiefdoms, called wards, which local councillors rule without meaningful checks and balances. The mayor has few powers, other than the ability to place cronies in positions of power. In this unaccountable, dysfunctional environment, petty corruption thrives and rumours of major scandal circulate.

To make matters worse, taxation and fees are arbitrary, largely unrelated to the services they support. Property rights are all but non-existent. In this lawless, unprincipled governance structure, large corporations, and especially those in the financial district, become especially irresistible targets. With no one obvious to lobby, without a vote, these corporations become the geese whose golden eggs get plundered.

Worst of all, no mechanism exists through which the electorate can directly influence the direction of the city. Toronto’s electoral system is so divorced from the important issues facing the city, in fact, that election campaigns – and Toronto is in the midst of one right now – are generally uninspired and inconsequential. The current campaign is so irrelevant to the needs of Pill’ organization – and he represents property owners who together accommodate 278,000 office workers – that Pill didn’t even touch on the Toronto elections in his speech. The only election he referred to, and threatened to engage in, is the next provincial election. If Toronto is to be protected, a provincial police presence is required.

Lawrence Solomon, author of the forthcoming book Toronto Sprawls, is executive director of Urban Renaissance Institute and Consumer Policy Institute, divisions of Energy Probe Research Foundation.

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