$64-million: Cost to city if vehicle-registration tax is axed on Jan. 1

Published Tuesday, Dec. 07, 2010 11:37PM ESTLast updated Tuesday, Dec. 07, 2010 11:38PM EST4 comments

Eliminating the vehicle-registration tax on Jan. 1 would cost the city $64-million next year – about $16-million more than originally estimated and more than twice the price of cancelling the tax on the three-year anniversary of its implementation, Sept. 1, 2011.

The projected cost is higher than expected partly because Toronto would forego eight months worth of revenue with a Jan. 1 cancellation, but also because city hall would have to process refunds for tens of thousands of motorists who paid to renew their licence plates for two years, according to a staff report going to executive committee Thursday.

The report indicates the city would be out $28-million, not $64-million, if it opted to eliminate the tax Sept. 1.

Mayor Rob Ford has vowed to kill the $60 annual fee effective Jan. 1, if Toronto's new council passes the measure as expected at its first real business meeting beginning Dec. 16.

The Mayor is believed to have widespread support on council for deep-sixing the much-despised tax, which was implemented in 2008. However, even the councillor Mr. Ford has tapped as budget chief has reservations about eliminating the tax so swiftly.

“I mean personally, personally I felt the tax got introduced in September and to me it would have been [better] in terms of fairness that the tax ended in September,” Mike Del Grande said. “It would have still ended in 2011. It would have bought a little bit of time to kind of feel the ropes, etc. But Rob Ford decided it's going to be January, so it's going to be January.”

The revenue Toronto would lose to eliminate the vehicle-registration tax at the start of the new year more than cancels out a higher-than-expected 2010 surplus, revealed in a separate report to the executive. The projected surplus for 2010 is now pegged at just over $282-million, about $7-million more than the $275-million former mayor David Miller projected just before he left office.

However, the $282-million surplus doesn't mean Toronto's municipal government has cash to burn next year. City finance officials earlier projected that Toronto would start the 2011 budget cycle $503-million in the hole; now the shortfall will be $221-million, plus the revenue lost through cutting the car tax. Mayor Ford has also pledged to freeze property taxes next year, denying Toronto another potential source of money to balance its books as required by provincial law.

Mayor Ford is pushing for a swift finish to the 2011 budget. He wants council to sign off on the spending plan by the end of February, approximately two months earlier than usual.

Recognizing that the municipal government could be in an even tighter money crunch in 2012 – when the Mayor has promised to eliminate the lucrative land-transfer tax – city officials are already contemplating major changes for 2012, at Mayor Ford's urging.

According to another report landing at the executive committee Thursday, the Mayor wants the city to pay third-party experts to review the budgets of departments that draw most heavily on tax dollars; he wants the city to undertake a “comprehensive review and update of the city's fees and user charges”; and he wants a full review of which city assets could be sold or monetized.

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