Yesterday’s announcement to increase TTC fares by 10 cents is a grim example of what happens when the City runs short of revenue: vital services are reduced and the most vulnerable communities suffer the most. Toronto’s City Manager Peter Wallace continues to warn that we are in a budget crisis, but has also suggested we can’t cut our way out of it.
Without new revenue sources, cuts get deeper, services suffer, and roads crumble. Not to mention the construction of new infrastructure such as Toronto’s long-term transit plan continues to be unfunded. A more sustainable option is for the City to raise more revenue, including new taxes. And one important way to accomplish this is through road tolls.
Transit fares are an example of dedicated user fees. The fares collected at the ticket booth go directly to operating the service. Currently, the TTC fare box recovers 70 per cent of its operating costs. The remainder is subsidized. It’s also important to remember that fares go to maintaining existing operations, not building new transit projects.
Road pricing – or tolls – are another example of user fees. They are also an opportunity for a dedicated revenue tool where mobility pays for mobility. Revenue collected locally by charging drivers for using of Toronto-owned highways is returned locally where it can be dedicated to maintaining and building transportation infrastructure, including transit. Tax-payers know where their money is going, instead of it getting lost in the City’s general revenue.
Another advantage of tolls is that they can be applied to users who live outside the city and use roads and highways that Torontonians pay through Toronto property taxes to maintain. A City of Toronto KPMG study estimates that road pricing could net between $89 and $377 million annually. A Pembina study that analyzes per/km road tolls (not a cordon) on the DVP and Gardiner could generate up to $500 million/year by 2025.
Pay what you burn, not what you earn
Indeed, tolls represent a big ticket option for revenue generation stacked up against other taxes and fees (see table below), with income tax much higher – but there is merit in the expression: pay what you burn not what you earn. A gas tax fits into this category as well and in fact was recommended by the Premier’s transit investment strategy panel back in 2013 as the preferred revenue option to fund the Big Move regional transit plan.