“One key ingredient in any solution to Toronto’s financial challenges will be a new relationship with our employees. Together with our Agencies, Boards and Commissions, the City of Toronto employs over 53,000 people. The vast majority of these are hard-working men and women who take pride in what they do for Toronto. But, the fact remains that it takes 37 homeowners to pay for each city worker.
“The math is simple. The average city employee costs taxpayers just under $90,000 – that’s salary and benefits. The average homeowner pays the city $2,400 in tax each year. So, it takes about 37 average homes to pay for each and every city employee. That’s 37 taxpayers. That’s 37 private sector jobs to pay for one public sector job.”
— Mayor Rob Ford, Empire Club, October 14th
The math may seem “simple,” as the mayor assured a business audience last Friday at the Empire Club. The problem is, his math, as usual, is wrong. Let’s see if we can unravel the strands of his calculations.
CLAIM: “The average city employee costs taxpayers just under $90,000.”
According to recent pronouncements from the mayor and city manager Joe Pennachetti, labour costs account for about half of the City’s gross budget of $9.4 billion (2011). If you divide $9.4 billion in half, you have $4.7 billion. If we then divide that figure by 53,000 employees, we get a number just south of $90,000.
So far so good. Tentative tick mark here. But here’s where the mayor’s arithmetic starts to get a little dodgy.
CLAIM: “The average homeowner pays the city $2,400 in tax each year.”
Okay, this is indeed the case, as countless city presentations have affirmed. But let’s not forget that the average homeowner isn’t the only source of the City’s revenues; far from it. In fact, residential homeowners account for only 44% of all property taxes collected by the City. The balance comes from multi-unit residential (16%), industrial (4%) and commercial (36%).
If you do the math, homeowners contribute just $1.55 billion to the city’s gross budget — which looks like a whole lot less than $4.7 billion, doesn’t it?
Why so low? Because revenue from property taxes totals $3.5 billion, as the City of Toronto’s 2010 annual report stateS [PDF] on page 41 (note to mayor’s staff: check 2010 annual report). The balance, as various budget presentations all explaiN [PDF] with the clarity only a pie chart can deliver (see page 24), comes from user fees, federal and provincial grants, the land transfer tax, surpluses and licensing revenue.
As it transpires, those 37 hardworking, private sector homeowners only do a fraction of the heavy fiscal lifting when it comes to public sector workers’ wages.
The mayor conveniently neglects to mention the 50% of Torontonians who live in apartments, and whose tax rate is not only higher, proportionally, than homeowners’, but who can not see how much they contribute to the public weal because landlords are not obliged to break out the tax portion of their leases.
We also don’t know which segment of Toronto society bears the brunt of paying the $1.5 billion in user fee revenues. And our business friendly mayor forgot to acknowledge the role the private sector plays in supporting those public servants.
So does it actually take 37 homeowners to pay for each City employee?
Nope. Based on residential property taxes, each civil servant costs homeowners just $29,000, and certainly not $90,000.
Sorry, Mr. Mayor. I’m not even sure I’d give you part marks for this one.
The fact is, a far more accurate reading of the fiscal burden of the public service is expenditure per capita. For the City of Toronto, that number works out to be $3,760 — i.e., what every resident of the city pays for municipal services.
So what are the comparable ratios for the Government of Ontario? With a $115 billion operating budget for 2010 and a population of 13.4 million, provincial spending per capita in Ontario is just a shade under $8,600.
And the federal government of Canada? Prime Minister Stephen Harper’s Conservatives authorized a budget of $236.5 billion in 2009, which works out to about $6,980 per person.
Indeed, $2.1 billion — or 22% — of Toronto’s gross revenues came from the Feds and Queen’s Park, so the per capita tax burden facing Toronto’s long-suffering homeowners is quite a bit less than $3,760. (Homework assignment: calculate how much less. Please round your answer to the nearest hundred.)
Let’s emerge from the numerical weeds at this point: however you do the computations, the reality is that Torontonians get a very good deal on their local government. But we’d only know that truth if the mayor and his numerically challenged advisors did their math correctly, instead of disingenuously.