Tax the Users

If Toronto is going to pay for its big transportation goals, a parking tax might make sense.

If there is a silver lining to only being able to drive 11 km per hour on Spadina during rush hour or watching the Toronto Transit Commission increase the fare again, it is that frustration breeds consensus – a consensus that we need more public transportation and that it deliver value for money.

Indeed, the Greater Toronto Area has big transportation goals, and big transportation goals require big investment. Given the financial state of our governments, however, “investment” is often code for “taxes.” If a GTA-wide tax is on the horizon, we better start having a sensible conversation about it sooner rather than later.

The Organization for Economic Cooperation and Development recently presented road tolls and parking taxes as potential tools to address both traffic congestion and transportation funding challenges in the GTA. Contemplating these two options seems like a step in the right direction.

First, these taxes would make the users of the transportation system fund improvements to that system. This seems fairer than implementing a broadly applied tax like a city sales tax. Second, levying a dedicated tax makes it easier to track what’s going into the pot and where the money is being spent.

Of the two, a parking tax would be more politically palatable. It would be easy to imagine the public furor (my own included) about having to pay to sit on the Don Valley Parkway. A parking tax is also easier to implement and administer.

But before I get too far into it, let me say that now is the time to start talking, not implementing. As Metrolinx is quick to note, the people of the GTA deserve to see some results. We must deliver some transit goods before we ask anyone for more money on top of the $9 billion in promised government funding.

On a related note, all levels of government also need to demonstrate that the public sector can build infrastructure on time and on budget. Toronto’s recent experience with the St. Clair streetcar upgrade has scared even the most stalwart transit advocates. In that case, both the budget and construction time were more than double the original estimate.

We, the taxpayers, must also have a clear understanding of where the money is going, who’s in charge of it, and who is accountable for delivering results.

Only after clearing these hurdles can we consider implementing a parking tax.

But what would such a tax look like? It could be similar to a sales tax, which is used in many cities. Vancouver, for instance, charges a 21 per cent tax on parking. Pittsburgh’s rate, the highest in North America, is over 37 per cent. Another option is charging a flat tax, as Chicago does.

Since we are trying to fund regional transportation goals, however, we need a parking tax that works across the entire GTA. Since drivers in Toronto generally get charged for parking while those in the surrounding areas don’t, the tax cannot just be based on the existing fee or it will become a significant disadvantage for Toronto-based businesses.

Rather, experts tell us that the tax would need to be calculated according to the area of the parking space or per parking stall. If the taxed space already has a fee, then the new tax would be passed from the owner to the user through increased parking charges. If the space is currently provided free of charge, the owner would have to decide whether to start charging a fee or recover the cost in some other way.

The amount of revenue that could be raised is significant. The Toronto Parking Authority estimates there are about 900,000 charged and uncharged parking spots in the city. At $100 per space, per year (considered to be a “mid-range” parking space tax), the revenue would be $90 million from Toronto alone before exemptions and market adjustments.

However, it will be critical to find ways to improve the parking experience for those who will be paying the tax. For instance, helping people avoid parking tickets by providing more flexible payment options will help generate good will. Or, as Metrolinx is currently exploring, we could make it easier to locate a free parking spot using GPS technology.

We need to begin a dialogue today that allows us to realize our much needed transit goals. As we do so, let's make sure we offer value to the "investors," every step of the way.