September 30, 1999

  To:Policy and Finance Committee

From:Chief Financial Officer and Treasurer

Subject:Feasibility of Implementing a Parking Levy On Private/Public Parking To Support Public Transit and Application of Revenues From Parking

Purpose:

This report examines the feasibility of implementing a parking levy on private and public parking in support of public transit in the City of Toronto. This report also provides an overview of the application of revenues from the City's parking related programs/services and examines the feasibility of allocating a portion of existing or future revenues to support the TTC.

 Funding Sources:

There are no financial implications for the current year with respect to this report.

 Recommendation:

That this report be received for information.

Council Reference:

At its meeting of April 26, 27 and 28, 1999, City Council adopted Clause 1 of Report No. 8 of the Strategic Policies and Priorities Committee, titled "1999 Operating Budget". In adopting the TTC's 1999 Operating Budget, Council requested a number of reports aimed at generating additional revenues or allocating revenues from parking related programs/services to support public transit in the City, viz:

a) on the feasibility of implementing a $1.00 levy that could be charged on private and public parking in the City of Toronto, to offset future TTC fare increases;

b) a recommended comprehensive parking levy, as part of a long-term strategy to sustain public transit in the City of Toronto, including the feasibility of dedicating a portion of revenue generated from permit parking, front yard parking, parking meters and municipal parking lots, such report to assess the anticipated economic impact of such a parking levy on businesses in the City of Toronto, as well as any correlation which might be expected based on past experience with the Commercial Concentration Tax; and

c) a review of the revenue generated by automobiles (e.g., parking fees, parking tags, etc.) and that the Planning and Transportation Committee be directed to recommend to Council what portion of the revenue should be allocated to the TTC.

 Comments:

Feasibility of Implementing a $1.00 Parking Levy on Private/Public Parking

In order to assess the feasibility of implementing a $1.00 levy that could be charged on private and public parking in the City of Toronto to offset future TTC fare increases, it is necessary to know whether the proposed levy is to be based on, a) the number of parking spaces or, b) on a per vehicle parked basis. In the case of the latter, it is necessary to determine whether the charge of $1.00 per vehicle constitutes a sales tax and, therefore renders the City ineligible to collect it. The City's Legal Services Division was requested to provide advice respecting the City's authority to implement the proposed levy.

Legal Services conducted a comprehensive review of the relevant sections of the Municipal Act and applicable court decisions. Section 220.1 of the Municipal Act, which permits a municipality to pass by-laws for imposing fees and charges, provides as follows:

"220.1(2) Despite any Act, a municipality and a local board may pass by-laws imposing fees or charges on any class of persons,

(a)for services or activities provided or done by or on behalf of it;

...

(c)for the use of its property including property under its control.

...

(4)No by-law under this section shall impose a fee or charge that is based on, is in respect of, or is computed by reference to,

...

(b)the use, purchase or consumption by a person of property other than property belonging to or under the control of the municipality or local board that passes the by-law;

(c)the use, consumption or purchase by a person of a service other than a service provided or performed by or on behalf of or paid for by the municipality or local board that passes the by-law;

(6)A by-law under this section may provide for,

(a)fees and charges that are in the nature of a direct tax for the purpose of raising revenue;

... "

The above provisions of the Municipal Act were ruled on by the Ontario Court (General Division) in the case of Re Carson's Camp Ltd. and a by-law passed by the Township of Amabel that imposed a fee or charge for each seasonal, tent and trailer site on campground owners. Based on the decision of the court, it is the view of Legal Services staff that City has no authority to pass a by-law under section 220.1 to levy a $1.00 levy on private parking in the City of Toronto on either the number of parking spaces or on a per vehicle parked basis. Such a levy would not relate to the use of City property and the City would not be providing any service. Therefore any such levy would constitute indirect taxation, as the levy would in all likelihood be passed on to the users of the parking facility for the purpose of raising revenue for the TTC. Such a levy would also be prohibited by clauses 220.1(4)(b) and (c) which prohibit Council from passing a by-law in respect of the use, purchase or consumption of property or a service provided by a private parking lot operator.

With regards to imposing a levy on public parking spaces operated by the Toronto Parking Authority it should be noted that the Toronto Parking Authority is a local board of the City which has been given jurisdiction over the construction, maintenance, operation and management of municipal parking facilities. As a local board it could pass a by-law under section 220.1 to levy a $1.00 fee on users of the parking facilities it operates on behalf of the City. However, based on the Ontario Court ruling in the above-noted case, it is also Legal staff's view that such a fee could only be used for the purposes of the Toronto Parking Authority and not for the purpose of offsetting TTC costs.

In the event that a parking tax or levy was imposed only on public parking facilities operated by the Toronto Parking Authority, such a levy could potentially create an unfair pricing situation. If such were the case, the Authority might be required to absorb the tax in its existing rates in order to remain competitive and thereby such a levy would not result in the generation of additional revenue. This action could negatively impact the City's share of Authority revenues that are applied as a corporate funding source in the Operating Budget.

2.Feasibility of Implementing a Parking Levy on Residential/Non-Residential Properties

In respect to Council's second report request concerning a comprehensive parking levy to sustain public transit in the City of Toronto, Legal staff was also asked to advise on whether the City has authority to impose a parking levy on residential/non-residential properties, and if not, what authority would be required to enable it to do so. Legal has responded that the City does not have authority to impose a parking levy on residential/non-residential properties. In order to get that authority, special legislation would be required. If an application for special legislation were made it would be circulated to various provincial ministries for comment.

At this point in time Legal staff indicate that it is difficult to predict how the Province or the private sector would view any such application. In addition, it should be noted that the Metropolitan Council on September 24 and 25, 1997 adopted Clause 5 of the Planning and Transportation Committee Report 19 which recommended that the Province of Ontario be requested to amend the applicable legislation to provide authority for the new City of Toronto to implement a municipal parking surcharge and other road user fees, if it so desires. To date the Province has not acted upon that request.

It is further noted that in April of 1999, Hemson Consulting Ltd. in association with C.N. Watson & Associates prepared a report entitled "Funding Transportation in the Greater Toronto Area & Hamilton-Wentworth" that speaks to the problem of inadequate funding for transportation infrastructure. The report reviews and discusses additional revenue sources to fund transportation infrastructure, one of which is a parking tax. The report concluded that a parking tax would not be effective for the following reasons:

it would be difficult to implement since it would not reflect system use;

large employment centres would pay a disproportionate share of the tax;

the tax would have to be very large to recover any significant amount of revenue;

it would act as a disincentive to providing adequate parking; and

the vast majority of spaces are provided free of charge resulting in no effective way of passing the costs on to consumers.

3.Parking Tax (Levy) Experience in Other Jurisdictions

In preparing this report, Finance staff consulted with other jurisdictions that have considered or have the ability to impose a parking tax. City and/or transit representatives of the cities of Chicago, Cleveland, San Francisco and Vancouver were contacted to obtain information and input on a parking tax.

Chicago

Staff in the City of Chicago advised that they had considered imposing a parking tax to generate additional revenue. However, the proposal was dismissed by elected officials prior to conducting any research due to the lack of information on the number of parking spaces, and the notion that since there was no paid parking in the suburbs, the tax would be perceived as a "downtown tax".

Cleveland

The City of Cleveland does have a parking tax, but it is used to fund the new football stadium rather than to fund public transit. The City also charges a 1% sales tax in order to fund public transit. In discussions with City of Cleveland staff, there did not appear to be any significant research done on the issue since the idea came about in response to the public outcry at the loss of its football team. City of Cleveland staff indicated that implementing the tax was not that difficult since the City planning department keeps updated inventory numbers on public and private parking spaces and their respective turnover rates.

San Francisco

The City of San Francisco has a "capital charge" (equivalent to the City of Toronto's development charge) to fund the City of San Francisco's capital transit stock. The charge is $5 per square foot of development. The charge applies to all space, not just parking spaces. The charge was a very contentious issue with the development community during its implementation.

Vancouver

On July 29, 1998, the Province of British Columbia, passed Bill 136, Greater Vancouver Transportation Authority Act. The Act permits the authority to assess a parking tax on one or both of:

a) the taxable parking area of parking sites located in the transportation service region, and/or

b) the taxable parking spaces of parking sites located in the transportation service region.

In 1992, the Province of British Columbia introduced Bill 51 (BC Transit Amendment Act) which permitted a municipality or regional transit commission to impose a tax on either the parking area or parking spaces of parking sites within the transit service area or within portions of the transit service area.

Although the City of Vancouver does have the ability to impose a parking tax on space, it has yet to be implemented. The concept of Vancouver's parking tax is similar to the abolished GTA Commercial Concentration Tax (CCT) in Ontario that was based on property assessment information. The proposed tax rate of $1.00/sq. ft. is the same as the former CCT, but there are some differences in the properties to be exempted, as well as, the threshold footages above which the tax would be triggered (200,000 sq. ft. in GTA versus 50,000 sq. ft. in BC). It is worthy to note that in 1992 when Vancouver Transit considered the introduction of the parking levy, the Ontario Legislature was already debating whether to abolish the CCT.

The report (July 7, 1999) to the Policy and Finance Committee from the Chief Administrative Officer and the Chief Financial Officer and Treasurer entitled "Toronto Transit Commission - Provincial Municipal Funding Trends and Longer Term Funding Strategies" discussed how other jurisdictions' transit operating and capital costs are funded and proposed alternate long-term and sustainable sources of revenue in order to maintain the TTC's economic viability. At its meeting of July 27, 1999, City Council referred this report back to the TTC for further consideration.

4.Economic Impact Resulting from a Parking Levy and CCT Experience

An assessment of the economic impact of imposing a parking levy on businesses in the City of Toronto has not been conducted due to the lack of clarity regarding the nature and amount of any proposed levy. However, based on the past experience with the CCT, it is likely that a new levy could also act as a hindrance and disincentive to growth and development of business. For example, at the onset of the recession during the early 1990s, hotel charges were increased by $4.00 to $6.00 a night to cover the additional costs for the CCT. Businesses including restaurants saw significant drops in their sales and commercial and office buildings experienced increased vacancy rates. A more in-depth review of the CCT is provided in Appendix 1.

5.Current Application of Parking Revenues

In conjunction with assessing the potential for implementing a parking levy, Council also directed that staff review the feasibility of dedicating a portion of the revenue generated from permit parking, front yard parking, parking meters and municipal parking lots to support public transit costs.

City Council at its meeting on April 26, 27 and 28, 1999 approved the 1999 Operating Budget. Contained within the 1999 net expenditure budgets for various programs are net revenues totaling $56.6 million which are derived from "parking related services" including, parking tags, parking fines, residential/boulevard parking permits, on-street metered parking and off-street parking facilities. The table below shows the source of revenue, associated expenditures and application of net revenues in the 1999 Operating Budget.

 Over $40.8 million (72.1%) of total net revenues from parking were applied to general City revenues in the 1999 Operating Budget. This treatment supports overall operations and directly reduces the amount of revenue that has to be raised from taxation to balance the City's taxation budget. $6.4 million (11.3%) was applied as a program revenue to partially fund the operations of the Transportation Program which directly manages the City's residential and commercial parking permits. The Transportation Program receives this revenue at it is responsible for maintaining the City's streets which allow the use of on street parking. The balance of $9.3 million (16.5%) is retained by the Toronto Parking Authority (TPA) to self-finance its capital program. The purpose of the TPA is to provide affordable parking to enhance the viability of the City's commercial and residential areas, in keeping with the City's overall objectives.

The redirection of existing parking related revenues from how these are currently applied to support the TTC could create budget pressures for the program(s) involved and potentially impact the City's operating budget. In addition, the ability of the Toronto Parking Authority to self-finance its capital works program could be affected.

Council could consider the allocation of increases in parking related revenues (future revenue increases not currently budgeted) to fund the TTC's operating or capital budget. Council's recent approval of new on street metered parking rates; revisions to the voluntary payment and set fine amounts for parking meter violations, as well as some changes in the tagging policy for certain areas of the City, should result in an increase in revenues upon full implementation. In addition, a review of the City's revenue sharing arrangement with the Toronto Parking Authority is underway which could result in some adjustment in the current allocation of net revenues. Increases in revenues from the foregoing have not been specifically earmarked at this time. However, it should be noted that directly subsidizing one program's expenditures with another program's revenues could distort expenditure decisions and corporate priorities. Accordingly, given the City's financial constraints, it is deemed appropriate to allocate any increase in the above-noted revenues to the City's general revenues thereby offsetting overall corporate funding pressures.

Notwithstanding the foregoing, if Council wishes to consider allocating a portion of future parking revenue increases to the TTC, it should request the Budget Advisory Committee to report during the 2000 Operating Budget Process on the amount of revenue that could be allocated for TTC purposes. It is noted that the implementation of revised parking meter rates are anticipated to generate a net revenue increase of about $2.2 million in 2000. Pending the submission of 2000 revenue estimates by the related programs, it is difficult to assess the projected increase in revenues that could be considered for allocation without impacting other City programs. It is also worth noting that Finance staff are reviewing the general issue of allocating revenues and I will be reporting on a corporate allocation policy in the near future.

Conclusions:

The City has no authority to pass a by-law under the Municipal Act to impose a $1.00 levy on private parking in the City of Toronto on either a the number of parking spaces or on a per vehicle parked basis. The City could pass a by-law under section 220.1 to levy a $1.00 fee on users of parking facilities operated by the Toronto Parking Authority on behalf of the City. However, such a fee could only be used for the purposes of the Toronto Parking Authority and not for the purpose of offsetting TTC costs. The implementation of a new parking levy on residential/non-residential properties would require special legislation. It is difficult to predict how the Province would view an application for such a change in legislation, as to date it has not acted upon a request from the former Metropolitan Toronto to provide authority for the new City of Toronto to implement a municipal parking surcharge and other road user fees, if it desired.

Staff research of four cities in Canada and the United States found that currently only the City of Cleveland has a parking tax and it is used to fund a new football stadium as opposed to funding public transit. Although the Province of British Columbia passed Bill 51 in 1992 providing authority for the City of Vancouver to impose a parking tax on space (similar to the former Commercial Concentration Tax which in Ontario which was abolished in 1993) to support the transit system, it has yet to be implemented.

The redirection of existing parking related revenues from how these are currently applied to support the TTC could create budget pressures for the program(s) involved, could skew expenditure decisions and potentially impact the City's operating budget. In addition, the ability of the Toronto Parking Authority to self-finance its capital works program could be affected.

If Council wishes to consider allocating a portion of future parking revenue increases as a result of changes in parking rates, fines and tagging policies to the TTC, it should request the Budget Advisory Committee to report during the 2000 Operating Budget on the amount of increased revenues that could be allocated for TTC operating or capital purposes without impacting other City programs.

    Contact Names:

C. BrunoD. Altman

Senior Budget AnalystManager, Financial Planning

397-4218397-4220

G. VollebregtL. Brittain

Director, Budget ServicesDirector, Treasury and Financial Services

392-9095392-5380

      Wanda A. Liczyk

Chief Financial Officer and Treasurer

Appendix 1

Background Information

 Overview of funding for transit services operating and capital costs in other jurisdictions

Generally, in Canada, only the provinces of Alberta, British Columbia, Manitoba and Quebec provide some funding to municipalities that can be applied towards transit. Funding sources include per-capita operating and capital grants, special project grants, operating and capital cost-sharing arrangements, contributions from gas taxes, parking taxes, hydro levies, other levies and other license fees. In contrast, in the United States, the Federal Government provides about 50% of all transit capital funding and 3% of all operating funding. In addition, average States funding represents 13% of local transit capital costs, and 22% of local transit operating costs. (Reference: Report (June 16, 1999) to Toronto Transit Commission from Vincent Rodo, Interim Chief General Manager).

The report (July 7, 1999) to the Policy and Finance Committee from the Chief Administrative Officer and the Chief Financial Officer and Treasurer entitled "Toronto Transit Commission - Provincial Municipal Funding Trends and Longer Term Funding Strategies" discussed how other jurisdictions' transit operating and capital costs are funded and proposed alternate long-term and sustainable sources of revenue in order to maintain the TTC's economic viability. At its meeting of July 27, 1999, City Council referred this report back to the TTC for further consideration.

The above-noted report cites how British Columbia's Translink, the regional transportation system for the Vancouver region and Montreal's Agence Metropolitaine de Transport (AMT) for the Greater Montreal Region are funded through a wide range of revenue sources, including: fuel taxes, hydro levy, provincial sales tax on parking, non-residential parking tax, dedicated vehicle licence surcharge, property levies on municipalities that receive commuter train service, property levies for capital asset funding and provincial subsidy for commuter rail infrastructure.

A.Commercial Concentration Tax

The Commercial Concentration Tax (CCT) was introduced by the Provincial Government in its 1989 Ontario Budget, for implementation on January 1, 1990. The CCT was one of a few initiatives to fund a $2-billion provincial Transportation Capital Program (TCP) over a period of 5 years (1989 - 1994) aimed at reducing congestion and improving access to growing markets throughout Ontario. Of the $2 billion, $1.24 billion (62%) was committed to projects within the GTA. These included road and highway expansion (Hwy 401, 403 and 407), municipal road links in Metro and surrounding areas and transit improvements. The CCT was imposed on properties in the Greater Toronto Area only. The rationale was that the people who receive the direct benefit i.e. improved transportation services should pay for the project costs.

A.1Principal Provisions of the CCT:

an annual tax of $10.75/m² ($1/ft²) to be imposed on all commercial properties exceeding 18,600 m² (approx. 200,000 ft²) and all commercial parking lots in the GTA

the first 200,000 ft² of commercial properties (not including parking lots) to be exempt

total area of parking lot to be subject to CCT

the tax to be levied against the land, and, therefore the landlord of the property to be responsible for the payment of the tax

race tracks, pipelines, trucking depots, warehouses, research and development facilities, residential and industrial properties to be exempt

land that is exempt for taxes for municipal or school purposes by any Act to be exempt except commercial parking lots operated by a municipality or local board

commercial parking lots operated on a seasonal basis to be exempt

A.2Economic Impacts of the CCT

The CCT was estimated to generate $625 million over 5 years, or an average of $125 million annually from both commercial properties and parking lots in the GTA. (In 1992, the CCT brought in $111 million for the Province.) For the former Metro Toronto, the greatest impact of the CCT was experienced by the parking operations of four of the Special Purpose Bodies, namely the Exhibition Place, the Metro Zoo, the TTC and the Metropolitan Toronto and Region Conservation Authority. The TTC experienced the largest single impact of all the Special Purpose Bodies. It was liable for an annual CCT of $3.58 million on its parking lots. The total combined taxes levied on parking lots together with taxes on commercial buildings through office leases were just over $5 million every year. As well, the Parking Authority of Toronto (PAT), the public parking operator of the former City of Toronto, paid about another $5 million a year on its parking operations.

At the time, many parking lots were losing money but still had to pay the CCT, which was viewed as punitive. For example, Whitby's municipal lots generated $105,000 a year in revenue but were liable for $165,000 in CCT, and they subsequently made all town parking lots free to fight the tax. Toronto's TTC also removed all parking charges on its commuter lots until the CCT was abolished. During the period the CCT was in effect, the PAT temporarily closed sections of its parking facilities to avoid payment of the tax on under-utilized parking spaces.

The CCT was introduced during the economic boom in the late 1980s. At the onset of the recession during the early 1990s, it was obvious that the CCT had become a hindrance and disincentive to growth and development of businesses in the GTA. For example, during this time hotel charges were increased $4 to $6 a night to cover the additional costs. Businesses including restaurants experienced a significant drop in their sales. Commercial buildings and office spaces experienced increased vacancy rates.

Furthermore, the CCT was perceived as an unfair and discriminatory burden based on size only (for commercial properties) -- the large landowners and developers were the hardest hit.

From the municipalities' perspectives, they viewed the tax as biased against the GTA since the tax was imposed in the GTA only. In addition, the revenues generated from the CCT were applied to the Province's general revenues and not designated to fulfil the purpose the tax was first intended. At the time, Metro was trying to maintain existing aging infrastructure and attempting to find solutions to its own internal pressing transportation issues. Given that 64% of the estimated revenues to finance the Transportation Capital Program originated in Metro, it was expected that the Province would develop transportation initiatives in collaboration with Metro. Such was not the case.

The fact the CCT was opposed by businesses, as well as GTA municipalities, especially Metro, contributed to the increased pressure in the Ontario Legislature to abolish the tax in 1993 and the legislation was finally repealed in 1997.

B.Municipal Parking Surcharge (Metropolitan Toronto - Request to amend Legislation)

The former Metropolitan Council considered the subject of a municipal parking surcharge, as a form of transportation user fee, in September 1997. Based on information contained in a report (July 31, 1997) from the Acting Commissioner of Planning, Council directed that the Province of Ontario be requested to amend the applicable legislation to provide authority for the New City of Toronto to implement a municipal parking surcharge and other road user fees, if it so desires. The municipal parking surcharge idea was put forward as a possible form of user fee in a proposed "Short-Term Pro-Transit Strategy".

The report cited the following benefits:

It would act as a visible expense for drivers, requiring payment of parking for each trip thereby have a greater chance of influencing the decision to drive versus an alternative mode of travel.

It could be structured to apply to all day parking users (driving to work or school), thereby not affecting short-stay parkers conducting business, shopping or other purposes.

Conceptually, the surcharge represents an extension of an existing charge.

The following key disadvantages of a parking surcharge were also noted:

Provincial legislation would need to be enacted to allow municipalities to levy such a surcharge.

It would require a new administrative structure for collection and enforcement. In addition, start-up costs to undertake an inventory of parking spaces affected, establish a business plan and conduct a public information program would be significant.

The report from the Acting Commissioner of Planning (July 31, 1997) estimated the net annual revenue that could be generated from implementing a $1.40 per day surcharge on all non-residential, off-street parking spaces used for all day parking at $100 million (net) annually across the City (formerly Metropolitan Toronto). A rate of $3.45 per day would be required to generate the same net income level if only parking spaces in areas well-served by rapid transit were included.

The estimated net revenue from a municipal parking surcharge could be substantial, however, the City would need to consider exemptions from any proposed levy in order to ensure that other corporate policies are not adversely impacted, for example, business improvement initiatives and TTC commuter parking lots. Accordingly, the level of net revenues that could be realized would be lower.

Requirements to Proceed:

In the event that Council decides to proceed with the implementation of a municipal parking surcharge it would first need to obtain Provincial enabling legislation that included provisions for inspection and auditing of privately operated parking facilities.

Secondly, the City would need to conduct a lot-by-lot inventory of all parking facilities that are potentially affected. Although, the current CVA assessment database contains information for stand alone parking facilities (assessment amounts, not number of spaces), it is still necessary to determine the number of parking spaces and obtain other information respecting parking usage. In addition, properties with parking operations forming part of commercial buildings and other types of developments would need to be captured separately.

A business plan would need to be developed that identified all parking spaces, times affected, surcharge rates and administrative requirements including collection, inspection and auditing.

Next, the City would have to approve by-laws to give effect to the parking surcharge, rates, conditions and other provisions. The administrative structure necessary to implement the surcharge including staffing and support would have to be established. Also, a public information program to explain the surcharge and its use would be appropriate. Finally, the City would initiate collection, inspection and auditing procedures.