Associate Editor: Francisco Gil-White

Section A  

The Toronto city region is the most populous, and the foremost center for business in Canada. As of 1993, the City of Toronto and the surrounding regions were headquarters to:

In 1994, Fortune ranked the City of Toronto as the world’s seventh best city for business; PHH Fauntus has ranked the City of Toronto, and its region, as the fifth most desirable international headquarters location; and the Toronto city-region is the fourth largest office space market in the world.

Greater Toronto is also Canada’s leader in arts, entertainment, and culture, attracting visitors from across North America. It is home to:

Furthermore, Greater Toronto stands out because of the tremendous ethnic diversity of its population (see Appendix 1). Twenty-five to thirty-three percent of Canada’s immigrants have settled in Toronto and the surrounding region over the years. Of recent immigrants, the largest groups in Toronto are Chinese (from both Hong Kong and the People’s Republic), Sri Lankans, Indians, Filipinos, Poles, Jamaicans, and Iranians. Between 25 and 30 percent of Torontonians have a mother tongue other than English or French (Canada’s two official languages). Toronto and the region boasts over 1000 native speakers of 50 different languages, with the most common languages being Italian, Chinese, and Portuguese.

Today, Greater Toronto is touted as a leading cosmopolitan city, unparalleled in North America for its safety, cleanliness, and high quality of life. It recently was selected by the United Nations as the world’s most multi-cultural, multi-ethnic city. 

Toronto’s Origins

Toronto’s beginnings were much more humble. It was selected to be the capital of the British colony of Upper Canada in 1795 primarily on military grounds, although the Governor voiced optimism about the commercial prospects of its harbor as a transit point for materials from the interior of British North America. Movement of goods was by ship, and so the original city was heavily concentrated around the lakeshore and harbor on Lake Ontario. Toronto means "meeting place" in the Huron Indian language: it is where the Don and Humber Rivers approach one another as they empty into the north shore of Lake Ontario. For settlers in British North America, Toronto soon became a railhead and wholesale, distribution, and stockyard center for cattle, pigs, wheat, and lumber from Ontario’s interior and the Great Lakes.

Notwithstanding its initial commercial role, Toronto’s growth resulted from its strength as a center of government. The public professional elite that emerged supported a more varied and affluent retail market than elsewhere in Upper Canada, and these amenities attracted many migrants, including refugees from the War of 1812 and the Napoleonic Wars in Europe.

New York and Montreal both saw the commercial potential of Toronto. Their competition in the 1700s and 1800s for dominance in the resource-rich hinterland (today, central and southern Ontario and the Great Lakes region generally) became a contest for control and influence over Toronto. New York developed the Erie and Oswego Canals and the Mohawk and Hudson Rivers in an effort to establish an alternative route to the St. Lawrence. In 1846, the United States passed the Drawback Act, which allowed goods to enter the U.S. for transshipment to Upper Canada tariff-free. These early connections to New York account in part for the fact that residents of the City of Toronto and its surrounding region think of it as an eastern "seaboard" city, even though the city’s geography and economic history are much more reminiscent of Chicago, in the midwest.

Until 1849, Toronto’s trade with New York and its overall growth prospects were seriously impaired by the British Navigation Acts and the mercantilist system of colonial tariff preferences. When Britain repealed the Navigation Acts and discarded mercantilism in favour of free trade in 1849, Toronto stood on the threshold of a rapid period of growth. In 1855, the Northern Railway joined Toronto to Barrie and Collingwood on Georgian Bay, then a key port for trade on the Great Lakes, and that same year Toronto became the eastern terminus of the Great Western Railway which joined Windsor, Hamilton, and Buffalo, New York. This was extremely significant: Toronto, now linked to all of southern Ontario, challenged and quickly defeated Hamilton as the key metropolis of Ontario. Furthermore, the rail link to New York was established even before Toronto and Montreal were so joined; a strong symbol of Toronto’s new independence and prosperity. In 1856, the Grand Trunk from Montreal through Toronto to Hamilton was completed, further obviating the St. Lawrence canal system. Later the Grand Trunk would extend to Sarnia and Chicago. Other lines to Lake Huron and southern Ontario followed.

As the city became a railhead, development within Toronto oriented away from the harbor area to along the rail lines. Workers, residents, and businesses were still concentrated in what is today the downtown, but there was a westward shift which is noticeable even today (see Figure 1). Ultimately, Toronto failed to become the dominant railway center for all of Canada. On the whole, however, Toronto established itself as an independent and growing business center.

Toronto also competed as a financial center in the 1800s with Kingston, an economic satellite of Montreal within Upper Canada. Kingston already had three banks with strong currencies in 1819 when the colonial administration announced the charter for the new Bank of Upper Canada (this was a time when "money" was still issued by private banks, not a national bank). Both Kingston and Toronto businessmen bid for the charter. Toronto won only by dint of the fact that many of the prospective Toronto bankers either sat in the colonial legislature, located in Toronto, or were intimately connected to legislators by both bloodlines and business ties. Toronto, the center of government, thus gave birth to Toronto, the center of business and finance. The emergence of Toronto as a centre for business and finance would ultimately prove far more important once the newly emerging Dominion of Canada established a capital at Ottawa.

The Rise of the City of Toronto

The development of a streetcar network in the later 19th centurty would soon add to the city’s attractiveness. By 1891, there were 68 miles of streetcar tracks serving the downtown core and the affluent bedroom communities of Yorkville and Rosedale, where professionals could live some distance away from the hectic pace of the city. This in turn opened up more housing for workers downtown, near the harbor, stockyards, and factories. Indeed, before the automobile, Toronto, like other North American cities, remained highly concentrated so workers could travel to their places of employment efficiently on foot or by horse.

The original City of Toronto was just 5500 acres ­ 22 square kilometres. It could not contain the population growth of the latter half of the 1800s. The City’s approach to planning was laissez-faire: it was left to private land speculators to provide housing for the growing population by buying up outlying farms and subdividing them into residential lots. Many of Toronto’s main streets today were, in the past, the borders of farms and served to mark off each new development from the next. From 1883 to 1914, 47 separate municipalities, farms, and estates were annexed by the City of Toronto, usually in exchange for the provision of water and sewage treatment. By the eve of the First World War, nearly all such developments had been annexed and only a few small, isolated, built-up communities lay outside the bounds of the City of Toronto, now 80 square kilometres in area.

The City’s long term population growth (see Appendix 2) can best be explained by the City’s steady and gradual evolution from a wholesaling and distribution center to a manufacturing center which required workers and thereby attracted migrants. Toronto’s manufacturing growth was based, in turn, on the presence of an affluent consumer market with the secure incomes of government officials at the core. 

The federal government’s "National Policy" contributed to growth as well. The policy established a tariff wall against manufactures from the United States which already possessed a well-industrialized and diversified economy, and which could have supplied the Canadian market with final products cheaper than those of the nascent industries of Toronto. Many American corporations chose to avoid these tariffs and serve the Canadian market by setting up subsidiary companies and production facilities inside Canada. The process significantly enhanced the industrialization of Toronto and southern Ontario and also made a large portion of the economy foreign-owned and controlled. The tariff wall remained largely in place until after the Second World War and accelerated the development of the Canadian economy, especially in Toronto and southern Ontario.

Toronto’s manufacturing was and continues to be very diverse, based as it is on a strong consumer market, financial services, and a wholesaling, distribution, trade, and transportation network which spans all of Ontario and the Great Lakes region. This stands in marked contrast to many other Canadian and American centers which depend for industrial growth on proximity to an abundance of a natural resource such as coal, iron, oil, forest, or prairie farmland. In 1986, the largest industries in Toronto’s manufacturing sector were machinery, transportation equipment, and electrical products (30 percent). Other urban areas of Ontario contrasted strongly: Windsor was 75 percent machinery, transport equipment, and electrical products, Oshawa 75 percent, London 60 percent, St. Catharines-Niagara 50 percent; Thunder Bay was 75 percent wood, furniture, and paper, and Ottawa 40 percent. The only major Canadian centers with a manufacturing base as or more diverse than Toronto’s were Montreal, Winnipeg, and Calgary. This diversity also helps to explain, in part, Toronto’s traditional ability to weather economic downturns better than the rest of Canada.

Toronto in the Twentieth Century

By 1911, manufacturing attained a dominant position in the City’s economy. Roughly a third of all employment was in manufacturing, particularly in consumer products such as clothing and textiles, furniture and wood products, paper, beer, starch, and soap. The small workshop and individual craftsman had led the way in the 1800s, but by the turn of the century the movement towards larger-scale manufacturing was well underway. Then, as now, however, Toronto could not compete with Hamilton, London, or Windsor to the south for heavy industries which require large tracts of land. Agriculture and primary industries had dropped out of the local picture, replaced by a growing professional class, service industries, and a strong construction sector driven by the housing needs of an expanding population.

Although the great wars of the twentieth century, as well as the Great Depression, were monumental events for the people of Canada, the City of Toronto’s local economy and landscape were not deeply affected by them. The population continued to grow, from just under 400,000 before the First World War to 631,000 in 1931 (though at a decelerating pace). The City’s population has not significantly changed since then, but for the annexation of two more towns, Forest Hill and Swansea, in 1967 (see Appendix 2). At the time, of course, manufacturing employment was significantly affected by each of these events. War production, beginning in 1939 provided a tremendous boost to the City’s manufacturing sector. These macro-level factors, however, fail to explain the steep post-war decline in the City’s manufacturing sector, accompanied by the continued, steady, long-term growth in Metropolitan Toronto as a whole. These large events, rather, set the stage for massive geographic and demographic growth of the local urbanized region and for the creation of Metropolitan Toronto in 1953.

The Origins of Regional Municipality of Metropolitan Toronto

In 1915, residents began to settle in towns and areas outside the City of Toronto. For some time, these communities remained separate municipalities. To the north were North York, East York, the City of York, Weston, and the residential areas of Forest Hill and Leaside. To the east was Scarborough, and to the west were Etobicoke, Swansea, Mimico, New Toronto, and Long Branch (see Figure 2). The reason for this growth is deceptively simple: the City of Toronto continued to offer promising job opportunities, but was becoming too crowded to house more workers at prices they could afford.

The City’s population rose 77 percent from 1911 to 1941 (376,000 to 667,000), while the twelve surrounding towns grew 624 percent, from 33,500 to 242,500, over the same period. By the mid-1950s, there were as many people living in the twelve surrounding towns as within the City of Toronto itself (see Appendix 2). Most of the suburban residents’ jobs, however, remained in the City. In 1946, there were between 156,000 and 160,000 manufacturing employees in the City, but only 5,000 to 9,000 in these surrounding towns. As late as 1961, the City’s total labour force was 334,000, but employment in the City was nearly 450,000, for an employment rate of 134 percent. The surrounding towns had an employment rate of only 59 percent (see Appendix 3).

The new built-up areas outside the City of Toronto tended to follow a radial pattern along rail lines or streetcar lines in five directions: east, north, northwest, west, and southwest (see Figure 1). As early as 1944, however, the City of Toronto began to worry about losing manufacturing jobs to the surrounding towns. Reasons typically cited included cheaper land ­ and thus cheaper parking, less traffic, and greater potential for expansion of plant facilities ­ proximity to workers’ residences, easier access for trucks and tractor-trailers, and the tax disadvantages of holding and redeveloping industrial land in the City. Industrial development outside the City also followed the radial patterns identified earlier and these are still visible today.

Creating a Metropolitan Structure of Government

By the late 1940s, the population of the twelve towns outside the City of Toronto had reached 500,000 and the City of Toronto could offer no more room for housing. Although the twelve municipalities were in dire need of expanded housing construction, lack of access to Lake Ontario for water supply and sewage treatment threatened to retard their growth and that of the Toronto area as a whole. As long as housing construction was stalled, so too were projects which depended on property taxes for funding, such as the construction of roads, sidewalks, schools, and other public facilities in the new suburbs. The City’s fear was, not surprisingly, that better suburban water supply and sewage treatment would only accelerate the movement of industries and jobs to the surrounding towns, with a serious impact on the City’s fiscal bottom line.

In a reprise of 1883-1914, the City of Toronto proposed outright annexation of the twelve towns in exchange for public works, but this time the suburbs resisted. Instead, these towns tried to address problems of planning and coordination by making discrete bilateral agreements. In fact, 163 such agreements were entered into between individual municipalities around the City of Toronto. The demands of the population, however, significantly outpaced the local politicians' ability to respond in the fragmented governmental environment. 

In 1953, the provincial government of Ontario (known as "Queen's Park" after the name of the legislative building) stepped in and created the Regional Municipality of Metropolitan Toronto (Metro). Metro, under the plan adopted, would serve as an upper tier ­ a region-wide government ­ and would not replace the thirteen municipalities. The two-tiered system represented a compromise between doing nothing and thereby letting suburban growth continue without planning or coordination, and amalgamating the thirteen municipalities outright.

Metro, as designed by the politicians of the day, was to achieve three goals:

The decision-making body of Metro, Metro Council, was composed of members elected to their towns' individual local councils and then elected by each council to serve on Metro Council. In this way, they were regional representatives, but there was no direct election to this Metro Council.

In 1967, seven of the municipalities were amalgamated by the province into one or another surviving municipality, and so today Metro consists of six lower-tier municipalities: the City of Toronto, East York, Etobicoke, North York, Scarborough, and the City of York (see Figure 2).

In its first two decades, Metro’s main function was to use its statutory power to levy revenue from each municipality for so-called "regional functions" and equip the twelve surrounding towns and their populations with water, sewage, roads, and other utilities. This infrastructure was funded, in part, by the greater financial resources of the City of Toronto.

As a result of this infrastructure development, the 1950s and 1960s saw the "filling in" of those undeveloped areas that lay in between the radial industrial areas of the suburbs, with residential and retail developments. From 1951 to 1971, the population of the City of Toronto did not grow at all (aside from the incorporation of Forest Hill and Swansea in 1967). Meanwhile, the population of the rest of Metropolitan Toronto nearly tripled, from 440,000 to 1,250,000. Most of this growth was concentrated in the three "inner suburbs" of Etobicoke, North York, and Scarborough, which together more than quadrupled from 227,000 to over 1,000,000 (see Appendix 2 and Figure 3).

Metro, as designed by politicians and planners, was premised on the notion that the individual municipalities would carry out truly "local" functions while the metropolitan (upper tier) level of government would have responsibility for "regional" issues. What is local and what is regional has been controversial and remains so. In 1953, the division of responsibilities was as follows:

Metropolitan Toronto Individual Municipalities

Since then there has been a noticeable shift of responsibilities towards the upper tier and away from the individual municipalities:

Additional Metro Responsibilities Areas of Overlap Between Metro and Municipalities

Metro has been universally praised by urban planners as a successful experiment in managing urban growth in the age of the automobile. Most critically, it met its prime goal of equipping the municipalities with water, sewage facilities, utilities, new arterial roads and highways, and an integrated public transit system (the Toronto Transit Commission) enabling these municipalities to grow, while avoiding the decay or depopulation in the core City of Toronto (see Appendix 2).

The Emergence of the Greater Toronto Area (GTA)

The Province of Ontario extended the Metro model of government to over twenty towns surrounding Metro between 1971 and 1974, creating the four additional regions: Durham (east of Metro), York (to the north), Peel and Halton (both to the west) (see Figure 4). Since then these four regions have experienced massive population, labour force, and job growth (see Appendicies 3, 4, and 5). In terms of land use, these regions surrounding Metropolitan Toronto were, and still remain, predominantly rural. Even with the massive growth described herein, only sixteen percent of land in these regions is considered urbanized; nearly 50 percent is still used for agricultural purposes.

The GTA is used today to cover all five regions (Metro, Durham, York, Peel, and Halton), from Burlington in Halton to the west to Newcastle in Durham in the east, and from the City of Toronto north to Georgina Township and Lake Simcoe (see Figure 4). It includes a population of over 4 million people. The GTA is not a level of government or statutory body with authority of any kind, but the use of the term signals a belief that the economies of all five regions are interdependent and growing more integrated. Over the years, there have been growing concerns among urbanists, planners, and some politicians, that this region cries out for coordination.

As predicted by many (and feared by the City) in 1953, Metropolitan Toronto’s success in equipping the municipalities outside the City of Toronto for growth and development quickly led to greater job growth in those municipalities throughout the 1950s, 1960s, and 1970s. Metro began to lose job growth to the four outer regions of the GTA. In the manufacturing sector, the rates of job growth in East York, Etobicoke, North York, Scarborough, and York were already slowing down to just over one percent per year by 1981, while manufacturing in the four outer regions continued to show robust growth (see Appendix 5). 

In terms of total employment, however, the picture is a bit more complex and interesting (see Appendix 3). Rapid population growth in the four outer regions since 1961 has resulted in labour force growth outpacing the rise in jobs located in those regions. Many tens of thousands in the labour force of the outer regions commute elsewhere to work --in many cases, to other outer GTA regions-- but overall, the resident labour force far outnumbers the jobs located in the four regions. In some cases, the employment location-to-resident labour force ratio is lower today than in 1961. Metro’s ratio, on the other hand, is far higher than that of the outer regions or the Metro unemployment rate (the percentage of the labour force resident in Metro without jobs, anywhere), indicating that Metro is still generally the source of disproportionate numbers of jobs which in turn produce wealth and income for the GTA. Within Metro, the City of Toronto has an extraordinary employment location-to-resident labour force ratio of 1.49, lending support to the argument that the City itself creates a disproportionate share of jobs and wealth for the GTA region. Further, the manufacturing sector and manufacturing jobs have been shrinking consistently in the City since 1951, and so only strong growth in other types of jobs can account for the City’s persistently high employment location figures.

Flight from Metropolitan Toronto 

The profound restructuring of employment and industry, and the 1990-92 recession have had a differential impact on various parts of the GTA economy. If one segments the economy into a "goods" sector (including manufacturing, construction, transportation, storage, communications, other utilities, and wholesale trade), and a retail and service sector (including retail trade, finance, insurance, real estate, business services, government, education, health, social services, accommodation, and other services), one finds that the "goods" sector employment across the GTA fell just over two percent between 1986 and 1991 (see Appendix 6). The 2 percent GTA-wide decrease, however, masks a 14.4 percent drop in Metro with a 12.5 percent rise in the four outer regions. Similarly, retail and service sector employment rose 2.5 times as much in the outer regions as in Metro (a 61.7 percent rise in the outer regions versus a 24.1 percent rise in Metro). Census figures on employment growth by occupation from 1986 to 1991 show similar disparities between Metro and the GTA as a whole.

While 1991 was the midst of the last recession in terms of job losses for the GTA economy, a further comparison of such figures will have to await the 1996 Census. All signs, however, indicate that these trends within the GTA continued over the past four years (see Figure 6). The Metropolitan Toronto Planning Department reports nearly 23,000 jobs lost in Metro in 1993-94. 

 Between 1991 and 1994, the number of jobs located in Metro fell by 103,000, which means a net rise in the four outer regions of over 114,000. Furthermore, within Metropolitan Toronto, the City of Toronto has suffered the greater burden of Metro’s job losses: one half, or nearly 51,000 jobs lost.

Time for a GTA-Wide Government?

 Local officials, particularly from Metro and the City of Toronto, today make the argument that the various cities and regions of the GTA have become so economically interdependent that GTA-wide planning for land use, transportation, and economic development is a necessity. Furthermore, officials and analysts would acknowledge that the City of Toronto remains the unchallenged financial centre of Canada. The City of Toronto also offers the prospective employer or businessperson opportunities for personal contact with other businesspeople, safe neighbourhoods close to the downtown, and a wealth of cultural attractions that make the entire region an attractive place to live and do work. The surrounding regions have growing labour forces and "greenfield" lands, ideal for building and expanding operations such as factories and warehouses. In terms of transportation, it is also easier for workers, suppliers, and distributors to access the outer regions than the congested streets of Metro. These features of the City, Metro, and the outer regions are viewed as complementary for the purpose of attracting new businesses to locate and expand in the GTA. However, it is argued by those who favour an expanded regional authority that, without GTA-wide economic planning, municipalities will continue to resort to competing against one another. 

Besides coordinated strategies to attract new business in the race for global competitiveness, there are manifold local planning issues which some argue could be more effectively addressed by a GTA-wide government as opposed to the five separate regions. Proponents argue that only a GTA-wide authority can :

As a result, as early as 1974, municipal and provincial reports have been issued which detail a need for some greater level of integration, or at least co-ordination in the region, in such areas as:

Critics, on the other hand, while recognizing the need for functional coordination, are not necessarily attracted to regional structures. Many are concerned, in particular, that a regional structure could advance the interests of large communities, especially the City of Toronto, at the expense of small or more efficient ones, such as a Mississauga, Brampton, or Vaughan (to name just a few). 

Early Efforts at GTA Coordination

Awareness of these challenges by local leaders and the unwillingness of Queen’s Park to take dramatic and definitive action has spurred numerous ad-hoc, issue-specific coordinating efforts. As early as 1987, Queen’s Park established the Greater Toronto Coordinating Committee (GTCC), comprised of the Chief Administrative Officers of all five GTA regions, as well as those of designated municipalities. The GTCC, however, possessed no power or authority over the various municipalities. Rather, its mandate was to foster informal discussion and coordination and to commission studies examining alternative patterns of urban growth.

In 1988, under the Liberal government of David Peterson, the province created the Office of the Greater Toronto Area (OGTA) with a mandate to coordinate the province’s policies and programs with respect to the GTA. In 1990, the OGTA and GTCC jointly commissioned the Urban Structure Concepts Study, a thorough examination of three future options for urban growth in the GTA: continued urban sprawl; "nodal" development (i.e. various dispersed office and industrial centres, surrounded by residential areas, thereby encouraging the use of public transit over that of the automobile); and concentration of future growth in Metro. This study served as a common reference point for further discussion of GTA planning issues. The OGTA followed that study up with "GTA 2021: The Challenge Of Our Future." This study consisted of reports by six working groups of provincial and municipal officials on human and social development, urban form, countryside issues, infrastructure, investment planning and financing mechanisms, and economic vitality.

None of these studies considered or recommended changes in the structure of governance in the GTA, but as the recession grew more severe and the recovery failed to produce sufficient jobs, political pressure persisted for action to boost the regional economy. In response to this pressure, the provincial New Democratic government of Bob Rae created the Greater Toronto Area Task force (more popularly called the Golden Task Force, named after its chairman, Ann Golden) with a mandate to examine everything from property tax reform to the structure of governance. 

Recent Developments

There are just about as many ways to alter the structure of governance in the GTA as there are municipal politicians. Broadly speaking, however, all such proposals contain some combination of the following components:

In the fall of 1994, a majority of City of Toronto voters supported the elimination of the upper tier Metro level of government in a non-binding referendum during the most recent municipal election. The Toronto City Council signalled its support for such an action with a 14-3 vote in favour of Metro’s elimination. The Mayors of North York and Mississauga announced a proposal to abolish the five regions and devolve most powers to the municipalities. Their plan would leave only a few specialized functions to be carried out by regional coordinating bodies with no statutory authority over their constituent cities and towns. The Chairman of Metropolitan Toronto has supported the elimination of all the regions, including Metro, and the establishment of a single upper-tier regional government for most of the cities and towns currently in the GTA, while excluding the most rural areas in the current outer regions of the GTA (what the Toronto Star newspaper dubbed a "super city").

These latest proposals followed the June 1995 provincial election of a Progressive Conservative party government, under Mike Harris, committed to reducing inefficiency and waste in the provincial public sector, including a reduction in the size of the provincial public service in order to reduce the provincial deficit. Many believe this commitment to a reduced public sector will drive the province’s policy on municipal government, especially with regards to municipal transfers. It may also impact their views of the future of the GTA. While in opposition, the Conservatives strongly criticized the current structure and costs of municipal government.

There are other influences on the thinking of the Harris government. The new provincial government’s core political support is in the four outer regions of the GTA, where the party won all sixteen seats and a higher percentage of votes than in any other part of Ontario. The government, therefore, is highly unlikely to adopt any model of GTA-wide government opposed by the four outer regions, which thus far have demurred on all such proposals. In addition, while it is commonly argued that the GTA’s huge economic and demographic growth are what necessitate a GTA-wide government, this enormous size and power are really potentially fatal obstacles to GTA-wide governance. It is difficult to imagine a provincial government proposing a single government structure for an area which contains 45 percent of Ontario’s population, income, and jobs, and which could speak with one voice for its people and power: it would be a "juggernaut" too large for the province to control, ignore, or oppose.

Property Taxes: The Gordian Knot of Municipal Government Reform

In the absence of a fundamental alteration of the structure of governance in the GTA, ad-hoc efforts to coordinate land use planning, economic development, transportation, and competitiveness strategies will continue, overshadowed by the fundamental problem of property tax disparities between the City of Toronto and Metro, and between Metro and the regions. Commercial tax rates are between $2.38 and $4.30 per square foot in the outer regions and towns, but remain at least $8 in Metro and $14.25 in the City of Toronto. Industrial tax rates rise from about $1.60 outside Metro to at least $2.60 per square foot inside Metro (see Figure 7). For many businesses, these costs are significant in determining where to locate within the GTA. Metro's commercial and industrial tax assessment base fell five percent from 1989 to 1994, while the base of the rest of the GTA rose 18 percent; the latter has climbed consistently each of the past five years.

Business interests and the outer regions argue that Metro has to get its own house in order ­ that the reason its business taxes are so prohibitively high is that residential property taxes have been kept artificially low. Those homes within Metropolitan Toronto built before 1953 were last assessed for property taxes in that year, and that assessment was based on 1940 market values. These residential properties are still taxed at fifty-year-old market values; among them are most homes in the City of Toronto and many more in the other five Metro municipalities. Homes built since 1953 have been regularly reassessed at their market value. In the meantime, residential property values have skyrocketed while business property values have risen much more slowly. As a result, businesses pay 57 percent of all property taxes collected in Metro, but their lands hold only 30 percent of the total value of lands in Metro; homeowners enjoy 62 percent of the market value of all land in Metro, but pay only 29 percent of the property taxes (see Figure 8). The impact on business property taxes is greatest in the City of Toronto where most neighbourhoods were built-up by 1953 and remain assessed at 40- to 50-year-old values. The discrepancy falls in those Metro municipalities where a greater share of the housing was built after 1953 (see Figures 7 and 9).

Market Value (re)Assessment (MVA) of all lands and taxation at a uniform percentage seems the obvious solution, but has proven to be politically very difficult. Market value reassessment would raise the property tax on a $250,000 home in the City of Toronto from $2,650 to over $12,000, while the average $250,000 home elsewhere in the GTA would remain taxed at $3,050. The very characteristics of the central core which Metro and the City prize so much ­ safety, cleanliness, diverse yet affluent neighbourhoods ­ are based in no small part on the fact that residential taxes are kept low. Metro and the City of Toronto fear that if residential taxes rise anywhere significantly above levels elsewhere in the GTA, homeowners and residents will flee and thereby guarantee the rapid depopulation and possible hollowing out of the central core. Such an outcome, it is feared, would destroy the unique aesthetic and sociological attributes of the City of Toronto and also impair the growth of the rest of the GTA.

Besides being politically difficult to sell, MVA is not as simple a principle as at first appears. The final impact of any market value assessment depends entirely on the method of assessment (i.e. rental value, resale value, replacement value, two-tier assessment, unit assessment, or some combination thereof), the maximum limit of property tax hikes, the phase-in period, provisions for resale or renovation, the year(s) chosen as the benchmark, and other factors. Residential values skyrocketed in Metropolitan Toronto in the 1980s, and so use of market value in any year before the most recent recession would raise howls of protest from homeowners in Metro. Subsequent housing price deflation has further demonstrated the volatility of property value, and thus on the actual level of tax revenue derived from the MVA. This has a negative impact for both government and taxpayers.

In 1992 Metro Council responded to the apparent crisis by approving a "revenue-neutral" market value reassessment scheme which would have seen an estimated $22 million property tax burden shift from the five other Metro municipalities onto the City of Toronto. However, the Council refused to actually implement the plan until the province would give its support. Queen’s Park, under obvious pressure, refused to support the Metro plan and so the MVA issue remains unresolved and as difficult as ever.

In its defense, Metro argues that it is forced to tax as highly as it does because it gets less funding from the provincial and federal governments than do the outer regions for the social and welfare services it must provide (by law, Ontario municipalities cannot run deficits, though regions can issue bonds, debentures, and other debt). This is in turn rooted in the notion that Metro and the City of Toronto are wealthy enough to fend for themselves and can subsidize other parts of the province. Metro contends that the 1990-1992 recession, which hit it far longer and harder than the rest of the country (see Section C), served to demonstrate that it is no longer a "cash cow" but a resource which must be carefully nurtured and supported if it is to continue to serve as an engine for growth.

However, of all the regional governments in the GTA, Metropolitan Toronto receives the highest proportion of revenue from grants, while generating the lowest proportion of revenue from property taxes. Furthermore, the proportion of total municipal and school board spending by regional government subsidized by the province is not the lowest in Metro. Finally, while school board spending per student is highest in Metro, spending per household is one of the lowest. All of these arguments heighten concern among the outer regions that GTA-wide government or coordination is really an insidious strategy to prevent further business losses by Metro to the outer regions which would force them either to subsidize Metro, or to adopt tax and planning policies unfavorable to business development.

The property tax issue and that of GTA governance and coordination are thus inseparable. Without a solution to the former, the outer regions will likely resist efforts at GTA-wide coordination. Indeed, the Harris government at Queen’s Park is determined to avoid proposals which appear to increase taxes or which hurt the outer regions of the GTA, their firmest base of electoral support.

The Golden Report

In April 1995, The Task Force on the Future of the Greater Toronto Area (chaired by Anne Golden) was created to "respond to growing concerns about the health and workability of the city-region". Specifically, the task force was directed to discuss the property tax issue mentioned previously, as well as to suggest the appropriate structure of government for the region. The Task Force members, through their endeavors, unanimously came to recognize the importance of city-regions for the nation’s economy. Their recommendations sought to improve both the economic efficiency and equity of city governance by transferring control and responsibility for services to the level of government best suited to deliver them. Their recommendations, however, have not been universally accepted. There is, for instance, a great deal of disenchantment with the Report from mayors of the municipalities encompassed by the Greater Toronto Area.

The case for property tax reform was based on both the erosion of the property tax base (significantly caused by successful assessment appeals, not because of the hollowing of the downtown core), as well as the perceived inequity between core and suburban business taxes

(which might lead to a "hole-in-the-doughnut"). The recommended solution consisted of:

"Actual Value Assessment" is a combination of "Unit Value Assessment" and MVA, in that both the value of a property as well as property characteristics affect the level of tax levied on the property. This proposal has received some political support from the Harris government. The Municipal Affairs Minister, Al Leach, promised to introduce legislation to implement AVA by mid-April 1996, but the Finance Minister has stated that "he doesn’t consider property tax reform ... a priority" and to date the legislation has yet to be introduced.

With respect to education funding, the Golden Report advised that all levies raised for education be spent in the GTA: "None of the revenue would be redirected to subsidize school boards outside of the region". However, the Harris government has proposed that a portion of the education levies raised from the GTA be transferred to the province in order to ensure that recent budget cuts to provincial education funding be "shared" by all local regions. Harris’s proposal reiterates the provincial government’s long-held view that the GTA should subsidize the rest of Ontario. In fiscal 1992, the average GTA household provided a $ 2 300 subsidy to the rest of the province. The GTA contributed roughly 47 percent of total provincial revenue, but only 40 percent of provincial expenditures were spent in the GTA.

In attempting to establish the most suitable local government structure, the Task Force emphasized:

The proposed model would replace the five regional governments of York, Peel, Durham, Halton, and Metropolitan Toronto, with a single Greater Toronto body that would have responsibility for region-wide issues. The local municipalities would be responsible for services that can be most efficiently provided locally, and would be given additional taxing power and freedom. This regional body would be composed of 30 members, as opposed to the 134 that currently belong to the existing regional governments. The annual savings from this re-arrangement is predicted to be between 1.0 and 1.5 billion dollars.

Predictably, the members of the regional councils are not satisfied with this "solution." Discontent is not limited to these members, however, as many citizens do not see the need for a super-regional government body; it is perceived by many as just another layer of government. The fact that the recommendations haven’t been accepted by any region or municipality suggests, perhaps, that the competing city interests may have been properly balanced. While few in local government seem to be enthused about the Golden Report’s recommendations, the official alternative provided by four of the region’s local mayors does not appear to address the regional issues that are critical to ensuring the economic and environmental health of the GTA. While admitting the need for region-wide coordination, power (i.e. the power to tax) would remain in the hands of the local politicians. Furthermore, in attempting to address the property tax issue, the mayors assumed that the province would increase educational funding by 500 million dollars, so that this plan could reduce taxes for all concerned. In light of the Harris government’s education funding cuts, this essential component of the four mayors’ plan is unlikely to be implemented.

In response to the Golden Report, the Harris government commissioned a task force, headed by Libby Burnham, to review the findings of the Golden Task Force. Burnham released a report critical of Golden’s recommendations. After public hearings, Burnham’s Task Force "... reported almost no support for eliminating the current upper tier and replacing it with a Greater Toronto Council." Burnham suggests that, "GTA residents do not want the GTA council because they see it as another form of government." The Burnham Task Force also found that there was little support for the AVA proposal (which was based on a form of MVA successfully implemented in Vancouver).

The extent to which the Golden Report reccomendations are implemented is uncertain. Where there is consensus (i.e. about coordinating efforts to attract and retain business), the recommendations are likely to be followed. However, since the AVA proposal is likely to increase taxes in the core areas of electoral support for the Harris government, its implementation is in doubt (unless it is applied on a province-wide basis). Nonetheless, the Golden Report (and the widespread publicity it received) have raised the awareness of the difficulties the GTA is facing.

The Challenge for the GTA

The challenge of the GTA is to find the appropriate structure that accomodates the integration and growing interdependence of the region while maintaining local development and identity. The region is currently highly diverse. There are rural and urban areas, low versus high residential taxes, and wealthy versus far poorer communities. There is a general recognition ­ and this includes the politicians in the regions ­ that the City of Toronto and Metro Toronto need to remain economically, fiscally, and culturally healthy. But there is no agreement on the appropriate structure for the region, nor is there agreement on how to coordinate policies, such as transportation and infrastructure issues, or specific policies for economic development and planning, education, social welfare, and taxes. The Golden Report, this past January, was but the most recent effort to describe a structure and the appropriate regional policies. It may be, however, that the region, and particularly its politicians, are prisoners of past success. The 1953 decision to create two levels of government has been viewed generally as a great success. And, it would appear that politicians, particularly from the core, have been hoping to recreate the city-region’s "Metro solution" for the 21st century. However, the solution may lie in another direction and not one reliant on structures and politicians. Political structures may not provide the answer for this city-region.