By: Seb FoxAllen
User fees are charges people pay to access services the City feels are important to provide but cannot afford to pay for with taxes alone. These can include anything from fees for sports leagues, community centre classes, and zoo admission, to road tolls, TTC fare increases, or a Vehicle Registration Fee. It’s not just so-called “optional” activities that are funded this way: several core City services, including garbage collection and water, are also supported with user fees.
The City of Toronto charges over 3000 different user fees, representing $2.8 billion in revenues each year.
In order to keep delivering services at the same levels as today, the City will need more revenue over the next several years. Are new user fees or increased taxes a better way to achieve these increases?
This year, City Manager Joe Pennachetti told City Council that “[i]nflationary rates aren’t going to maintain services into the future.” This means that the next City Council will have to increase the amount of money it collects from Torontonians.
Taxes and user fees represent different ideas for how government should collect money from residents.
Taxes spread the financial burden for providing services across the entire population. They allow the City to collect more money from high-income earners and ask people to indirectly fund even services they don’t use. The result: higher taxes for everyone, but cheaper and more accessible services for users.
User fees are based on the idea of charging individual residents directly for the specific services. This is a less efficient way to collect money, because the money comes in a bit at a time. In addition these fees disproportionately impact groups (including women and low-income earners) that typically use city services. The result: taxes do not need to be raised above inflation, but service-users bear more expensive out-of-pocket costs.
As an example, the TTC is funded by both tax revenue (in the form of a yearly municipal subsidy) and user fees (in the form of fares, metropasses, etc.). Increasing the contribution from taxes would maintain the price of individual fares and metropasses, but require a tax increase for everyone (even for those who never use the TTC). Increasing the contribution from user fees would mean a lower tax bill for everyone, but would significantly increase the cost for TTC users in the form of more expensive tokens and metropasses. In the case of transit specifically, data shows that a user fee model places a disproportionate burden on women, who are the primary users and purchasers of fares and metropasses.
Ask your candidate what types of user fees they support and what, if any, types of services they think might be better-secured by a pooled tax base model.
Are there ways to make current user fees fairer?
A common argument against user fees is that they are harder to apply fairly across different income groups: A computer class with a $50 user fee costs the same for a lawyer as it does for a service worker, even though the $50 represents a much higher percentage of the service worker’s income.
Ask your candidate whether they consider this gap to be a problem and, if so, what kinds of tools (subsidized spaces for low-income participants, youth and senior rates, etc) can be used to apply current user fees more fairly.