The Greater Toronto Area consists of four regional municipalities and the City of Toronto, and within the regional municipalities (the upper tier of municipal government), there are 25 local municipalities (the lower tier). Its finances therefore involve many different governments. Understanding municipal finance means identifying which services are provided by which level of government, using which source of revenue, and whether the sources of revenue are appropriate for the services funded. It is also important to consider how revenues and expenditures vary by geographical area. Do certain parts of the city-region pay or receive more than their fair share? Do financial policies encourage sprawl or compact development?
The finances of the Greater Toronto Area are further complicated by three recent changes. First, the amalgamation of the cities within the former Municipality of Metropolitan Toronto has changed the financial situation in the City of Toronto. Second, Local Services Realignment has altered the way services are provided – some services that were once the responsibility of the provincial government have been transferred to the municipal level, and vice versa. Third, the reform of the property tax system has affected the way taxes are levied in the Greater Toronto Area.
This report identifies the services provided by the different levels of government, the sources of revenue available to the governments in the GTA, and the effects of recent changes in those arrangements. It also describes recent and possible future economic trends that may affect municipal finance and regional variations in revenues and expenditures within the GTA.