Chow facing political, economic headwinds as 2025 budget approaches

Mayor Olivia Chow says she doesn't yet know what the property tax increase in her second budget will look like. But experts say economic and political headwinds could limit the mayor's ability — or desire — to introduce a rate hike similar to 2024's post-amalgamation record.

Last year, Torontonians faced the largest increase they've seen in decades, at 9.5 per cent. Chow spent months making the case for the jump in rates to fund service enhancements and tackle a $1.8-billion shortfall.

But as the city begins its 2025 budget process in earnest, wrapping early pre-budget consultations next week, Chow has made it clear she's not yet ready to say where that figure will land. And we likely won't know her preferred number until February.

"I don't know," Chow said when asked what the tax rate will be earlier this month. "I want to hear from folks where things are at, because we know that in 2025 the economy is not in the best shape."

Some experts say this budget season will be even more challenging for Chow than last year, because of an opening deficit over $1.2 billion, negative economic indicators like higher unemployment and the pressure to deliver on promised transit, affordable housing and front-line service improvements. 

Shakir Chambers, a conservative strategist and vice-president with the consulting firm Oyster Group, said it will be a difficult balancing act. Public pushback could be a more serious consideration this time around than her first budget because it will begin to form a pattern, he added.

"I think for Mayor Chow, when you've already moved forward the largest property tax increase [since amalgamation], I'm not sure you want to have this second budget come in with the second-largest property tax increase," he said. "I think, for her, the argument is going to be difficult."

Chow swept into the mayor's office in the summer of 2023 vowing that a "modest" property tax hike was in the cards. She stressed that the city needed to "do our share" even as it appealed to upper levels of government for billions in relief funding to address lingering pandemic costs.

"Last year's property tax increase did result in more police, more paramedics, more firefighters," said Charles Bird, a liberal strategist and principal at Earnscliffe Strategies. "But politically, I'm not sure it's sustainable. Unless she's decided she's not running again, so she's just going to go full on and do what's necessary to try to get the numbers back on track."

Chow has been coy about her political future, stressing earlier this year that it's too soon for her to think about re-election, since the vote is almost exactly two years away. 

Former city councillor Joe Mihevc, a veteran left-leaning civic politician who now teaches at York University, agrees there will be limits to the size of an increase Chow can introduce for fear of voter backlash.

"The closer you get to an election, the tougher it is to have a large budget increase," he said. "So, I think the 9.5 per cent that she did last year is not going to be palatable at the end of the day for Toronto residents, it will have to be something less."

The politics will be challenging, but even more so the numbers themselves. City staff confirmed Friday that Toronto will face opening pressures of $1.2 billion and a $26-billion capital budget shortfall "to address aging infrastructure over the next decade."

The 2024 budget gave us a glimpse into the next year's possible tax hike.