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Who Runs Toronto?

The Development (and Other) Money Behind City Hall

Who Runs Toronto?

“One of the great achievements of the system has been to divert anger from the corporate sector to the government that implements the programs that the corporate sector designs.” - Noam Chomsky

Who runs Toronto?  

It’s a question that causes much speculation from the public and activists.  

A common assumption is that it’s simply whoever has money and is willing to give it: rich individuals or corporations who donate money to  politicians who use the cash to get elected and do their bidding.  

Example: City Hall is currently being lead by Mayor Tory, a former CEO of one of Canada’s largest corporations, Rogers.  He owns $ millions in Rogers stocks, and is involved in some Rogers entities.

A year ago, Tory - as mayor -  wrote a letter to the Federal Government supporting overturning a CRTC decision that Rogers had a direct stake in, coming into direct conflict with council.

Rogers + Mayor = influence. 

But as Toronto NOW pointed out, this action by the mayor was controversial and could have gotten the mayor into hot water legally.  It’s not common, nor is a letter from the Mayor particularly important to a federal decision made by the Federal government.  

So which sectors of the economy are influenced by the City of Toronto? How much is money really important in City elections?  And what besides money plays into City decisions?

“It’s the Contracts!”

People often forget that Toronto is massive.  Geographically it’s the fifth largest city in North America; population wise, fourth.  It has the 6th largest budget in Canada and controls a $10 billion dollar budget.

While it is the centre of financial capital in Canada and a major hub of manufacturing, communications, infotech, tourism and film, most of these industries are Provincially or Federally regulated; almost none are directly affected by the City of Toronto. 

“There are few contracts controlled by the City,” says a source who works in a key City department. “Garbage, construction/roads…cleaning was on the block but it falls into different buckets and they’ve privatized a bunch of what [CUPE] local 416 did.”

While there can be concern about bribery or conflicts of interest with the allocation of contracts, there are relatively few of them and many of the more consistent ones (like roads and repairs) go through the City’s purchasing department.  There could be some graft and money changing hands, but it’s unlikely that it would be on any major scale.

When it comes to “money” in the City of Toronto, almost nothing is as important as development, construction and housing. 

The Condo Boom

One of the most important areas that is controlled by the City of Toronto is development.  Nothing can be built without the approval of the City of Toronto or a process-laden appeal to the OMB (Ontario Municipal Board), and Council meetings are often packed by motions related to individual developments.  

Development projects, mostly condos, bring jobs, community benefits (also known as section 37 benefits) and development charges to the half of the City wards that experience construction projects.

Reports vary, but estimates say over $80 billion was sold in real estate last year in Toronto while hundreds of development projects are currently in the application stage.

Billions are flowing in from investors both domestically and around the globe who buy expensive pre-sale condo units along with developers who then flip them for millions in profits.  These are major players in global finance and they control massive pools of assets. 

According to the source who works in a key City department, a lot of the “financing” or start-up money to develop is coming from Kazakstani billionaires looking for a high return, Singaporean banks looking for safe investments and “we are just starting to see the big National-Chinese-Company money come in.”

No surprise then that development companies are considered to have strong influence in politics.  

A 2014 report called If It’s Broke, Fix It: a Report on the Money in Municipal Campaign Finances of 2014 prepared by a group called Campaign Fairness Ontario argued that developer contributions in 13 municipalities in Ontario directly influenced the outcomes of local elections.  

An April 2016 analysis by the Toronto Star, found that though corporate campaign donations were banned in 2009, they were rife in the last election.

One of Toronto’s “Condo King” development companies - Tridel - had founders and a VP donate over $15 K to 10 candidates including the mayor.  VP Stephen Upton’s donations broke the law: “a cap set by the Municipal Elections Act that restricts any donor to $5,000 total contributions”.

Fred Dominelli, an individual businessman whobought up expensive tracts of land vital to city redevelopment interests” prior to 2003, broke the Elections Act by donating $10K to 26 candidates. Wayne Squibb and family members from the real estate investment company Realstar Group donated $12K to Tory.

If It’s Broke, Fix It, found that the development industry makes up more than half of all corporate donations.  It also found that development money is far greater where projects in the approval process are dependent on council decisions.

How can this play out on a practical level? As reported in the CBC in 2016, Etobicoke Councillor Mark Grimes was found by Toronto's integrity commissioner to have improperly used his influence in his dealings with two developers building condominiums including allowing one to reduce paying $100,000 in benefits to the City. 

That same year, the CBC also reported that Toronto Coun. Justin Di Ciano (also from Etobicoke) requested a  planning report change to benefit home builder Dunpar Developments with whom Di Ciano has personal and professional connections.

Canadian Political Machines

Here’s the funny thing about donations from the development industry: they’re ridiculously small.  When I once told a friend in the US that the biggest Ontario donor in the last 3 years paid $500,000 in political donations they laughed out loud.

“In Canadian elections, money is, as you've pointed out, not like in the States,” said a City -connected news reporter who wished to remain anonymous.   “A political machine is a staff, strategy, yes some money, volunteers, and enthusiasm on the ground.”

“Campaign money is very regulated,” said another source who works in City Hall familiar with campaigns.  “Most people can run a campaign on only $30 - $40K.”  While it’s a lot for someone with no money, it’s basically 50 - 60 max donations or 1000 smaller ones.  Not impossible.

Campaign volunteers play a far bigger role.  “Some councillors use union members for labor,” while private companies provide volunteers for others, they said.  However, incumbency and “lists” are the best way to ensure someone wins a local election.  Volunteers make signs, canvass, all supporters, and help get out the vote…but incumbent councillors will have lists from their work and paid City staff that can practically do this for them. 

The source says winning elections is not an insurmountable feat for an outsider with little money unless they are going up against an incumbent. Incumbents usually stay in for decades; while financial campaign limits level the field for open seats.   So if councillors don’t need private backers to win elections, how would they get influenced?  

“Other perks.”

Jobs, jobs, jobs

Perks can be almost anything, from dinners to envelops of cash secretly changing hands, but as you might imagine, such transactions can be difficult to track.

Councillors David Shiner and Giorgio Mammoliti, after getting max donations from large landlord Greenwin-Veriroc, were also getting rent well below market value in 2013 according to the CBC.  

The owners of Greenwin-Veriroc, Cary Green and family members run millions of dollars in contracts with the city and donated $17K to 7 candidates...also breaking the Elections Act cap on donating.

A senior executive of the company was also found to be at an illegal fundraiser held by Mammoliti in 2013 that had him being investigated by the police.

According to the source familiar with City Hall, many different perks are rumoured for favours “the price people pay for real estate…paid positions on Boards of directors…private sector jobs after they left the City…jobs for friends, kids and spouses,” were all mentioned as possible pay-offs.

Jobs are especially important for any councillor looking to help someone.  City Hall source: “You wouldn’t believe how many people every week contact a councillor's office looking for work.” 

City officials are prevented from offering jobs internally but the strength of the bureaucracy wields tremendous power in the City.  Unions are able to pool resources and build alliances to try to influence policy by supporting campaigns and candidates.  This also includes the most powerful workforce in the City: Toronto Police Services.

TPS

Forget secret dossiers on politicians: with over $1 billion being spent on policing in the City and the highest cost to the City - higher than the TTC - police hold tremendous power through an agency of over  5,000 police officers and thousands of civilian staff and a Police Association well connected politically and well-funded by member dues.   

Former Deputy Chief Peter Sloly left the TPS one year ago after admitting that the TPS "can probably drop ourselves by several hundred police officers,” and was widely seen to have been driven out of the force.

As all budgets are being trimmed, the TPS continues to fund officer levels higher than what is actually required by law.

Political connections abound in the force itself.  Former TPS head Julian Fantino became a prominent, if loathed, Conservative Cabinet minister.  Former Chief Bill Blair became a Liberal MP after being courted by all three federal parties. The current head of the Police Board Andy Pringle was found to be actively raising funds for Conservative Federal Candidate Kellie Leith.  Safe to say that City Council has yet to stop the TPS gravy train from siphoning ever more and more of the Toronto budget and it’s not hard to see why this could be difficult. 

Big Projects and Big Assets

While most of these issues are “business as usual” at City Hall, private money will also flood into Toronto any time City assets or big policies are on the block.

A big push to get jets at Billy Bishop airport ran aground in 2015, but not before a lot of money was thrown around beforehand.

Robert Deluce, CEO of Porter Airlines,  and his family members gave $11K to 17 candidates and broke the Elections Act cap law.  Aubrey Dan who sits on the Porter Airlines Board also broke the law giving $5K to 11 candidates.

Victor Pappalardo who operates a charter out of Billy Bishop and other family members gave $18K to 6 candidates.

As taxi-like service Uber exploded in Toronto in the last few years, the taxi industry was greatly worried and hoping for Uber regulation which passed in 2016.

Gail and Don Souter of Beck taxi gave $7K to 10 candidates, including many who had been on the Licensing and Standards committee responsible for regulating cabs and Uber.  Co-Op Cabs CEO Peter Zahakos also gave money to 3 members of the committee.

Big private money loves it when governments spend billions.  Bombardier was very happy to be awarded a non-tender contract worth of new streetcars by Mayor Miller as part of the Transit City plan, until it became obvious that Miller was serious about delivery and they messed that order up bad.

Mayor Ford diverted billions in existing transit dollars for a Scarborough Subway, tearing-up and wasting millions in existing contracts at the time.  It’s unknown it he had a preferred bidder for the contract, though Ford and his brother were notorious for trying to lobby for people they were connected to.

Under Tory billions of dollars have been allocated to replace the Gardiner, with original estimates ballooning by billions more and almost no discussion.  Who’s going to get the contract and how will be interesting to follow.

Big private money also loves it when governments privatize money making assets, so it came as little surprise when privatization of Toronto Hydro was being pushed by the Mayor, up until last month when it became clear there weren’t enough votes to get it to pass.  What was surprising was when The Toronto Star uncovered that two political allies of Mayor John Tory, Bob Richardson and Nick Kouvalis (who ran Tory’s campaign) were hired by Toronto Hydro as part of a consultation on privatization.

A Culture of the Rich

This last case is interesting because there’s no real personal interest for Tory to support privatization.  Tory is a former CEO from a rich family and doesn’t need board positions or money, but a quick cost/benefit analysis shows that it’s a bad financial deal for Toronto.  Why would he back it?

Hang around City Hall long enough and you and quickly realize that  for every community group and individual that deputes there are armies of lobbyists pushing the City to make all kinds of decisions.

In the last election, Barry Campbell, Paul Brown and Chris Holz from lobby group Campbell Strategies gave $9K to 12 candidates, probably for no specific legislative reason.  

Councillor Ana Bailoa was arrested for drunk driving in 2012.  The media storm hid from the fact that she had been socializing with Councillor Grimes (there he is again), prominent lobbyist Jamie Besner and former Ford chief of staff Nick Kouvalis (him too) who were working for Sussex Strategy Group at the time around promoting casinos in Toronto.

Tolls and Toll-systems

While you can find a host of lobbyists behind almost every development or important decision to allow or block something important in the City, you also find an overwhelming culture that promotes economic trends sweeping the globe.

Analyzed through the lens of economist Michael Hudson, Tory’s current government actions make perfect sense. 

“The real agenda is to force privatization and disable government regulation,” he says talking about current efforts to “reverse and privatize public investment.” 

“Its ideology is that the economy should be owned and operated by private owners, private enterprise, whose aim is short-term profit…and to nullify attempts to tax natural resources or economic rent.

“The idea is to turn roads and the transport system into toll roads, which will be owned by foreigners and run at a high charge. The Internet and the water system will be sold off and made into toll systems, to charge for their services and for other basic needs. This will impose a neo-feudal rentier economy throughout the world as the finance, industrial and real estate (FIRE) sector takes over the government sector.”

Tory’s actions, seen through this sense make perfect sense: privatize hydro, increase user fees, bring in tolls, keep taxes low.

With house prices reaching new highs it would make it an ideal time to increase taxes on homeowners or institute some kind of “progressive property tax system” so the more your house is worth, the more you pay in taxes. 

Believe it or not, this was actually attempted in the last session of council only to lose by two votes.  The Mayor and most of his Executive voted against it.

In fact, almost every attempt to raise taxes has failed before it could even begin, while many options for new taxes have been ruled out by the mayor in favour of road tolls and increases in user fees that began under Rob Ford

While some (including Tory) might claim that keeping taxes low was the mayor’s mandate, the fact is that the City is rapidly increasing taxes, but are just calling them user fees.  

And they are falling mostly on the poor.  In the last 6 years, City revenues have grown more from TTC fare increases than from property tax increases.  

Taxes from people who rent in Toronto are actually 3.6x more than what home owners pay.   

In the meantime, services for people who rent an apartment and use the TTC are on the chopping block with million of cuts being proposed in this budget.

Last year a similar dance occurred and Councillor Perks noticed a discrepancy:

“Councillor Di Ciano [moved] a motion that we start to look at the tax increment grants – tax increment equivalent grants. Right now we’re carrying on our books something like $200 million in tax relief to businesses and more of those are coming. Businesses across the city will pay less in real dollars in 2016 than they paid in [2015] and on top of that we’re giving huge grants.

“Now it’s interesting when you compare that with the $5 million that we’re committing to poverty reduction here.”

So Who Runs Toronto?

As one might expect, capitalism is complicated.  While it’s easy to envision a secret cabal with developer CEO’s, Kazakstani billionaires, and the head of Beck taxi sitting around thinking up directions to give the mayor, the reality is that there are a host of actors pushing private agendas to make billions on housing, transit and a toll-economy.

Sadly, one group not mentioned above is the public.  While some councillors support their residents with votes and services, they don’t have lobbyists, billions and political connections. 

Instead they have protests, deputations and elections.  Next one is in 2018.  


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Topics: Governance
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