It may not get more than a passing glance when it goes in front of Toronto City Council at their meeting next week, but one short sentence buried on the fifteenth page of a routine budget report should send a chill up the spine of Mayor John Tory.

Here’s what it says: “Overall, year-to-date Municipal Land Transfer Tax revenue is lower compared to the same period in 2017.”

Because budget reports at city hall aren’t written with a lot of flair, the text isn’t bolded. It isn’t written in a giant font. It’s not surrounded by a bunch of fire emojis. But it probably should be, because this will matter a lot. A small decline — or even a period of no growth — of revenue from Toronto’s Municipal Land Transfer Tax (MLTT) will seriously impact the delivery of municipal programs and services. Funding for stuff like transit, homeless shelters and affordable housing will be put at a risk.

It’s an issue that deserves a lot of attention during this year’s municipal election.

Why? Well, first, let’s explain what exactly the MLTT is. About a decade ago, with the city’s finances perpetually facing annual shortfalls, the Ontario government granted the City of Toronto the special power to impose a municipal tax on real estate.

Mirroring the longstanding provincial version of the tax, the Municipal Land Transfer Tax is collected every time land within city limits changes hands. Every time someone buys a house or condo, they’re paying a pretty hefty bill — on a $500,000 property sale, assuming no first-time homeowner exemption, city hall will charge the buyer $6,470 in tax.

It sounds quaint in retrospect, but when this tax was introduced it wasn’t predicted to be much of a cash cow. A chart released by the city earlier this year shows just how hilariously wrong that prediction was.

Graphic on revenue history, from the 2018 City of Toronto budget report.

Growth in MLTT revenue has been many times greater than any other city revenue source. Nothing else is even close. It’s never seen a decline.

"If Toronto’s real estate market stalls, will you let the health of the city stall with it?" @GraphicMatt on why @JohnTory should be worried about MLTT revenue decline #cdnpoli #onpoli #topoli @TorontoComms

This consistent, explosive growth has been a boon to Tory and councillors who champion low taxes. The MLTT in 2017 brought in more than $800 million, and now represents nine per cent of the city’s total revenue. “This has been an enormous benefit and allowed the City to both maintain services and keep property tax increases below the rate of inflation,” wrote city manager Peter Wallace in a report on Toronto’s long-term financial plan released earlier this year.

But that report, written by Wallace shortly before he left his city hall job for a position with the federal government, also pointed to the risk posed by the city’s reliance on the MLTT. “Municipal Land Transfer Tax revenues do not need to decline to pose a significant problem. If the tax does not continue to grow, Council may have to make difficult decisions to close the structural budget gap each year,” he wrote.

That report was published on March 5, 2018. Not even five months later, that “significant problem” Wallace warned about could become a reality, with that one sentence warning that MLTT revenues for 2018 are on pace to be lower than they were in 2017.

Can a strong Toronto real estate market rebound change that? Maybe, but it needs to be the right kind of rebound. The Toronto Real Estate Board’s market report for June talks up “positive signs with respect to the housing market.” And indeed, the average price of a Toronto condo is up more than nine per cent from a year ago. But the number of condo sales is down six per cent. And when we’re talking about MLTT revenue, the number of competed sales transactions is the important metric. Increasing real estate prices won’t help the city if land isn’t being transferred as often as it once was.

Things get further complicated by the nature of pre-construction condo sales. When someone buys a condo in a new building, they don’t pay the land transfer tax until the sale officially closes, which can take years. In effect, the city could be taking in MLTT revenue this year from the peak of the condo market two or three years ago. This year’s decline could be a delayed reaction to a stabilizing condo market.

And here’s the really scary part: no one at city hall has a real plan to deal with this. In June, councillors were happy to use surplus cash from 2017 — driven mostly by the MLTT — to plug holes in their plan to improve safety for pedestrians and cyclists, adding more than $20 million in spending. No one at the meeting asked what they would have done had the real estate cash windfall not been available.

Few at council — definitely not the mayor, who arrived long after the MLTT was approved and implemented —have ever had to grapple with a fiscal reality at city hall when revenues aren’t growing. They haven’t had to deal with a situation where there is no new money for increasing needs around issues like shelters for the homeless or overcrowded subway platforms. They’ve never really been asked how they would prioritize those needs over a desire to keep homeowners paying low property taxes.

With this new budget report and a municipal election coming, it’s time for voters to start asking. This election can’t just be about vague promises of low taxes and better services. Instead, anyone serious about running for a seat at city should must answer this question: if Toronto’s real estate market stalls, will you let the health of the city stall with it?