Toronto city council unanimously approved allocation of the funds from the third party sign tax to six priority arts and culture programs.
The city will now seek public input into how to spend and measure the impact of the new arts and culture funding, beginning with a public consultation session on Saturday.
A 2011 report stated that every dollar invested into arts and culture generates a yield of $17.75 from a combination of ticket sales and investment from other governments and private corporations.
The majority of the new funding will go to the Toronto Arts Council, an arms-length organization that distributes arts and culture funding on behalf of the city.
Ward 37 councillor Michael Thompson, chair of the Economic Development and Culture committee, says this is the next step in an ongoing process that will see $17 million over four years for increased arts funding.
"Arts are an important piece of the societal building puzzle," Thompson said Friday. "We are going to see more activities that will drive and enhance our ability to get foreign direct investment in Toronto."
Thompson also stressed the importance of the arts for building communities and attracting young people to the city.
Claire Hopkinson, the executive director of the Toronto Arts Council, said the new funding will go towards sustaining growth, contributing to city building, and providing arts and culture access.
She said the council particularly wants to focus on expanding services outside the downtown core to improve arts access to at-risk youth.
"The new funding really helps us ... respond to emerging artists across the city," she said.
One of the purposes of the consultations is to discuss what constitutes success.
Thompson said that success can be measured by how well arts and cultural programs expand throughout the community.
He stressed the need to influence young people, to keep them away from "negative influences, like drugs and gangs."