Budget shell game?

By Admin Wednesday February 18 2015 in Editorial
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In balancing the upcoming $11.5 billion budget, Toronto City Council has an $86-million problem, but one for which Mayor John Tory says he has the solution. With a request denied by the province for a grant of $86 million to fill the revenue gap and achieve a balanced budget, which is mandated by the province, Tory’s solution involves borrowing the money from the city’s capital reserve. His plan would be to repay it with interest over the short term.

 

This is certainly creative bookkeeping. Tory does not want to appear to be following up on the previous mayor’s tactic of shrinking services in order to keep within a tight budget.

 

Nevertheless, what Tory has to look at is how to realistically solve the city’s revenue problem. The politically risky alternative would be to increase property taxes by more than his promised rate of inflation increase.

 

Tory’s budget plan calls for a 2.25 per cent property tax increase this year – plus 0.5 per cent more to go toward the Scarborough subway fund – and to hold increases to the rate of inflation in years to come. To an average homeowner with property assessed at $524,833 the increase would mean paying $71.70 more in municipal taxes this coming year.

 

To respond to all the budget requirements adequately, Councillor Gord Perks suggested that property taxes would have to be increased by six per cent.

 

The real problem is that this city, with its central role in this country’s economy, is functioning under revenue generating rules as if it were a small hamlet. This revenue model, which is heavily dependent on property taxes, is not only hamstringing Toronto. All the major cities in this country face the same dilemma.

 

The time has long passed for the rules governing revenue tools in Toronto and other large metropolitan jurisdictions to be updated. That is what Tory should be highlighting to council and the people of this city and more importantly to federal and provincial partners.

 

During his tenure as mayor, David Miller advocated strongly with other mayors to get Ottawa to direct revenue to municipalities with the gas tax fund. That amounted to $154.4 million in 2013 for municipal infrastructure. But that new revenue tool was a limited victory.

 

Thus, Tory is now resorting to this bit of sleight of hand after refusing a $200-million line of credit from the province, which the province offered after it denied Tory’s request for a grant. Clearly, the province is playing politics so as not to be seen to be favouring Toronto.

 

It remains to be seen whether Tory can convince council to go along with this plan. If he doesn’t, it will mean service cuts reminiscent of Rob Ford’s tumultuous tenure. Tory has already begun talking about “finding efficiencies”, which could mean either service or staff cuts. Bear in mind that such cuts would be in addition to cuts made during the previous administration.

 

Tory’s other option would be to continue along the lines established by the Rob Ford administration and hike service fees or to add new user fees across city services. Already, transit users are anticipating a fare hike of 10 cents per ride for non-cash fares across the board, beginning in March.

 

So many years after amalgamation, this city still has not found a configuration of revenue tools that works and it is clear from the disappointment of failing to get another grant from the province that something has to be done to save Toronto from the chaos that comes with trying to design a balanced budget and still give the appearance of a world-class city.

 

With all the best intentions of prioritizing transit, poverty reduction and public safety, Tory has already hit a wall. He is trying to make the best of this budgetary challenge, but this taking from Peter to pay Paul is a desperate strategy.

 

Moreover, Tory has stated that his plan includes repaying into the capital reserve with interest. It is a weak short-term response. In the longer term, even someone with the most rudimentary arithmetic skills can see this method is unsustainable. The real answer is that this city needs both revenue and spending reform.

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