Toronto can’t ‘cut our way out’ of budget woes, city manager warns

Audience hears budgeting might have to get creative as more taxes and fees ‘not yet acceptable’ to council

Thestar.com
Oct. 17, 2016
By Betsy Powell

As he prepares for the 2017 budget season, Toronto city manager Peter Wallace says he accepts city council has no appetite for raising residential property taxes or introducing revenue tools to help balance the books.

“That is the world I work in, that is the council I serve,” Wallace said Monday in a speech to the Institute on Municipal Finance and Governance at the University of Toronto’s Munk School of Global Affairs.

Yet the cost of delivering city services at this year’s level will require an additional $607 million in 2017, and $438 million in 2018, both “very challenging” gaps to close, he said.

The city will not be able to “cut our way out of this problem,” Wallace said. He added he believes Toronto’s focus on austerity measures for the last six years has been successful, but it’s “absolutely not sufficient.”

Reinstating the vehicle registration tax or introducing an alcohol tax or parking levy, could generate “significant money.” But they are measures “not yet acceptable to council” and likely impossible to implement anytime soon.

“I can’t rely on any of these aspirational tools. I can’t rely on tools that I don’t know work.”

Because of this, Wallace warned he may have no other choice but to rely on “bridging solutions” to close the 2017 budgetary gap, something he previously said he hoped to avoid.

“Whatever we can’t solve through expenditure management we’re going to deal with on the revenue side, I’m not 100 per cent sure that’s going to work out all that well, it’s not worked all out that well so far,” he said.

“So we may need to find, as a practical matter, some bridging measures, some . . . interim solutions.”

Moderator Shirley Hoy, who was Toronto’s city manager between 2001 and 2008, said “raiding reserves” is an example of a bridging solution used in the past “in order to make sure there’s no service disruption in the more critical municipal services continue.”

Wallace has said previously that revenue tools is “not a dirty word.”

“Revenue tools are exactly what has saved the city of Toronto and exactly what has allowed the city of Toronto to continue to prosper and make public investments,” he said earlier this year.

But in his address Monday, Wallace noted he was speaking to an audience primarily of academics, and that the “bottom line” criterion in city budget-making is that there must be “political acceptance.”

Wallace, who oversees more than 30,000 city staff and a $12-billion operating budget, also repeated his previous warnings about the urgent need to find ways to pay for the $29 billion in unfunded capital projects that council has approved.

The rate-supported budget launch begins early next month, with Wallace bringing a long-term financial plan to council in December.