Budget provides proof of city's spending problem

torontosun.com
By Sue-Ann Levy
Jan. 22, 2017

As he heads into the final budget wrap-up meeting Tuesday, Toronto’s budget chief insists that not only will the city’s $91-million deficit be eliminated but there’s also a plan to reduce the amount they’ll be taking from rainy day funds.

Gary Crawford told the Toronto Sun Saturday they’re trying to “bring down” the $22.1 million they intend to draw from various city reserves to fund expenditures in city divisions, the TTC and other city agencies this year - knowing this one-time money must be found again next year.

“We’re working on bringing down that reliance on one-time money,” he said. “Otherwise it will come back to bite us next year.”

He couldn’t say how that will be done. But a report to the Jan. 12 budget committee shows many major city reserve funds - from which money has been drawn and not topped up in recent years - are seriously underfunded.

The report says that a critical part of the city’s long-term financial plan is to maintain “healthy balances” in the reserves - as that “strengthens long-term fiscal sustainability.”

While many of the city’s reserves do not have a funding target, those that do are not meeting them, CFO Rob Rossini confirmed at that Jan. 12 meeting.

For example, the city’s tax rate stabilization reserve is supposed to have a balance of 1% of the tax levy - or $40 million - but ended 2016 with just $16 million. No money has been budgeted in 2017 to top that up.

The capital financing reserve - which is used to fund the replacement of infrastructure or vehicles - is supposed to be at $800 million but holds less than $200 million.

The reserve to pay employee benefits is about half of its $430-million target and Rossini said the city won’t hit that amount “anytime soon.”

No wonder Crawford is concerned.

Continually raiding the city’s savings to prop up increased spending - while adding more to the city debt and the debt servicing costs (also part of the 2017 budget plan) - doesn’t just put the city in more precarious fiscal state.

But money to cover the one-time withdrawals must be found in the following year’s budget and that creates an ongoing cycle of expenditures that greatly outweigh revenues coming into the city.

In other words, it reinforces what I’ve said repeatedly: Toronto has a spending not a revenue problem.

Crawford says they are absolutely adamant that the 2017 property tax increase will be kept to 2% (not counting the 5% hike each in the garbage and water rates as well as increases for all size of garbage bins plus the hike in the cash cow called the Municipal Land Transfer Tax).

He says they’ve already found $176 million in savings (a good portion of which I’d characterize as overinflated budget demands which won’t be met) and promises that on Tuesday we will see some minor service changes, as well as some major ones. Crawford didn’t say what those will be.

“Tough choices have to be made,” he added.

(I hope I’m wrong but I’m not holding my breath, especially considering the fact that Mayor John Tory’s ultimate goal is to maintain “civility” at council and civility comes at a price.)

Crawford said that Tory’s plan to end the tax rebate given to vacant commercial property owners could eventually bring in $22 million per year - probably only $11 million in 2017 by the time they put the changes in place.

But let’s not forget that $3 million must be added back following Tory’s decision last week to add 300 additional day care subsidies. That move will only be partly offset by a plan to end a grant (amounting to $1.1 million in 2017) given to daycares operating in schools.