Toronto’s plan for ‘balanced’ budget has $79 million in unknown funding and cuts

TheStar.com
January 29, 2019
Jennifer Pagliaro and Francine Kopun

City staff say the 2019 city budget can be balanced by raising property taxes in line with inflation, increasing TTC fares -- and by relying on $79 million in unknown cuts and yet-to-be secured funding.

The first effort by staff to put together a balanced budget for the year was presented to council members and the public on Monday. According to critics, the plan’s reliance on tens of millions of dollars in income that hasn’t been nailed down and cutbacks that have not yet been identified makes it risky.

The city's budget chief, Councillor Gary Crawford, acknowledged Monday "it’s going to be a tough budget year," with council looking for ways to save money and asking Ottawa for assistance.

Despite that, Mayor John Tory’s budget chief, Councillor Gary Crawford, insisted on Monday that the budget is balanced.

“It’s balanced when you’re looking at some of the strategies we’re looking at,” Crawford said. “To suggest that it’s not there is pretty much impugning the integrity of the city manager.”

It is unclear how staff plan to bridge the $79-million budget gap. The city manager suggested some options Monday, but it will ultimately be up to council.

Critics disputed the idea that the 2019 budget is balanced.

“There’s $79 million in magic money where staff is pretending the budget is balanced and it’s not,” said Councillor Gord Perks.

Before the meeting, Crawford promised there would be no cuts to programs or services, despite the fact that there are still funding shortfalls, and concerns over a drop in income from the Municipal Land Transfer Tax (MLTT) -- expected to be down nearly $83 million from 2017.

“It’s going to be a tough budget year. There are not a lot of extras,” said Crawford. “We will continue to provide the kind of investments that we have over the last number of years, whether it’s poverty reduction, youth hubs, child care, but there will be some challenges, no doubt.”

There was grim news on the capital budget side, with the city now projecting that over 10 years the repair backlog for Toronto Community Housing -- which provides rental housing to some 110,000 people in the city, many vulnerable -- will increase by $1.4 billion to a total $3.2 billion. That will leave thousands of units at risk of being shuttered permanently. That expense -- less than what is budgeted for the planned one-stop, $3.35-billion Scarborough subway extension -- should be shared by the other level of governments, city officials reiterated Monday. To date, no funds have been committed by other governments for the backlog.

Perks said the budget does little for those who are already struggling.

“If you’re a tenant, if you need housing supports, if you want to ride on a bus that doesn’t break down, this is not a great budget for you,” Perks said. “If you’re doing well, if you own a very expensive home, this budget benefits you the most.”

He said he needs to spend a couple of weeks with the budget before he understands how much taxes should be raised, noting Toronto still has relatively low property taxes compared to other cities in the GTA. He said he’s willing to bring a bigger property tax increase to city council for a vote.

“I think we have to say to people: Do you want to live in a great city where everyone has an opportunity to get ahead, or do you want to save just a little bit of money on your property tax bill? I am prepared to pay more tax and I think more people would if they understood just how dire this budget is.”

The $13.5 billion operating budget put forward Monday is the first attempt to balance the many services and programs the city provides -- from snow-clearing to swim classes -- against city revenues from property taxes and fees for services.

City staff are proposing a residential property tax increase of 2.55 per cent, which they say is in line with inflation. The plan also includes a 3 per cent water rate increase, estimated at $27 per residence; a hike in garbage rates of 2.2 per cent, as well as upping the cost for all garbage bin sizes; and a TTC fare increase of 10 cents.

Staff also plan to lower the contribution council makes to the capital budget, which is used to fund large infrastructure projects -- many of which are completely unfunded.

The $79-million shortfall stems from three separate issues.

First, the budget assumes that the federal government will contribute $45 million toward additional shelter costs, but the federal government hasn’t yet agreed to that.

Staff attribute the added pressure on the city’s already overcrowded shelters to the high number of refugees that have migrated to Toronto, as a result of federal immigration policies. Over the weekend, Tory, who is in Ottawa meeting with other big city mayors, urged federal official to provide the $45 million, his spokesperson Don Peat said.

City manager Chris Murray said it would be reasonable to expect further contributions because the federal government has already provided $26 million since June 2018.

Second, the budget assumes that the TTC will find $24 million in cuts in “undetermined corporate reductions.”

And third, Murray said the city still needs to find $10 million in additional savings to balance the budget, which he told reporters is not an insurmountable problem that could be resolved through eliminating management positions and other efficiencies.

Part of the challenge this year is the fact that Toronto can no longer bank on an incredibly hot housing market as it has over the past four years. The MLTT, introduced in 2008, is a tax paid by homebuyers when they take ownership of a property. A slowing housing market has been cited as the reason for the decline in MLTT revenue.

The city expects to earn about $727 million from the tax in 2019, roughly equal to the estimated 2018 figure despite the recent decline which hasn’t necessarily stopped. Until 2018, revenue from the MLTT rose substantially every year, allowing the city to continue spending without increasing taxes above inflation.

Asked what guarantee the city has that home sales won’t continue to slump, staff said they will monitor MLTT revenue on a weekly basis.

Staff’s budget proposal includes a plan to phase out the rebates on garbage bins of all sizes. In 2019, the rebate for large bins will be eliminated entirely. It will be cut by half for medium-sized bins and by just under a third for small bins, saving the city an estimated $35 million in 2019. Combined with the rate increase this means that people with large waste bins will pay $80.81 more in 2019; those with medium bins will pay $96.25 more and those with small bins will pay $72.06 more.

Crawford said that the city plans to invest in transit, community safety, libraries, Toronto Community Housing repairs and child care. He said the city will also invest in speeding up the work on the relief line subway and hire an additional 300 police officers.

Policing remains the biggest single line item in the budget. The average homeowner, with a home assessed at $665,605, would see a property tax bill of $3,020 if this budget was approved, not including provincial education taxes. That is $104 more than in 2018. Of that, $703.21 or 23 per cent would go to Toronto police.

The budget presented by staff also leaves some planned programs and services unfunded.

That includes a plan to extend the TTC fair fare pass to those receiving housing supports and child care subsidies as part of a second phase of the program. The city has only budgeted to provide the lower fare option to those receiving child care subsidies at a cost of $2.4 million this year. Currently, the pass is available to those receiving support from the Ontario Disability Support Program (ODSP) and Ontario Works (OW) programs. Who might be eligible in future is now subject to review, staff say.

Just last week, Tory promised on Twitter to fund the next phase of the pass.

Critics who have long opposed the strategy of making inflation the target for property tax increases note the budget does not account for the growing number of new residents moving to the city who also rely on public libraries, road maintenance and other daily services.

“I think it’s uninspired,” said Councillor Mike Layton, who sits on the budget committee. “It’s not really leaving us with something that Torontonians can be proud of, that works towards long-term solutions in our city around transit, around housing.”

“What I think that the people of Toronto want to see is a government that is willing to be brave enough to make bold proposals to resolve these issues across our city that we’re seeing and not just hide behind the same old, same old, status quo budget which is what is reflected here.”

The budget launch Monday is just the first step in a process that begins anew each year. After making its way through debates at committee and being subject to comments from the public, the budget will be finalized by council in March.

Because last year was an election year, council has not yet provided staff with direction on the budget, and council has five weeks instead of the usual 8 to 12 weeks to work on the budget.

However, as in previous years, Murray asked all city divisions and agencies to try to keep their budgets at 2018 levels. He said they looked at past direction from council to assume an inflationary-only increase in property taxes.

As he did in 2014, Tory promised to keep property taxes at or below the rate of inflation this term.