Toronto needs a grown-up discussion about its finances

Theglobeandmail.com
Jan. 18, 2016
By Marcus Gee

The latest budget proposals from Mayor John Tory’s administration only delay the inevitable day of reckoning for the city of Toronto.

The proposals tabled by budget chief Gary Crawford on Monday represent the usual collection of cheese-paring, cobbling and compromise that we see every year as the budget process nears its end. Mr. Crawford balances the books by dipping into reserves, squeezing special dividends out of city agencies and asking officials to clamp down on discretionary spending for things such as travel and office supplies.

The result is a budget held together by duct tape, cobwebs and hummingbird spit. Mr. Crawford manages to hold the residential property-tax increase to 1.3 per cent, in line with the mayor’s election campaign promise to bring in tax hikes no greater than the rate of inflation. It manages to find some change under the seat cushions for good things such as student-nutrition programs, better cleaning and security in public housing and earlier Sunday transit service.

Mr. Crawford told reporters that by “sharpening its pencils” and going over its spending line by line, the city had produced a responsible, affordable budget.

But, as even he was willing to admit, it is nothing near to a solution to the city’s ongoing budget problem. The hard decisions are put off for another day. How does a big city like Toronto pay for all the services its residents rightly demand, from policing to clean water to tidy parks? How does a growing metropolis straining under the pressures of growth afford big investments in transit and roads and housing?

Late last year, city manager Peter Wallace warned councillors that the city is able to pay its bills only because it is reaping a windfall from rising real estate values. Toronto “has been a free rider on a real estate boom,” he said. Its land-transfer tax brings in a staggering $500-million a year.

What happens if that money dries up? The dollar is down, oil is down. If real estate falls next, city hall is in big trouble. Mr. Crawford admits that “I get nervous” when he thinks about how much the budget depends on the land-transfer tax. Well he should.

The city can’t go on like this indefinitely. Councillor Gord Perks said on Monday that if the city was candid with its residents, it would tell them: “We’re giving you more stuff than you’re paying for.”

Apart from the annual fight to pay its current bills, the city faces a struggle to muster the money for big, costly long-term projects. Mr. Wallace warned that it has $23-billion worth of capital projects in the pipeline.

The city badly needs a hard-headed discussion about how it pays its way. Will it get one? There are a few encouraging signs. Mr. Crawford said that, after this budget is put to bed, there will be time for deeper conversation. Everything is on the table, he said.

In a major speech last month, Mr. Tory said that “we simply can’t just shrug our shoulders and continue on the same path.” To raise more money, he proposed a special city-building fund, with the first contributions coming from a 0.5 per cent property-tax levy.

Since then, councillors have been kicking around various new “revenue tools,” from road tolls to a tax on parking spaces to a hotel tax. There has even been talk about selling all or part of some important assets, such as Toronto Hydro or the parking authority.

But the history is discouraging. Talk about a new funding model has been floating around city hall for years. This discussion about having a discussion is one of the constants of municipal politics. Will it rise to something more this time around the block? When talk turns to “fixing” finances for good and all, a healthy skepticism is in order.