Bigger challenges lie ahead as city council prepares to pass 2015 budget

Some worry the current strategy - putting off the pain of realistic tax increases - may be fatal for future sustainability.

Thestar.com
March 9, 2015
By Jennifer Pagliaro

Tasked with filling a gaping $86-million hole, Toronto city council is now steps away from committing to borrow money from itself so as to pass a balanced budget.

If approved as written this week - there are few clashes expected in the first budget of the new term - property taxes will rise 2.75 per cent, while the city reinvests in some services that were cut over the past four years, including the TTC.

The decision to find the needed cash internally and reduce the amount put towards the capital budget will place additional financial hardships on council beyond 2020, forcing the city to find more and more savings each year - a move some are calling unrealistic and unsustainable.

As councillors take their seats at a special meeting, starting Tuesday, to approve the budget, they do so knowing their biggest challenge of building out the city’s transportation infrastructure will cost them at least $500 million in overruns - more than the entire operating budget for children’s services or paramedic services or the total amount needed to run Toronto Water or solid waste services.

Those pending costs, from which senior governments have stepped back, add to growing concerns about the city’s financial viability.

“With respect to going forward, there absolutely are challenges, and the mayor’s conscious of that,” said Mayor John Tory’s spokesperson, Amanda Galbraith.

It takes just four numbers to see why some councillors are looking ahead warily: Though the city needed to find $25 million this year to break even, next year, that number will be $69.3 million. In 2017, it grows to $114.5 million. In 2018: $160.6 million.

Each increase is the equivalent of a 1.7 per cent hike in taxes, on top of any inflationary increases and the Scarborough subway levy.

Galbraith said the mayor’s push to find further efficiencies in coming years will be “business-like approach of going line-by-line through departments and items and sections of the city.”

After two false starts earlier this year, Tory, along with city manager Joe Pennachetti and budget chief Councillor Gary Crawford, presented a united front - explaining the new strategy that involves the city borrowing from itself.

Tory had announced a deal with the province that was expected to help with the budget shortfall - which the city blames on the province’s cancelled payments to support social housing - but even the mayor’s office was caught off-guard when Premier Kathleen Wynne’s government put a market-rate loan on the table instead.

The city jumped to a bank-loan option, but later settled on the new internal borrowing strategy.

Early on, many veteran councillors praised this year’s budget process as one of the best they’d seen. But as the city turned inwards to plug up the hole, some worried the financial headache has only been delayed.

Councillor Gord Perks argued the current budget proposal relies on “wishful thinking,” which will leave council “walking on quicksand” in 2016. He will bring a motion to council this week to instead raise taxes by a total 5.6 per cent - the difference, for an average household, of paying an extra $12 a month as opposed to $7.

“That means we don’t have to gamble with our finances,” said Perks, who added he doesn’t expect the motion to pass since Tory has the support of at least the 16 other members of his executive and budget committee.

“But I think it’s very important that, at a minimum, Torontonians see what a prudent approach would look like.” There are 45 people on council.

Deputy Mayor Denzil Minnan-Wong, the mayor’s right-hand man, said finding efficiencies is a 365-day-a-year job that extends beyond the budget process.

“It’s not a perfect document,” he said. “I think this process has gone reasonably smooth.”

Crawford called the last two months a “balanced” and “thoughtful” approach, and said he is confident the city can find $69 million in efficiencies next year. He said their focus will now be multi-year planning for goals spanning the next three years.

“I don’t agree with the notion of, oh, we have a problem, we just have to raise taxes to solve it,” he said. “Do we have our work cut out for us? Absolutely.”

Tory seems unwilling to discuss publicly whether the city should look at new taxes to increase revenues to the city. On Monday, Galbraith said the mayor was focused on seeing the current budget process through.

Others worry the choices being made this week could set the city up to fail.

“I’m very anxious about the next few years,” said Councillor Janet Davis, an 11-year council veteran who said those new revenue tools must be considered.

“I think we will see whether there’s an appetite on this council and from this mayor, to have a meaningful discussion about building a sustainable budget for the future.”

Council will meet Tuesday and Wednesday to debate and approve the budget.