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There's lots hidden in Toronto budget

When you poke around in the numbers of John Tory's budget, you see a lot hiding, including money written in where it doesn’t yet exist.
Jan. 20, 2015
By Edward Keenan

As you’ve probably heard, Tuesday’s announced budget - which is still subject to more than a month of wrangling and discussion before it becomes law - contains a lot of new investment in services and infrastructure. Indeed, budget chief Gary Crawford was pitching “historic service investments” and before the presentation meeting was even over, Mayor John Tory was over at the Economic Club giving a budget-themed speech about his “government of compassion.”

But it’s also a budget that proposes to keep property tax increases below the rate of inflation. Given the years we heard about opening gaps and budget shortfalls in the hundreds of millions of dollars - including this year - the question becomes, how’d they do that? Well, there’s a lot of jiggery-pokery (as my grandfather would have said) involved when you move beyond the headlines. When you poke around in the numbers, you see a lot hiding - costs to ratepayers, unusually optimistic accounting assumptions, and money written in where it doesn’t yet exist.

If you’re trying to keep your eye on the ball, the most obvious trick is under the “balanced budget” shell, where you see the budget, presented as “balanced,” assumes an $86 million bailout from the provincial government to compensate for lost grant revenue. Which is to say the budget isn’t balanced yet. The province has announced that in place of giving the city that money, it will lend $200 million - and in the past the province has forgiven some loans to Toronto - but still, borrowing to cover that hole doesn’t actually “balance” the budget. $86 million is equivalent to almost the entire slate of TTC enhancements announced this week - it would take a 3.5 per cent property tax increase to cover.

In the same vein, there are other interesting assumptions in the budget. For instance, it doesn’t include raises for police officers from the contract they’re negotiating now - which will be a substantial line item. Even an inflationary increase in salaries of 2.6 per cent could cost over $25 million (Crawford does say money is set aside for them, though it isn’t clear where). Chief financial officer Rob Rossini himself pointed out that the city is budgeting a $20 million increase in fees from stepped-up parking enforcement - he says it’s taking a “risk” in doing so - even though revenue from that department has actually fallen in recent years.

And notably, the city is projecting $425 million in revenue from the Land Transfer Tax - a $75 million increase over last year’s budgeted number that matches 2014’s actual take. In past years, city staff have strongly - strongly - cautioned against optimistic LTT revenue projections, because it’s a very volatile tax. If Toronto’s real estate market cools even a little bit, the budget impact could be huge. But that prudence has been tossed aside, giving budgeters $75 million in new money to work with.

Finally, there are a lot of costs to the people of Toronto that don’t fall under that modest tax increase. It’s clear enough that you have to add the 0.5 Scarborough subway tax increase passed last year to the 2.25 per cent increase announced by Tory and Crawford. Together they add about $71.70 to the average homeowner’s tax bill. And then you add the TTC fare increase - if that home buys a single Metropass every month, that’s about an additional $96 a year.

Then there’s the 6.5 per cent water rate increase (as per longstanding plans) that amounts to about another $57 for the average household.

There’s also an increase of 2.25 per cent for garbage collection. It comes in addition to the beginning of the phase-out of the waste collection rebate program, which in the past sent $224 to every single household. That program is being cut by $18 million this year - money that goes right back into the operating budget - so it’s the balance-sheet equivalent of a 0.75 per cent property tax increase. The increased cost from new rates and decreased rebates will depend on the size of bin people have, from $3.91 to $126.39, but will cost those with a medium bin $33.64.