Toronto’s 2015 budget hole may throw a wrench into political promises
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In addition to a spacious office and a cool gold chain, the next mayor of Toronto will inherit something far less swanky: a $452-million budget hole.
The city’s 2015 projected budget pressure — reported as part of the 2014 budget process — has been largely ignored as candidates make spending and tax-cutting promises, even though it could threaten to throw a major wrench into their campaign promises.
That $452-million figure, calculated after anticipated revenue changes, is more than double the budget pressure council had to deal with in 2014.
It includes $403 million in incremental changes, mostly due to inflation and growth, offset by planned user fee increases and other revenue growth. There's an additional $86 million brought on by the loss of provincial funding, something council in 2014 opted not to deal with in 2014.
Despite what you may have heard in mayoral debates, the city is legally required to balance its budget every year. That means the budget hole will either need to be filled with tax and user fee increases or further spending cuts to city programs. But staff figure that even with a TTC fare increase of 10 cents, a two per cent residential property tax increase and $30 million in assessment growth from new developments, there’s still an “efficiency target” of $333 million.
Is there reason to panic? It would seem a bit hypocritical for me to say yes, given that I was very critical of the fear mongering around the 2011 $774-million budget pressure figure waved by Mayor Rob Ford and some councillors as a reason to consider closing libraries.
Unfortunately, the circumstances have changed.
Back then, the city was en route to posting an unfathomably large surplus — nearly $300 million. This year, city staff are projecting much lower figures — the May 2014 operating variance report forecast a surplus of just $1.2 million. Back then, there was still room for significant efficiency savings. This year, the city manager has said the city is tapped out and tax increases at the rate of inflation won’t work.
And this is all made worse by the fact that some candidates seem determined to actually make the budget gap worse. Doug Ford, for example, has talked about cutting the land transfer tax by 15 per cent in 2015, which would increase the city’s 2015 budget hole by another $52 million. That would inflate the initial figure to more than $500 million. Yes, half a billion dollars.
Property tax revenue increases below the rate of inflation -- as some candidates have presented as desirable -- can also hurt the city’s financial situation going forward. It’s the equivalent of an employee getting salary increases below the cost-of-living adjustment for several years. Eventually she’d just end up poor.
Dealing with the 2015 budget gap will be job one for whoever wins on October 27, but few candidates seem to really want to acknowledge it.
I asked both Olivia Chow and John Tory about the city’s 2015 budget projections earlier this year. Tory told Metro he didn’t accept the premise that there wasn’t any more waste or efficiencies to be found at city hall, citing the example of agencies having real estate departments that could be consolidated. Chow said the problem could partially be addressed by cancelling the Scarborough subway project. But neither measure would be enough to completely fill the budget hole in 2015.
So the question remains: how will Chow, Tory or Ford deal with the 2015 budget? They’ve spent a lot of time talking about how they’ll fix our transit problems years down the line. But it would be nice to hear more abou ta budget problem that will be among the first things to hit their desk.