Why Toronto Doesn't Have a Fiscal Crisis

Countdown by FTGU

Partial transcript of interview:

Community organizing has saved 58 student nutrition programs and 12 school-based recreation programs from Mayor Rob Ford’s chopping block.

On Friday, it was announced that these services will be covered by a property assessment growth that is not included in the current surplus.

But there’s still over $85 M in city services facing cuts. In the Wellesley Institute’s report Countdown to Zero, Sheila Block argues that Toronto can balance its budget without cuts to city services.

Sheila Block joins me to discuss the report.

Q: The city says that they have a shortfall of $774 M and yet there’s also a surplus of over $154M. The numbers are a bit confusing to me. So does the city have a deficit or a surplus?

SB: You’re not alone in your confusion. A lot of people have been confused because both a lot of numbers have been thrown around by the city government and by politicians. And also the budget making process at the city is different than what it is at the federal or provincial level. And so that makes it a little confusing.

That $774 M that was originally talked about is what’s called an opening shortfall and what that really signifies is what’s the ground that needs to be covered during the budget making process. That number is often a bit bigger than what it will be at the end.

It compares 2011 revenues to 2012 expenditures. You have your prior year’s revenue compared to your following year’s expenditures so that accounts for some of the gap. And then through this process after that opening shortfall was identified , a number of things happen. You get actual information about where the actual revenues and expenditures are going to be and there’s a political process here where governments make decisions about how much to increase taxes and where your actually going to wind up.

So the surplus number that you talked about is actually the prior year’s surplus. The surplus from 2011. The opening shortfall of $774 is what starts the budget making process not what ends it.



Q: Does the city need to have a $0 deficit budget?

SB: The city needs to have a zero operating budget because that is a legal requirement. It always has to balance it’s operating budget. It comes from the province. It’s come from the constitutional oddness of cities. The constitution was written when the vast majority of Canadian lived in rural areas, now 80% of Canadians live in city. But cities are very constrained that they’re really the creature of the province. The province has a requirement that cities must balance their operating budget.


Q: In your report Countdown to Zero, it states that Toronto doesn’t have a severe fiscal crisis. But does it have fiscal pressures? What is causing these pressures?

SB: It has some financial difficulties because cities are now big complex places then they need to do a lot of difficult things to do on the very small property tax base that it mostly relies on so there are some difficulties. We have a lot of infrastructure that we would like to renew. We need more transit. But they’re not issue around the operating budget. They’re not issues around as Mayor Ford’s own review show, there isn’t a lot of gravy. That isn’t the problem that the city is facing.

It’s complex to balance the budget, and Mayor Ford has done a few things that have made things difficult. As you mention, he cancelled the vehicle registration tax, he also had a zero tax increase last year and that’s a real problem because you need to have your revenues increase to account for increase in inflation and increase in population. We have less revenue than we need and if he reduces the land transfer tax we will be in more trouble.


Q: Some have blamed the provincial and federal government for the financial challenges that cities face. Are they part of the problem?

SB: Both levels of the government are part of the problem. We are the only major city that doesn’t have support for transit that’s a big problem that both provincial and federal government need to step in. In terms of the housing issue that we’re facing, we’re the only OECD country that doesn’t have a national housing plan.

The provincial government has stepped in to try and upload the social service costs that were downloaded by the previous government. The provincial government has tried to make some things better, but definitely the provincial and federal government have contributed to the city’s fiscal woes.

Q: In the report, you state that there are other alternatives that doesn’t involve cutting services. What are those alternatives?

SB: Mayor Ford and Finance and Budget Committee have insisted that they will not use the prior year’s surplus. That really doesn’t make any sense. If they put in a normal property tax increase and a proportion of the surplus from 2011 they could get the deficit down to zero and they could balance the budget. They don’t need to cut any of these services that we all rely on.