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Gherson: A plan to right Toronto’s sinking fiscal ship

A busy downtown street with people crossing.

This article originally appeared in The Toronto Star.

Toronto’s finances hangs over the city like a malevolent cloud that won’t go away. As municipal budget season rolls in, the stark reality facing Torontonians, at least according to city staff, is that without historic-scale (though investment-repelling) property tax increases and a lot of federal support, Toronto won’t be able to balance its books.

Torontonians face a proposed tax hike of up to 16.5 per cent (10.5 per cent if the feds come through with $250-million for shelter costs). This moment should be recognized as a stark and powerful wake-up call. 

For more than a decade, including in an alarming 2010 budget analysis "The Growing Chasm", Toronto Region Board of Trade has been warning about the city’s unsustainable fiscal position. And we’ve proposed solutions that won’t derail Toronto’s business growth and our North American competitiveness, in the process dragging down our collective prosperity and quality of life, two qualities that have attracted people and businesses to Toronto over the years. These hallmarks are seriously fraying.

Which is why the yawning fiscal chasm can no longer be ignored. It is estimated to be a monumental $36 billion over the next 10 years, even after the historic “New Deal” clinched last year between Mayor Olivia Chow and Premier Doug Ford.

The reality is Toronto simply does not have the means to pay for the ever-expanding assortment of services it provides today without significantly eroding the quality of core municipal services.

But the real question is: should it?

Toronto is filling service gaps left by other governments. So many of these services — dental care, child care, long-term care, housing, shelter beds, mental health, nonpolice crisis response, and more have been piled on over the years by successive councils. That’s not to say there hasn’t been a need, indeed often a pressing one. But, $1 out of $5 collected through city property taxes funds a service that should be paid for by Ottawa or Queen’s Park. Thanks to Toronto, they’re off the hook.

The three-year “New Deal” has helped reduce the city’s operating and capital pressures, but it should come with a brightly flashing warning sign. It’s only the beginning of what will be needed to realign spending responsibilities and structurally right Toronto’s sinking fiscal ship for the next generation.

Having experienced a massive and largely unfunded population surge over the last decade, Toronto is choking on its rapid growth. With federal policy fuelling this surge, Ottawa must also come to the table. Toronto businesses and residents shouldn’t be footing their portion of the bill.    

New revenues aren’t an invitation for the city to do more, rather it’s an opportunity to do better. The first requirement is to balance the books. This year’s budget process should be the starting point for renewal.

City Council needs to take greater accountability over Toronto’s budget. It’s time to create a strong expenditure management framework — a Toronto Treasury Board — as a strategic oversight mechanism to ensure municipal spending aligns with Toronto's long-term financial health. Presently, any member of council can introduce a motion for a new program or service that councillors vote on, often without staff analysis or consideration for how costs will escalate and impact the city’s finances. A little horse-trading on council, and the motion is passed.

New York City’s Office of Management and Budget manages America’s largest city budget by evaluating the cost-effectiveness of city services and proposals. Toronto’s budget is the seventh largest in Canada, larger than five provinces, all of which have a treasury board function. It only makes sense for Toronto. 

The city also needs to control operating costs by restructuring service delivery and prioritizing high quality shared services, a point made by the Board of Trade in our 2020 "Shaping Our Future" report. And it should consider a variety of revenue options, such as leveraging existing assets from land, buildings and even utilities to reduce its chronic deficits.    

Delivering high quality core services, like well-maintained transit and transportation systems, safe water and wastewater infrastructure and sufficient emergency services is Job 1 for the city. While the New Deal is critical for the city’s long-term financial health, it is not an invitation to do "more with more." To address our fiscal chasm, we need to figure out how to do better with what we have.