I Agree With The Solutions But The Major One Will Be Ignored

A strategy to fix city budget mess
March 29, 2007

Toronto's new $7.8 billion budget offers depressing reading. It comes complete with warnings of higher property taxes, new taxes on everything from beer to movies and parking, closures of seven swimming pools and increased fees for skating rinks and public golf courses.

What's worse, despite these moves, the city will still be running a huge deficit, one that will continue to grow in future years unless both the city council and Queen's Park take concrete action now to clean up this mess.

To fix this annual budget problem will require a multi-pronged strategy that, first, addresses the underlying causes of the financial crunch; second, sees city hall finally getting serious about trimming some services and bureaucratic fat; third, imposes new taxes; and fourth, sees residential property taxes possibly rising faster than they have in the past.

Ending this annual budget mess will be a major challenge for Mayor David Miller, city council and the provincial government. For years, Toronto has failed to balance its budget, for many reasons. In the coming year, the city will be $71 million in the hole. As a result, the province is being asked, yet again, to bail out the city with a last-minute cash infusion.

Such annual begging can, and should, stop. How to do it is clear.

First, Queen's Park should quickly answer the call to bail out the city this year. Why? Because the city's dire financial plight is mainly the province's fault. Under former premier Mike Harris and continuing today, Queen's Park saddled the city with responsibility for transit shortfalls, welfare programs, drug benefits and subsidized housing. This is known as downloading. But the province failed to provide Toronto with the ability to pay for these new burdens. Under Premier Dalton McGuinty there has been some change. Money is flowing for Toronto's subway and some other programs. But the fundamental unfairness of downloading remains.

Longer term, Queen's Park must assume responsibility for paying for more of these services, including possibly assuming more costs of the Toronto Transit Commission. City officials had hoped Queen's Park would agree to cover the $175 million annual cost of drug benefit and disability programs. But that did not happen in last week's provincial budget.

Second, Miller and city council must get serious about cutting costs. Has all the fat been removed from the city bureaucracy? Are there more efficient ways of delivering services? These are legitimate questions, especially when taxpayers see local politicians setting a poor example of fiscal restraint. City councillors voted themselves a 9 per cent pay hike last year, although their salaries were already set to rise with inflation. City hall is set to undergo an ill-advised $2.9 million renovation, and Miller's office costs are rising by 30 per cent, mainly due to the addition of new staff.

Third, as much as people hate taxes, city council is right to look at imposing new levies, especially if the province fails to adequately help this city. If it took maximum advantage of its new taxing ability, the city could raise more than $300 million yearly through a land transfer tax; vehicle, road and parking levies; and by taxing alcohol, tobacco and entertainment. Some, but not necessarily all, of such fees must be seriously considered.

Fourth, property taxes may have to rise faster than Miller would like. In the new budget, homeowners will face a property tax increase of 3.8 per cent, more than double the cost of living, despite Miller's election promise to keep taxes "in line with inflation." But in light of the profound challenges facing this city, such an increase should be no cause for outrage. In fact, it is probably unrealistic for either Miller or property owners to expect such moderate increases in the future. Property owners across the Greater Toronto Area, from Oshawa to Oakville to Newmarket, have seen their taxes rise much higher, sometimes as much as 8 per cent to 9 per cent a year, as their municipalities struggle to balance their budgets.

Only by tackling the budget shortfall on all these fronts will Toronto finally be able to get its books in order.

Certainly, unfair provincial downloading is the main reason for Toronto's budget mess. That needs to be fixed. But any realistic solution must also include a fresh determination to find savings at city hall coupled with new levies and, regrettable as it may be, higher property taxes.