Everyone Knows We Are In Trouble But Comrade Miller & Politburo

Somewhere in the game of smoke and mirrors McGinty and Miller are clouding the fact that there is only one taxpayer.......

City uses funds as bait
April 16, 2007
Royson James

It's not news that the city of Toronto's cash reserves are low, much lower than its neighbours. It's been so for almost a decade, as every year councillors dip into the funds to finance programs and spending.

Next thing, city staff tell us the city's debt will reach $3 billion in a couple of years, even as Mississauga remains debt free.

We've known that scalping reserve funds and getting further into debt is the budget strategy of choice for Toronto city council. In 1998, the city treasurer warned the city's debt would jump to $3.5 billion from $1.1 billion. We are now at $2.6 billion and rising.

Mayor David Miller knew in 2003, when he was a councillor seeking the office, and in 2006 when he sought re-election, that Toronto was on that road.

He could have said clearly what their options were: higher taxes and service cuts or watch the fiscal crisis deepen. Instead, he sold us the current plan of depending on Queen's Park to see the error of its ways and sending bundles of cash Toronto's way.

Premier Dalton McGuinty has sent bundles of cash Toronto's way. It's just not enough to prevent further reserve raiding. Nothing short of greater fiscal discipline will accomplish this.

Want a new rec centre and don't have the cash? Borrow. Or, take some cash from reserves.

Can't pay for provincially mandated programs? Use some reserves.

The mayor wants to add more office staff to bolster his already one-sided domination of the council agenda? There's money in dwindling reserves.

Toronto has another $1.6 billion in reserve funds it must maintain for insurance claims and employee benefits. The discretionary reserves are down to $24.3 million, the city says.

Apparently, since 2001, Toronto has siphoned $1.3 billion from its reserve funds. So, why the fuss over taking another $71 million for this year's budget?

It can't be that the fund is nearly depleted, though the chief financial officer says it is. When you have already scalped $1.3 billion from a fund, including $131 million for this year, another $71 million is not going to break the bank.

No, the furor over depletion of reserve funds is orchestrated to put pressure on the McGuinty Liberals as they are about to head into an election. The strategy could backfire. Politicians, faced with extinction at the polls, fight back.

The good relationship that has existed between Queen's Park and city hall could disintegrate and today might serve as a barometer.

When the city's executive committee meets, Mayor Miller should have a legal report advising on the wisdom of taking legal action against the province for being a "deadbeat."

Queen's Park, the city maintains, is not paying its bills. It forces Toronto to provide provincially mandated programs and reimburses the city only a percentage of the costs. The shortfall this year is about $71 million – after one accounts for the nearly $200 million McGuinty gave Miller for this year's operating budget.

The legal report will be more diplomatic, but councillors who requested it left little doubt as to their motivation.

The McGuinty government has "demonstrated itself to be no better than the Harris government," said Councillor Maria Augimeri. "They are intentionally putting the city at risk."

The committee threatened to cripple the planned subway extension to York University and beyond; then it asked legal staff for advice on going to court to recover the shortfall.

If Augimeri's comments form the basis of debate today, it signals an end to the great relationship that has developed between Miller and McGuinty. Her statement is dead wrong. For, not since Premier Bill Davis has the city of Toronto had a premier, and a provincial government, that has so favoured Toronto.

The broadside from Augimeri and other councillors came as budget chief Shelly Carroll returned from Queen's Park saying Finance Minister Greg Sorbara rejected her entreaties.

Never mind that Sorbara's staff have a different version of what happened and Sorbara has since said there is still room for discussion, the city's budget committee lost its mind.

To close their fiscal gap, the committee took about $40 million from one reserve fund and $31 million from a transit reserve fund for the subway extension from Downsview to Vaughan. That might increase the subway costs in future years, and it won't kill the project, but it will send a signal that the city is mad, councillors can jeopardize a project to Sorbara's riding, and more retaliatory action can be dredged up if Queen's Park doesn't pony up the cash.

The easiest thing is to cheer on the city. Clearly, Queen's Park is short-changing Toronto on many cost-shared programs. But one should always be careful when picking legal fights with someone who has most of the legislative tools stacked in his favour.

If McGuinty wants to, he can order Toronto to pay for all transit costs. Mike Harris did this. There is no recourse. Cities are creatures of the province, even with the advent of the new City of Toronto Act, which gives Toronto new powers and autonomy.

The legal question here might be: Where the province and the city has an agreement to cost-share a service, does the province have to pick up its share of the costs as outlined when the agreement was signed?

The more difficult determination might be this: Can the province unilaterally decide to cap its contribution?

The whole question doesn't address the bigger issue, being this: If Queen's Park gave Toronto $500 million, even $700 million, every year for the foreseeable future, we are not sure the city could pay its bills.

Such is the monster of the $8 billion city budget that it will take more than petulant legal challenges to fix.