Council Starts Down Path to Balance Books, but Questions Remain

This week, City Council began to wrestle with the very large hole in the City’s budget resulting from COVID-19.  Since March, the City has been hard hit by additional expenses, especially from areas like shelter and housing support, or the need for additional protective equipment and cleaning supplies.  Expected revenue has also dropped dramatically, especially from fewer riders on public transit, reduced municipal land transfer taxes and reduced revenue from user fees.

Altogether, the City now expects it will be short $1.9 billion for it operation by the end of 2020. In addition, staff are estimating a shortfall of $1.5 billion for 2021. The City needs to act quickly, because unlike provincial and federal governments, it is not permitted to run a deficit.

Council voted to support $513.7 million in cost savings through staff and other spending reductions, including redeploying staff to critical areas, delaying new hires, mandating staff use their vacation time. With these strategies in place, the City projects a reduced total year-end shortfall of $1.35 billion.

On the brighter side, earlier this week the Ontario government announced that they are providing up to $4 billion in one-time assistance to Ontario’s municipalities in partnership with the Government of Canada. While it remains to be seen what portion of that funding will be allocated to Toronto, we remain hopeful that this will avoid the need for substantial changes to service levels when Council next meets in September.

Serious discussions will still be required as the City grapples with its finances in 2021 and beyond.  For the City to meet expectations to large program areas that service much of the GTA, such as transit and housing, it must finally address the need to bring in revenue through different streams rather than relying so heavily on an often unfair property tax system.  To do this, the City will need to engage with the provincial government to urge more autonomy, or even a charter city status, a distinction for special autonomy that exists in many other parts of the world.

Sometimes a crisis will expose weakness in an already damaged system, and present an opportunity to fix the problem both for the present, and for the future.  This is most definitely a time for action.