Interest money

Toronto needs the cash — but who’s willing to pay for the city’s huge fiscal gap?

The great number

$857 million

Big number: $857 million, Toronto City Hall’s projected operating budget shortfall from the end of this year. Since Toronto is prohibited from running an operating deficit, the city has already begun pushing back about $300 million in infrastructure projects.

Mayor John Tory is about to end his second term not with a bang or a groan, but with a gaping void.

According a report presented at this week’s meeting of Toronto City Council — the last regularly scheduled meeting before the municipal elections this fall — City Hall is on track to post an operating deficit of $857 million this year.

This is a problem not only because deficits are generally a bad thing, but because Toronto and other municipalities in Ontario are prohibited from running operating deficits. The gap must be closed. And so the city began making cuts totaling about $300 million in planned maintenance and repair projects.

Don’t blame the pandemic. COVID-19 accelerated Toronto’s fiscal quagmire, but it didn’t create it. Instead, this city’s budget challenges originated nearly 25 years ago, when the city was forcibly merged without a sustainable funding model.

The problem, since: No one wants to pay for Toronto.

The provincial and federal governments do not want to pay. Tory has tried and tried and he will try more. And while he’s had real success securing emergency funds — about $2.9 billion from Prime Minister Justin Trudeau and Prime Minister Doug Ford since March 2020 — pledges for predictable, recurring funds remain elusive. .

The mayor has good reason to ask for more, with Toronto providing many vital services — refugee shelters, delivering public health programs, operating funds for public transit, and more. – but so far, no dice. With Queen’s Park and Ottawa struggling with high rates of inflation and massive deficits, there’s reason to think they’re burnt out.

Developers don’t want to pay either. The city’s homebuilders are furious a proposal before council this week to increase development charges — the municipal fee per unit attached to each new house — by 46% by 2024. The fee attached to a one-bedroom condo should increase from $35,910 to $52,367.

Development groups and housing advocates have pointed out that these costs will be passed on to buyers, which seems like a bad idea during a housing crisis. They score a point. But even if the council adopts the proposed increases, the amount contributed is supposed to be just enough to cover infrastructure linked to population growth. It will not be enough to build a better city for everyone.

Current residents also do not want to pay. Or at least Tory doesn’t want to ask them to pay, despite Toronto residents paying some of the lowest residential property taxes in the GTA.

Tory has stuck to his promise to keep residential property tax increases at or below the rate of inflation for the duration of his term, with the exception of a temporary special “municipal building tax.” The levy was a hopeful sign that the mayor understood the city’s money problems couldn’t be solved without additional revenue, but so far he has been unwilling to revert to the idea of ​​remedy. to this last giant budget hole.

And of course the debt won’t pay for Toronto. Not anymore. Tory has benefited greatly during his tenure from ultra-low interest rates on debt, which the city is allowed to use to fund infrastructure projects, but not recurring operating expenses. According to the city’s audited financial statements, Toronto’s net debt rose from approximately $5.4 billion when Tory took office at $8.4 billion today.

The city’s latest financial statement specifically calls it unsustainable. “The city will need to identify future sources of revenue to settle its debts,” the report states, ominously.

Adding more debt would probably be too expensive, anyway. As inflation hammers the global economy, interest rates on new city debt have risen rapidly. City hall got 30-year interest rates as low as 2.4% in 2020. from Toronto the last issue of 30-year debt bore interest at 4.4%. A huge swing.

The end of the era of cheap debt marks the end of the city’s last viable short-term fiscal strategy. The can has been thrown so far down the road that the road ends. It’s just thorny bushes and jagged rocks from now on.

So I would like to make a plea. I was happy to see Tory get a real challenger in this fall’s mayoral race last week. Gil Penalosa is a candidate for good ideas for building cities. I was also pleased to hear some of the candidates seek to fill the surprisingly high number of vacancies on the board. They also have a lot of good ideas.

But Toronto doesn’t just need ideas. This town needs money. Applicants must tell us where they will get it.