In Mayor Rob Ford's Toronto, the fact that "one-time savings" happen annually is an inconvenient truth.
Since the municipal election heated up in 2010, Toronto has been existing in a fiscal alternative reality. During the campaign, City Hall was a painted as a place full of tax-and-spend, corrupt politicians, held captive by unions with rivers of debt turning our streets blood red. Businesses were fleeing. Graffiti blighted the skyline as far as the eye could see.
But fear not, good citizens. A fix would be easy. A nip here, a tuck there. A round of some good ol’ fashioned belt tightening. All done with no service cuts…guaranteed. We’d be good as new in no time.
That virtually none of that nonsense rhetoric held any water was hardly the point.
Our credit rating was just fine, thank you very much. Corporate and condo towers were rising up at a record rate. Toronto continually found itself ranked high among international cities for liveability and business friendliness. But one-time fringe councillor Rob Ford and his small band of right-wing ideologues convinced enough voters that his version of reality was true to get himself elected mayor. Stop the Gravy Train! And the assault on fact, veracity and just basic high-school economics has been ongoing ever since.
One of the first signs that we’d been had came when the Ford administration filled the holes in its inaugural budget using a more-than-$300 million surplus left behind by the previous mayor, David Miller. Wait, what? David Miller? That profligate David Miller? A surplus? But…but…?
Not so fast, folks, Team Ford told us—it wasn’t a surplus, it was a “one-time savings.” Those are two entirely different things.
Then we had another
surplus—errr, one-time savings. And another. And just this past week, another surplus—errr, one-time savings was announced for the first quarter of 2012.
How many one-time savings does it take to make a surplus?
In the real world of municipal government financing here in this province, cities are prohibited from running an operating budget deficit. They tend to overestimate their projected costs and downplay possible revenue as a result. Surpluses are not at all unusual, nor are they one-time. In fact, they are a sign of sound fiscal management.
Some have argued that City staff can be a little too conservative with their estimates and present a more dire situation than is really the case. This prompts an overreaction from some politicians who demand unnecessary cuts and reductions in order to meet the bottom line. It’s a problem that has been exacerbated (in this writer’s opinion) here in Toronto by council’s decision to get a budget done as close to a calendar year as possible while the actual wheels of finance and commerce operate on an April-to-April fiscal season. This time lag creates more uncertainty, more guesswork, and more conservative estimates.
Despite these regular (annual, like clockwork) infusions of one-time savings, Mayor Ford has been forced to make some tough decisions. Like cutting services. (Oops. Yes, about that guarantee…)
Well, first of all, the mayor would appreciate it if you stopped calling them cuts, because they’re not cuts. They’re efficiencies, and he never guaranteed not to find efficiencies. In fact, he guaranteed he’d find efficiencies.
Besides, to the mayor’s way of thinking, you can’t have a surplus if you owe money, and while municipalities aren’t allowed to run operating budget deficits, they can rack up a whack of capital debt. Cities have to build and maintain things like roads and public transit systems, and it turns out that this is expensive. How else are you going to pay for it other than using any and all operating budget surplus—errr, one-time savings? The bigger this one-time savings, the more capital debt you can pay down. In order to increase a one-time savings, you need to trim here and there on the operating side of things.
So, you see the dilemma Mayor Ford’s facing. The only other alternative to using operating surpluses to offset capital costs is debt financing. And as Councillor Doug Ford (Ward 2, Etobicoke North) suggested at Tuesday’s budget committee meeting, debt is the first step toward bankruptcy—as anyone who’s ever taken out a mortgage knows.
Imagine all the things we could have if we weren’t paying interest for the things we need. Our budget chief pointed out that the city saved $20 million on interest charges last year. That’s almost a third of the amount we lost by repealing the detested vehicle registration tax a couple years ago. It’s also a drop in the bucket of cash we gave away by freezing property taxes in 2011 and not making up the difference in 2012.
The trouble with debt, in the eyes of Team Ford members, is that you need to generate revenue to pay it off. Generating revenue is just another term for taxation, and a civil society cannot function properly under the burden of taxation. Government should not be in the business of generating revenue because generating revenue is the business of business.
This is the worldview we’ve allowed to permeate throughout City Hall.
No debt. No revenue. No expenditures except for in the service of those first two rules. That this is inherently contradictory and mathematically impossible seems utterly lost on the people pursuing and advocating these policies. But lies—errr, pieces of campaign hyperbole—that this city was going to hell in a hand basket and our fiscal foundations were crumbling served as the little piece of thread that, once pulled, unravelled the entire outfit. One invention led to another two being needed to prop the first up, and so on and so on.
The truth is much more economical. If we’d had an honest and straight-forward discussion from the beginning, that the city was facing some very serious challenges but was in a strong position to deal with them, we wouldn’t be wasting our time and energy digging through the mounds of falsehoods and irrationality that now makes up the debate at City Hall; and we wouldn’t be constantly reminding the mayor and his supporters that what they said then is miles away from what they’re saying now. The target we’re shooting for wouldn’t constantly be in motion.