Here’s What You Can Expect From Toronto’s 2017 Budget

What do Toronto's budget decisions mean for 2017, and what tough choices will the City have to make?

By Neville Park

Photo by Neville Park

"Yes we will" have "serious" talk about city revenues after this budget is passed: Toronto mayor. #topoli

— Oliver Moore (@moore_oliver) February 17, 2016

But @JoshColle puts task force and police on notice re: need for change and cost containment. "We'd better see it in the 2017 budget"

— David Rider (@dmrider) February 17, 2016

“That’s a debate council will have to have”

—Gary Crawford (Ward 36, Scarborough Southwest), on revenue tools

The 2016 budget involved a lot of people nodding and agreeing that we definitely need to have a serious conversation and make some tough decisions…next year. For sure. We promise. As City Manager Peter Wallace diplomatically phrased it,

The City’s fundamental fiscal challenges have not been addressed in the [2016 operating budget]. Therefore, 2016 is a transition year to a dialogue which must be held with City Council prior to the 2017 Budget process with the goal of achieving a sustainable fiscal plan.

Oh boy, here we go.

Icebergs

The big “fundamental fiscal challenge”: our structural deficit. “Hold on a second,” observant readers will cry, “I thought municipalities aren’t allowed to run a deficit! Haven’t you been ragging on politicians for years for boasting about ‘balanced budgets’ when it’s the bare minimum legal requirement?” That’s technically true. But every year the City budget starts off with a big shortfall because we always take in less money than we have to spend.

Source: City of Toronto [PDF]

One contributing factor in this situation is “downloading”—when the provincial or federal government decides to stop chipping in for services like transit and housing. This is exacerbated by continuing funding cuts. For example, the elimination of the Toronto Pooling Compensation (provincial funding meant to offset the downloading of social housing) will put us an extra $45 million in the hole next year. To make up that lost money, we’d have to increase property tax revenue by almost two per cent.

(In case you were wondering, politicians and budget geeks phrase costs in terms of property tax increases because that’s our biggest source of revenue, and one of the few we can deliberately increase.)

Source: City of Toronto [PDF]

On the capital side, the City currently has $22 billion worth of unfunded projects, including SmartTrack, the TCHC state of good repair backlog, and the fabled Downtown Relief Line. Some are “shovel-ready”, others still nebulous and hypothetical. We don’t pay for these out of pocket; it’s more like getting a mortgage, where the City pays off the cost over the infrastructure’s lifetime. But we can only borrow so much, and Council will have to choose which projects to prioritize.

Politicians don’t like raising taxes. They don’t like closing libraries or postponing transit expansion, either. Unfortunately, they will have to choose which they like least. The only ways to get around the structural deficit are a) start taking in more money, permanently; or b) cut back on services, permanently.

New taxes

We’ve already extensively catalogued new ways the City can make money. Realistically, which one(s) might Council be willing to put on the table next year?

For years, Kristyn Wong-Tam (Ward 27, Toronto Centre-Rosedale) has quixotically tried to bring back the vehicle registration tax. She will probably bring it back next year, and it will inevitably be voted down. However, this year lefty Shelley Carroll (Ward 33, Don Valley East) was surprisingly joined by the more conservative Norm Kelly (Ward 40, Scarborough-Agincourt) in voicing support for a municipal sales tax. This is a small but promising development; a sales tax will need support from the suburban bloc, as well as both ends of the political spectrum. With a year for them to drum up support, we may be able to expect a sales tax-related motion in the 2017 budget process.

Tackling the police budget

Many of the City’s programs and agencies, particularly the “soft” social services, don’t actually cost that much. The growth in expenses is largely due to 1) the TTC and 2) the police. Slashing the TTC budget would probably bring the city to a halt and cause mass chaos. But in an era of plummeting crime rates, shrinking the police force doesn’t actually look so bad.

Until now, the steadily rising police budget was virtually untouchable. But this year, Michael Thompson (Ward 37, Scarborough Centre) led a small faction pushing for sweeping cuts, arguing that fighting poverty is the best way to prevent crime. Police chief Mark Saunders personally lobbied councillors at the last minute, and Mayor John Tory pleaded with Council to wait for a hastily announced task force to report back on more measured changes.

While the police and the mayor successfully resisted cutting the budget, we can expect that their opposition will only get stronger. Former mayoral candidate David Soknacki, who is on the task force, made tackling the police budget a key part of his platform; he is unlikely to throw away his shot at implementing reform. This will give Thompson and like-minded councillors more concrete and reasonable cuts to propose, and it will make it that much harder for opponents to argue we should wait.

Will 2017 be the year City Council stops waiting? We can only hope.