On December 15, Toronto’s staff recommended budget will go before city council, with spending estimates on both the capital and operating budget.
It will identify a gap between the services that city staff is recommending and the revenue currently available to pay for them.
The city manager has indicated that, unlike in other years, city staff will not recommend how to close the gap between expected revenues and expenditures. They will leave that to politicians, which will make for a fruitful and interesting budget discussion.
Last week Mayor John Tory made a proposal for new revenue dedicated to housing and transportation. We know that fixing the city’s aging infrastructure is important. While much of the budget debate has been focused on how to pay for Toronto’s infrastructure needs, there has been less emphasis on the operating budget.
All Torontonians rely on the public services funded from the operating side of budget
Here are three recommendations for the 2016 operating budget:
Poverty reduction: put words into action
Advocates are calling for $75 million in new spending in the 2016 budget as a down payment on city council’s poverty reduction plan. Housing, child care, transit, access to and improvements in existing public services require hard dollars to turn council’s unanimous commitment to reduce poverty into action. Without funding, this commitment isn’t worth the paper it’s written on.
The city should also spend smarter to support poverty reduction. That includes moving forward on its commitment to become a living wage employer, more progress on its social procurement strategy, and on its job quality index.
City spending: the gravy train is empty
Both the city manager and the mayor have said that they will be looking for efficiencies in the operating budget.
It is always important to look for ways to improve the delivery of public services. However, we have to remember that former Mayor Rob Ford’s quest for gravy bore little fruit. The core services review resulted in a confirmation that the vast majority of city services are either legally mandated or considered traditional services like parks and recreation.
There is one exception to note. The police budget continues to be the fastest growing cost for city services. The proposed budget from the 2016 Police Services Board will increase expenditures by 2.7 per cent bringing it up to a billion dollars. And, recent media reports suggest that there is room to increase efficiencies in the way policing is delivered.
Continued reliance on gapping — the term used for leaving city positions unfilled to balance the budget has got to stop. It was always a short-term measure and it means staff are not available to provide the city services that we rely on. The 2015 budget relied on gapping for $127 million in savings. The complexity of communities’ needs are increasing, requiring increasingly sophisticated services. These are impossible to deliver without sufficient staffing.
Aim higher on the property tax ask
The mainstay of Toronto’s capacity to pay for the services we all rely on is property taxes.
They make up the biggest share of city revenue, accounting for a third of the total in 2015. Unlike provincial or federal taxes, property taxes do not increase with economic growth, population growth, and inflation. They also don’t increase with property values.
As a result, each and every year, city councillors have to vote to increase property taxes just to provide the same level of services as they did last year. And, each year in which city revenues fall behind, the prior year’s decisions have a compounding impact on future years.
It is important to remember that city policy is to increase taxes on non-residential property at one-third the increase in residential properties. So, holding residential property tax increase to inflation means an even smaller increase in total revenues.
Last year, property tax revenue, excluding the 0.5 increase for the Scarborough subway, rose by 1.5 per cent — well below the 3 per cent needed to keep up with inflation and population growth.
Just to maintain existing city services, revenue would have to keep up with the increasing number of Torontonians who access those services.
A property tax increase of 4.5 per cent this year would raise an additional $170 million and make a real difference.
Sheila Block is a senior economist with the Canadian Centre for Policy Alternatives’ Ontario office. Follow her on Twitter: @SheilaBlockTO.