Budget 2009 Q & A

I have received some questions about Toronto’s budget process and how tax and public dollars are spent. Many enquiries addressed the same issues so, for your convenience, I have provided the following Q&A to help you understand how our decisions were reached.

1. What is the total amount of the City of Toronto budget?

The City’s 2009 operating budget is $8.7 billion dollars. Of this amount, property taxes make up $3.4 billion while the balance is paid from provincial grants, user fees, and other revenues.  Our budget is divided into two categories – capital and operating. Operating pays for the almost 50,000 people who work for the city and the services they provide.  Capital pays for the physical structures like community centres, parks, traffic lights, and roads. Our two biggest costs are the Toronto Police Service, costing approximately $855 million, and the TTC, costing $378 million over and above fares.    

 

To see what city services your tax dollars fund, please see: http://www.toronto.ca/budget2009/pdf/09_op_factsheet_tax_dollar_work.pdf

 

2. Where does the money go?

You can download the pie chart here 

 

3. Who makes sure that the City spends the money where it is required?

The City has a Chief Financial Officer who is responsible for managing the operating and capital budgets. We also have an Internal Audit Division that examines our financial controls, and an Auditor General that performs frequent “Value for Money” audits.  Our financial statements are then audited by Ernst & Young, Chartered Accountants, and then our “books” are sent to the province.

 

4. Has anyone ever looked at how the City can be more efficient?

In 2007, the Mayor commissioned a Blue Ribbon Fiscal Review Panel of respected representatives from the private and non-profit sectors. This panel examined all of the city’s finances and made 61 recommendations. Of these, 39 were implemented in the first year alone. The panel reported that the city had done a wonderful job of implementing these measures so quickly. For more details on the Blue Ribbon Panel see: http://www.toronto.ca/mayor_miller/pdf/blueprint_report_20080217.pdf

 

5. Why can’t the City cut its expenses more?

Cutting expenses is easy; however this could lead to a decrease in service. There are often forces beyond our budgetary control. For example, in 2008, the heavier-than-expected snowfall caused us to spend an additional $45 million dollars to clear the streets.

 

6. Why do we have to pay city staff more each year?

The City is required by provincial law to negotiate under a collective bargaining agreement with its various unions. The City must ensure that its salaries and wages are competitive with other surrounding governments so that we can retain and attract high-quality staff.

 

 

 

7. If the City is trying to save money, why is Toronto hiring an extra 1,016 people in 2009?

The proposed budget includes new positions to respond to key areas like increased transit ridership and projected growth of welfare caseloads. Less than half of the new positions (457) in the proposed 2009 operating budget will be paid for through property taxes. Other new positions are paid for through subsidies from other governments or directly by the users of the service. Due to the recession, the City is budgeting for a large increase in the demand for social services sparked by growing unemployment. Additionally, in challenging economic times, people tend to utilize public transit more often than during stronger economic cycles.

See the Briefing note on-line at: http://www.toronto.ca/budget2009/pdf/bn_2009_staff_rec_approved_positions.pdf

 

8. Has the City cut any expenditures from the 2009 budget?

 The Budget Committee asked that every division in the city meet a 0% increase or minus 2% in their 2009 operations. While not every division could meet this goal, savings of approximately $107 million were realized.  However, as mentioned, we are still required by law to negotiate with our unionized staff under the collective bargaining agreement. By law, we are required to have a balanced budget and cannot run a deficit like the federal or provincial government.

 

9. When I have less money I can cut back on my expenses. Why can’t the City?

For the last 10 years, Toronto has deferred or cut back on several substantial projects such as our water and road systems to save money. This deferral has resulted in a $600 million backlog in these two departments alone. Our streetcars are now over 34 years old and must finally be replaced (over $225 million). The Gardiner Expressway, 50+ years old, requires over $80 million/year just to stop falling concrete. In 2008 and 2009, higher than projected snowfalls forced the City to go over-budget on snow clearance. In short, we cannot defer major projects and services any longer. We must rebuild and maintain our city in the same way people have to eventually address repairs or maintenance of their homes.

 

10. Where does the revenue from my property taxes go?

The City uses property tax revenues to deliver the services you receive every day. The operating budget reflects the 24 hour / 7 day role that city government has in the protection of residents and provision of services. Local government provides the services that have the greatest impact on the quality of life in the city and the budget pays for these services.

 

See the chart “How your tax dollars work for you” on-line at:  http://www.toronto.ca/budget2009/pdf/09_op_factsheet_tax_dollar_work.pdf

 

11. How much of my taxes go to the provincial and the federal government?

For every $6 residents pay in federal and provincial taxes (PST, GST, etc), Toronto only receives $1 back.

Furthermore, for every $2,200 paid by Toronto residents in property taxes, the city is required to submit a minimum of $960 to the Ontario government for educational spending.

 

12. How much do my property taxes and fees pay for the services I receive?

Your property taxes only pay for a portion of most of the services you receive.  Services such as water, wastewater, and garbage pick-up are fee-based and billed through the City’s utility bill. Other services, like recreation programs, are on a user-fee system.

 

See the chart “How your tax dollars work for you” on-line at:  http://www.toronto.ca/budget2009/pdf/09_op_factsheet_tax_dollar_work.pdf

 

13. How much will my property taxes go up in 2009?

The average residential property tax bill is budgeted to rise by $89 for 2009, or 4%.

 

14. Why does the City’s budget increase each year rather than shrink?

Our city is growing each year by approximately 25,000 people, and they require more services.

 

15. What portion of the City’s budget is legislated by the federal and provincial governments?

Approximately 33% of all city services are delivered as a direct result of provincial/federal legislation and regulations.  Visit the website at:

http://www.toronto.ca/budget2009/pdf/where_2009_expenditure_budget_goes_FS.pdf

 

16. When Scarborough was a city, we didn’t have property tax increases.  What happened?

In 1998, Toronto, North York, Scarborough, York, East York and Etobicoke were forced by the Provincial government to amalgamate. In the first three years of amalgamation (1998-2000), Mayor Lastman and Council froze property taxes for three years. During this time, inflation rose by approximately 2.9% each year, which meant that while expenses rose, revenues remained flat. This resulted in “lost” property tax revenue of $225 million. This “mistake” has resulted in a budget challenge each year, since Toronto has no control over the cost of inflation.

 

17. What happens if it doesn’t snow next year or we save money in other areas?

In 2008, the City posted an approximate surplus of $74 million. This was applied to the 2009 budget. Any surplus funds in 2009 will go into a reserve fund for future year budgets.

 

However, many city services are contracted out (i.e. snow removal). This means that we must commit to a contract and a fixed cost regardless of whether it snows or not.

 

18. Why can’t the City sell assets like the Parking Authority and Toronto Hydro to cover budget shortfalls?

The City of Toronto owns billions of dollars worth of assets. However, residents do not want us to sell parks, community centres, or water treatment plants because these all provide vital services. The Parking Authority and Toronto Hydro make healthy profits that directly flow directly into the budget. These revenues allow us to borrow funds more easily and issue city bonds to raise the financing necessary to invest in extended services and increase the “value” of the city. When public assets are sold to the private sector, like Ontario did with the 407 Highway, public control is completely lost. In the case of the 407, fixed toll rates have been raised several times by the private owners resulting in this roadway becoming one of the more expensive toll roads in North America.

 

19. If the City is under financial pressure, why are Councillors receiving a pay raise?

This is not true. In 2005, Council approved a motion to have Councillor salaries frozen, although each year they would receive a cost of living increase equal to inflation.  For 2009, this will be 2.42%. Many Councillors, including myself, have chosen not to accept the cost of living for 2009. If every Councillor donated their cost of living increase to the City, it would only result in a saving of approximately $98,000.

 

20. How many NEW jobs will be created by the 2009 budget?

As a result of the City’s of Toronto’s 2009 capital budget, over 35,000 jobs will be created and retained in the private sector.

 

Full 2009 city budget details can be found on the web site at: http://www.toronto.ca/city_budget/index.htm