Glen
Senior Member
Some biased quotes below...
http://www.thestar.com/news/insight/article/748420--your-day-of-financial-reckoning-is-nigh-toronto
http://www.thestar.com/news/insight/article/748420--your-day-of-financial-reckoning-is-nigh-toronto
On Feb. 16 the city of Toronto will unveil its budget for 2010. Already the city, facing a shortfall of some $400 million to make ends meet, has called on all departments to cut their budgets by five per cent – making this the most highly anticipated municipal budget in years.
Yet this $400 million problem is nothing new. And the problem will only get worse unless the mayor and council are willing to "think big" and consider new ideas for restraining spending or raising revenues.
Throughout this past decade, Toronto has depended on a variety of non-sustainable sources of cash, including bailouts from the province and withdrawals from its own reserve accounts, to balance its budget. Put plainly, the city has been running a structural deficit since the start of the decade.
That structural deficit has grown rapidly, from a $72 million gap in 2002 to a $447 million rift last year
The problem is, at its root, a simple one. From 2000 through 2008, the city's operating expenditures increased at an annual average pace of 5.3 per cent. Yet its main source of revenue, property taxes, increased at 3.6 per cent per annum. It is this wedge between the growth rates of spending and revenue that gave rise to the structural deficit.
Clearly Toronto's budget situation is a very serious one. It can be looked at in two ways. The city is either spending money above and beyond what its sustainable revenues warrant, or Torontonians are not paying enough in taxes and fees to sustain the city's spending track. The reality is that both perspectives contain some truth, though it's essential to exhaust all opportunities for efficiencies and cost reductions first.
In its search for solutions, the city will also have to keep an eye on its competitiveness. From 2002 to 2007, job growth in Toronto averaged a meagre 1.1 per cent annually, while the surrounding region added jobs at a yearly rate of 2.8 per cent.
One key contributing factor to this state of affairs is the tax burden on Toronto's businesses, which is high compared to the burden on residents. In 2009, residential properties made up the vast majority (72 per cent) of all real estate value in the city – yet these properties account for only 43 per cent of all property tax revenues. By contrast, commercial and industrial properties account for only 20 per cent of real estate value but provide 40 per cent of all property tax revenues.
Such is the problem with structural deficits. The residents and businesses of this city have become accustomed to receiving a certain level of services, so it is a truly unpleasant surprise to learn that, in fact, the taxes they pay aren't covering their true cost. Delaying the search for solutions only allows the fiscal chasm to grow. The city's problem is a big one, and the search for lasting solutions will require some big thinking.