Clarification: Why We Have Budget Cuts in 2007

I have received a note from the Mayor’s office explaining why various agencies like the TTC have been asked to make cuts in 2007 in the wake of Council’s deferral of the Land Transfer Tax and Vehicle Registration Fee.

If these had been passed, they would have taken effect in 2008.  I was under the impression (no doubt from a garbled media report) that the new revenues would have started to flow in 2007, but this is not correct.

Even if Council does vote to implement these measures in October, they won’t be up and running for January, and there will be a shortfall from the anticipated revenue for 2008.  If Council rejects the measures again, well, then I don’t want to even think about the implications.

Either way, the intent of cuts to the 2007 spending is to free up whatever money is available to carry over into early 2008.  The big TTC cuts cannot be reasonably implemented until the new year, but if they are, they will permit a flat-lining of the subsidy from 2007 to 2008.

None of this is at all pretty, and the important political task is to marshall support for the new taxes going into the October Council meeting.  Unfortunately, the TTC will likely be pressured to approve the 2008 cuts in September before they actually know what revenues will be available in 2008.

My preference would be that if they must make a decision, pass a fare increase in September (we are overdue for one anyhow), and hold off on the service cuts until after the October meeting clarifies the budget situation for 2008.

Update [July 23, 6:40 pm]

After I wrote this post, I received this comment from Councillor Gord Perks in another thread, and I have moved it here:


In response to a post from M. Huigens you suggested that the land transfer and vehicle registration taxes would have gone into effect immediately, and the need for freezing some spending and reviewing the 2007 operating budget stems from that loss of immediate revenue.

I just wanted to give a small correction. The taxes were scheduled for a Jan. 1st implementation. The deferral created two problems. If the taxes pass council in late October, we are unlikely to make that Jan 1st implementation date. It may be March before they are in place. This will leave a shortfall of several tens of millions.

The second, and more serious, problem is the possibility that we don’t approve them in October. In that event our 2008 budget is bleak indeed.

In both cases we need to control expenditures that will have a big operating impact in 2008. An example of this was the decision to delay extra TTC service which had been scheduled for this fall. If the taxes don’t pass we will also need to generate a surplus this year to give us some flexibility in 2008. Thus every department has been asked to find immediate operating savings. We will better understand what those will be in about two weeks.

In any event the main issue remains. As the Oct. 22nd vote approaches Torontonians need to discuss the kind of city we want. Do we believe in a bare bones paving and policing style of government, or do we want to build Toronto with a broader mix or public programs: Ridership Growth, Transit City, climate change measures, investments in underserviced neighborhoods, culture, libraries, housing, and recreation.

I know your website will be an important place for this crucial conversation.


Gord Perks