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:

Steve,

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.

Sincerely,

Gord Perks

18 thoughts on “Clarification: Why We Have Budget Cuts in 2007

  1. Why do [you] believe that the proposed Land Transfer tax is the only path towards economic health for Toronto?

    Steve: There are three potential large sources of new revenue for Toronto:

    Land Transfer Tax
    Property Tax
    Provincial Uploading

    The LTT will generate about $300-million annually, a value larger than most of the other proposed taxes put together. Several of those other proposals would not be easy to implement and we would have to set up eight or nine small tax-collection procedures to pull in less revenue than we can get by piggybacking on an existing Provincial tax collection mechanism.

    The Property Tax would have to take a huge hit, 18% has been cited, to generate the revenue we are not getting from the LTT and the vehicle registration fee. Although the tax on a home in Toronto would still be lower than in the 905, an increase of this magnitude would not be popular.

    Provincial uploading of social service costs could save us a few hundred millions, but we need this in addition to the LTT and vehicle license fee which, by themselves, will not cover our projected 2008 deficit.

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  2. I think the TTC needs to be specific on cuts in its September meeting, to make clear what’s at stake in October. It should pass a package of service cuts contingent on October’s council decision. Councillors would know that a $10 million cut would axe the service on list A, a $20 million cut would eliminate the routes on lists A & B, etc. Any cuts would take effect as soon as possible after council’s decision.

    Otherwise, we risk getting stuck in the same situation as before: councillors choosing between a specific tax increase or a vague set of service cuts. We saw how that turned out the first time…

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  3. That’s more what I thought. But without getting into the politics of the thing, does the Mayor have the authority to cut the budget (this years – 2007) without getting a vote from council? Cutting this year’s spending means that less money is taken from reserves.

    Steve: The Mayor cannot formally cut budgets, but in anticipation of the need for Council to change its spending plans, the Mayor can request reports from departments and agencies about how they would cut costs if the City were to reduce their funding. Any surplus this creates would go into reserves for 2008 when the hole is deeper.

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  4. I think the proposed TTC cuts are wrong-headed, even as strategic posturing.

    A quick scan of who voted which way will show that almost all the councillors who voted against the Miller tax hike are from suburban wards where transit use among VOTERS is quite low.

    Threatening cuts to a service most those councillors don’t use, particularly when it will not likely shift a significant number of votes in their wards (keep in mind the appalling low turnout rate in muncipal elections, and that most who do turn out are home owners, and not students), makes no sense.

    It’s neither fair (punishing those who likely support the increases in taxes), nor likely to bring pressure to bear in the significant way desired.

    A more reasonable alternative would be for the Mayor to announce that due to insufficient funds for road repair, the transportation dept budget is reduced to ZERO. The Don Valley Parkway and the Gardiner Expressway are closed to save money on lighting, traffic police, the camera system and maintenance. That would cause an unholy uproar in suburbia and be much more liklely to get the attention of the neanderthals on council.

    Even Doug Holyday would vote for new taxes, assuming he could find his way to Council without the use of the Gardiner.

    Steve: I hate to say this, but of the Councillors representing the former City of Toronto, the vote for deferral [corrected at 10:40 pm] was:

    For: Walker, Stintz, Palacio and Saundercook.

    Against: Bussin, Davis, Fletcher, Giambrone, McConnell, Mihevc, Pantalone, Perks, Rae, Vaughan

    That’s hardly a clear split between downtown and the suburbs, although intriguingly all of the “for” votes are from wards bordering on the burbs.

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  5. I know that Miller wants a share of the GST transferred to the cities. But let’s be reasonable; the battle for a majority government won’t be fought in Toronto. On the other hand if the Liberals want to hold onto to Queen’s Park they can’t let the NDP win seats; why not transfer one cent of the PST? Can the province afford this? In any case it would seem that the provinces, constitutionally speaking are the ones who should be funding the cities (even if strategically speaking a proper federal infrastructure program rather then silly, non-producing tax cuts, seem wiser).

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  6. “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.”

    And this, folks, is why this issue is so maddening.

    We can have this WITHOUT these new taxes. To say otherwise is severely misleading. This is from someone who supports the car registration levy.

    Gord et al., I’ve said it before, I’ll say it again. You and your ilk have some nerve to not look at all cost-cutting opportunities available to you, and then have the nerve to threaten 21 routes, a fare hike, and the cancellation of a subway route because we don’t like the taxes you want to consider.

    Learn to govern, get a real Mayor, turn this into a real city for once, and then get back to us.

    Steve: First off, the “cost cutting opportunities” will not solve a $500-million deficit, and some of the ones so often advanced by “your ilk” will trigger widespread labour disruptions we can well do without. As for threatening routes, etc, Gord Perks has to plead innocent because it was the rather ham-fisted approach to these cuts by the TTC (of which Gord is not a member) that led to so much negative publicity. This information should have come out as “here’s what may happen”, not “here’s what we have already decided to do without any consultation”.

    As for a real Mayor, well let’s see, we had mega-Mel who was entertaining but not a particularly good Mayor, and we might have had John Tory who will give away anything to woo votes — sounds like the sort of politician you despise.

    I’m a Miller supporter, and the one thing we might agree on is that he has to come out and fight for what he believes in. That’s what real mayors do, even if you don’t agree with them.

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  7. A correction to #4 above: Councillor Bussin voted against deferral. The full list is in this PDF from the Toronto Star

    One problem with comparing councillors’ voting records and the implications on transit service, is that most Toronto residents using TTC to get to work, travel outside their own ward to get there. I could live in Councillor Bussin’s ward but need to travel through Councillor Ootes’ ward to get to Councillor Stintz’s ward. Presumably if I worked at the East York Civic Centre and called up Case Ootes’ office (on this issue, or, say, about the frequency of the O’Connor bus taking me to work), he would say that he represents the residents (voters) in his ward and that I should express my opinions to the councillor where I live.

    Steve: Thanks for spotting that. I have fixed the list in the comment.

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  8. //// For deferral.
    For: Walker, Stintz, Palacio and Saundercook

    Michael Walker: I am not surprised. He never could make up his mind who he was for — the renters in my old area on Davisville or the Forest Hill mansions.
    He supported to continue a lovely garbage perk of side and backyard pickup to be continued for that area when the rest of us regular folk had to continue to haul it to the curb if we were in a house. Is this still done?

    How much money does that cost???

    I wonder if his Forest Hill constituents are willing to provide taxi chits for their cleaners and nannies!

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  9. What I don’t understand is why the city does not simply proceed as if the taxes will be passed in October, and instruct the various agencies to have some level of emergency plan in case this doesn’t happen and the funds aren’t available.

    Now, I do have a question, which is, how bad are the already implemented cuts really going to be in the long term? Sure, this years service improvements are out, but if the money becomes available next year, have we really done anything more than defer upgrades another year?

    Steve: If the taxes are not passed, we will have a huge hole to dig out of, and the last thing we need is to have new services up and running at extra cost that will take months to shut down again, not to mention the huge annoyance to the public. Better to assume the worst.

    Indeed, if Miller said “damn Council, I’m going ahead anyway”, he would be attacked for ignoring the will of Council and plunging the City into bankruptcy.

    If we do manage to implement the improvements next year, preferably in late winter rather than the fall, we have a fighting chance that the momentum of transit growth won’t be lost. If we wait too long, then the current inadequate level of operation becomes the accepted norm, and people lose any faith in transit’s ability to deliver good service.

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  10. This city needs to get its act together. Instead of taxing us Torontonians, why not implement road tolls on the 905ers entering the city?

    Why is Miller against road tolls for transit?

    Steve: Simple. Assuming that road tolls drive people onto transit, we don’t have the capacity to absorb the riders. Also, I suspect that selectively taxing only the 905-ers would not be easy, let alone legal. It would certainly destroy any political support for future subsidies from Queen’s Park.

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  11. “Steve: Simple. Assuming that road tolls drive people onto transit, we don’t have the capacity to absorb the riders. Also, I suspect that selectively taxing only the 905-ers would not be easy, let alone legal. It would certainly destroy any political support for future subsidies from Queen’s Park.”

    Steve, road tolls would never tax 905’ers only, but they would have a disproportionate effect on them based on the idea that there are more 905’ers on Toronto’s two expressways than 416’ers.

    Further, I have to take issue with the logic of no road tolls because we don’t have enough transit service.

    When Ken Livingston, Mayor of London, UK implemented congestion charging he used the leverage of FUTURE toll revenue to buy the necessary service improvements (rolling stock etc.) prior to the toll beginning. I believe service was given a 20-25% boost co-incident to the launch of the congestion charge.

    There is no reason the same can’t be done here. Announce new tolls, Let’s be realistic, if they move at lightening speed, they could be operational by July 2008.
    That’s 11 months from now. In that time, I’m sure we can get a rush delivery of another 150 buses.

    I’ll admit, we do have a problem on the streetcar side given the longer lead time for deliveries, but we could add buses as supplemental on streetcar routes if need be.

    We can also start the toll lower so it does cause a seismic shift to transit, but a more gradual one, till new service is ready.

    GO Transit may be strained, but that is someone else’s political problem, not Toronto’s.

    Steve: Actually GO Transit is our problem because that’s where people diverted with road tolls will try to go, as well as to the subway. Leaving aside the fact that you cannot get a “rush” one year order of buses, that’s not what you need to absorb diverted long-haul commuters who drive down the DVP and in on the Gardiner.

    Also, compared to many other possible taxes, the infrastructure you have to create to collect the toll is far more substantial than piggybacking a new tax on an existing revenue stream. That’s the beauty of things like the Land Transfer and Vehicle taxes: Queen’s Park already has the machinery to collect them, and the Toronto portion can be added on at minimal cost without creating a new bureaucracy (as some writers here have suggested).

    We can have these two taxes (and possible others that are also administratively fairly simple) in place for next spring.

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  12. To M. Briganti: please stop thinking that all 905ers are desperately trying to get into the 416, against the will of us poor Torontonians. The commuter flow into and out of the 416 is becoming more balanced all the time, so should they be taxing us to pay for their road upgrades?

    What’s the consequence of this border tax?
    * You force people off the highways on to secondary roads to avoid the tolls, increasing congestion, commute times, and pollution/smog.
    * The concerns of corporate taxes (incl. education levies) will be nothing compared to the new reason for business to vacate the city – which takes all those lovely payroll taxes, lunches, after work spending, etc. right out of town as well. I cannot believe this would be revenue neutral in the best case, so you’re actually advocating a loss of revenue.
    * For those 905ers that still find they work in town, there will be an incentive to move inwards and drive housing prices even higher. (point two may mitigate this as people flee the city).
    * What do you do about people crossing the city? The 401 connects people from Durham to Peel, so they have to enter the city but they’re not staying. Are you going to charge them for using a provincial resource (Toronto doesn’t own it, Ontario does, remember)?

    If you want road tolls, have road tolls for everyone, but stop advocating 416 vs. 905 nonsense.

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  13. Allow me to tell this in the form of a little story.

    In March 2007, you come up with a dream plan to renovate your house for $6,000. It’s kind of unlikely to happen, but you flip through the catalogue looking at all the nifty stuff you’d like to get.

    Then, to your great surprise, in June 2007 your parents tell you that not only are they gonna give you the $6,000…but they’re going to hit the bank for more dough on your behalf. Now you’re not talking about $6,000 in renovations, but $17,000 — enough to put in a full addition!

    You can’t believe your luck. The house was getting a bit crowded as it was, and now you can think big and expand the joint!

    Yay!

    Along comes July 2007, and mom is finishing up on her budget plans. You need $30 to do a little fixer up on the front door, cuz the hinges are a bit loose from all the people coming in and out all day.

    So you ask mom to spot you $30 to fix the squeaky hinge.

    Not only does she say no to the $30, she asks you to cut out $100 from your existing expenses, even if this means locking the doors to a few rooms in the crowded house and turning down the heat and lights.

    Oh, and she wants you to start charging your guests for using the phone too.

    Idiots. We are governed by idiots.

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  14. Why are there no other taxes available? What about hotel taxes, liquor taxes, restaurant taxes and the like. What about adding more red light cameras, bringing in photo radar (it’s a tax on speed after all). You could allow people to pay to use car pool lanes, or you could if we had many. They could charge more for water and turn Toronto Water into a profit center.

    There must be hundreds of ways for the City to make money. How did we go from “everything’s mostly fine, but gosh, we’d really like to the province/feds/tooth fairy to pony up some more dough” to “oh sweet lord, cancel all the buses” without a time for a logical, all-encompasing debate on the various way for the City to make money. I have little doubt that the City’s coffers are looking pretty bare, but who failed to sound the alarm?

    As for road tolls, maybe they could enact a toll on vehicles exiting the 401. I know they could never put a toll system on the highway itself, but at some point a lot of those drivers enter or exit. Maybe 50 cents to get on and 50 cents to get off. That’d get you $500 mil in a hurry.

    Steve: What the City can tax is determined by the legislative powers granted by Queen’s Park. The full discussion paper is available online including estimates of the proceeds from various possible taxes.

    Taxes on liquor and on billboards will be the subject of a report this fall. We already have a tax on hotels that is used to finance tourism campaigns. As for speeding tickets, the revenue from them does not come to the city because it is a provincial offence.

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  15. When Ken Livingston, Mayor of London, UK implemented congestion charging he used the leverage of FUTURE toll revenue to buy the necessary service improvements (rolling stock etc.) prior to the toll beginning. I believe service was given a 20-25% boost co-incident to the launch of the congestion charge.

    A couple of points:

    There is a difference between congestion charges and road tolls. Road tolls are very specific: we put in a toll to use the Gardiner or the DVP, whereas congestion charges use photo radar at every single access point around a specified area encompassing the downtown core.

    Now, we talk about road tolls because, intuitively, we think these will be easy to implement and will have the following advantages:

    – it forces 905 commuters to pay for the use of infrastructure (the Gardiner and the DVP) that’s wholly paid for out of the 416 property taxes.
    – it reminds us of the Highway 407 arrangement, and the possibility that we might be able to sell off these items (hopefully at a far fairer price than Mike Harris’ fire sale) for some serious capital improvements.

    Steve is arguing, though, that if you put toll booths on the Gardiner and the DVP, there is considerable incentive for commuters to get off these highways and onto parallel local streets (Don Mills, Lakeshore Boulevard, the Queensway, King Street), dramatically increasing congestion and slowing down public transit even more.

    Congestion charges would address this point as there’s no avoiding these charges. But there is, I think, a difference between London, England and Manhattan. There is a great amount of prestige in maintaining a Central London or Manhattan address, and so you can force people to pay a premium and they’ll pay it.

    Is there a similar amount of prestige in calling downtown Toronto home? Or will we strongly encourage businesses in downtown Toronto to up sticks and look for cheaper pastures in the 905 area code.

    Do not forget that, in the early 1990s, there was a disturbing trend of businesses in the 416 area code relocating to Vaughan and Markham. They were going because there was more space to be had in the suburbs, because commercial taxes were lower, and because (I believe) the Petersen government had just put in a commercial concentration tax that substantially increased the cost of downtown parking, with no similar increase in suburban parking. The result was that Toronto felt the early 1990s economic recession more keenly than the rest of the province. That’s something we have to be wary of.

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  16. Copenhagen is building new mass transit, and has an interested method to keep operating costs lower…no drivers!

    http://www.railway-technology.com/projects/copenhagen/

    It looks pretty amazing. TTC should investigate driverless operation for Transit City.

    Steve: This proposal includes having attendants on trains, and so the cost of on board staff is not completely eliminated. More to the point, the cost of the drivers on the subway (which is what this technology is, at heart) is nowhere near the majority of the operating cost. Station, signalling and infrastructure maintenance eats up a lot. The whole purpose of an LRT implementation in Transit City is to simplify the infrastructure thereby greatly reducing construction costs (and carrying costs for the capital debt) as well as ongoing maintenance costs for stations and tunnels.

    Many of the Transit City lines will not carry demands requiring a completely separate infrastructure for years, if ever, and those that do still benefit from being designed to run on the surface as much as possible (e.g. Eglinton).

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  17. In response to the following reply of Steve:

    “First off, the “cost cutting opportunities” will not solve a $500-million deficit, and some of the ones so often advanced by “your ilk” will trigger widespread labour disruptions we can well do without”

    So it’s perfectly acceptable to not cut costs because you’re afraid of labour disruptions ?

    Well, sorry , I can do without a gutless mayor, and a hugely inefficient city structure, but it seems I’m stuck with those for now.

    I know I’m in the minority on this site, but why do the much needed (but politically incorrect) job cuts never get mentioned ?

    I challenge anyone to go look at the ATU113 collective agreement, as anyone who works in the private sector will be astonished at the the unbelievable amount of perks and ridiculous things in this contract..these people would never make it in a non public sector job…

    Steve: I threw the “your ilk” epithet back in that quotation because I am tired of people treating anyone even slightly left of Mike Harris as a raving socialist rather than addressing the policy and political issues. It was a paraphrase from the original comment where it was directed at the Mayor and his supporters.

    With respect to labour disruptions, they have a cost. There is the short term (or maybe not so short) impact of any walkout. If you are too doctrinaire in union-bashing, no legislation will force workers back on the job. Longer term, there is a cost in the poisoned environment between the public (who no longer can count on their transit system), the workforce (who resent management) and politicians (who would rather score talking points than dealing with real issues).

    Councillors Hall and Milczyn have proposed a wage rollback so that everyone would lose money off of their current pay. This is completely different from job cuts (what you propose) that only affect the people who are laid off. In fact, the TTC has already said that it will try to avoid layoffs by absorbing surplus staff through attrition, but if budget cuts are quite severe, then layoffs will occur.

    One other point you may have missed is that part of the reason for the TTC’s increasing workforce over the past decade has been changes in provincial labour laws that restrict the length of day and hours of work. That change triggered a requirement for more operators that had nothing to do with the collective agreement, and it actually delayed some of the early Ridership Growth Strategy improvements because the TTC was playing catch-up on operator hiring.

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  18. Just to clarify, and I’ve said as much on here, I’ve thought Mel Lastman to be as big, if not a bigger idiot as Mayor then David Miller. To say I think likewise of Messrs. Harris and McGuinty is not untrue by any stretch.

    Toronto has had an absolutely horrible decade, of which Mr. Miller is the first who has had to deal with this head on. The issue that set me off, which it should every thinking, rational Torontonian, was Mr. Perks’ assertion that if we don’t implement these taxes, then welcome to bare bones Toronto. None of us want that, but any suggestion that this City Council has done all it can to ease the pain of an inevitable large tax increase is ridiculous.

    I agree the Sheppard subway is ridiculous. I agree that McGuinty is screwing us, for the sole purpose to pander to 905. I agree we need the vehicle registration tax. What I don’t understand is City Council justifying giving itself a raise. What I don’t understand is why this city isn’t privatising whatever it can. What I don’t understand is how this city can expect to threaten to take away 21 routes, implement a fare hike, and threaten to take away the Sheppard line four days after losing a vote, and not look like a bunch of blubbering idiots.

    In short, Steve et al., if you thought I meant needing a real Mayor meant bringing back Mel, you are sadly mistaken.

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