Toronto reduces services now to lower next year’s operating budget shortfall: Without new revenues 2008 will require further service reductions and/or significant tax increases

Toronto, August 10, 2007 - The City of Toronto today announced cost-containment measures that will require immediate service-level adjustments and reduce the 2008 operating budget shortfall by at least $83 million.

As part of the cost-containment process requested by Mayor David Miller last month, City Manager Shirley Hoy and her management team have identified more than $34 million in operating budget reductions that will be put in place for the remainder of 2007. These measures include the Monday closure of all City Community Centres from mid-September until the end of the year, reduced library hours, delayed opening of outdoor artificial ice rinks, reduced pickup of yard waste and leaves, cancellation of planned door-to-door waste pickup at townhouses, reductions in snow removal services and litter pickup, reduced maintenance of City parks and trees, reductions in bylaw enforcement and building inspections, and early closure of all municipal golf courses.

City Manager Shirley Hoy recommends that these immediate measures be continued next year to reduce the forecasted 2008 operating budget shortfall of $575 million by at least $83 million.

“The measures taken today are necessary to address the impact of not having the revenues required to provide basic municipal services,” said City Manager Shirley Hoy. “The solution to the City’s financial challenges must include three strategies: the Province of Ontario should pay the true cost of their programs, the Province should resume permanent operating budget support for the TTC and the City must obtain new and diverse sources of revenues.”

The measures announced today include both the cost-containment initiatives announced last month (such as a hiring freeze and the elimination of discretionary spending) and service level adjustments (see backgrounder) to be implemented immediately. All of these measures are in addition to any other under-spending of budgets which may take place within the City.

“The cost-containment measures announced today are most regrettable, but unavoidable,” said Mayor David Miller. “The choice is now clear. Toronto Council can support investment to meet the needs of a growing city or it can oversee the continued erosion of our quality of life.”

The measures announced today have significant impact on municipal services and will reduce the City's current ability to continue with a number of city-building initiatives.

As cost containment measures and service level adjustments were reviewed by each division, the following principles were applied:

  1. Service standards and/or service levels were to be adjusted to achieve targets.
  2. Service level adjustments were not to affect the most vulnerable.
  3. New or enhanced services approved by Council have been deferred
  4. Full elimination of major programs or services would not be recommended since they require Council approval.
  5. Capital projects will proceed only if they do not affect operating budget reduction targets.

The City identified 376 positions that will remain vacant as part of the hiring freeze. Any staffing that does proceed will require the approval of either the Deputy City Manager or City Manager and will take place only in cases where staffing of the position is required to meet legislative or health and safety requirements or is critical to service delivery.

To place the City on a firm financial footing, the Province of Ontario must pay for the programs it requires the City to deliver and provide permanent financial support for TTC operations. In addition, the City must have new sources of revenue that grow with the economy. Unlike the provincial and federal governments which have access to income and sales taxes, the Government of Toronto must depend almost entirely on property taxes that do not grow with the economy. Without new sources of revenue, it will be necessary for Council to consider further service reductions, the elimination of programs and services and/or significant property tax increases in 2008.

The Toronto Transit Commission (TTC) and the Toronto Police Service (TPS) have provided a preliminary estimate of 2007 cost containment measures equalling $9 million, $6 million from TTC and $3 million from Police. Work is underway by both services to review further reduction options for the remainder of 2007 and 2008. The Transit Commission and Police Services Board will consider these options in the fall.

At a briefing session today, the City Manager highlighted that the City continues to have only 25% of its budget available to find the majority of budget reductions, since the remainder of the City's budget is used to pay for provincially-mandated programs, transit and emergency services.

“Toronto is the only city in North America with a population of over two million people that continues to rely solely on property taxes to deliver services,” said Councillor Shelley Carroll, chair of the City Budget Committee. “A city as large and diverse as Toronto, with unique transit and policing needs, requires sources of revenue other than an unfairly structured property tax system to pay the cost of the services the City needs to succeed.”

One-third of the City's total operating budget continues to pay the cost of provincially-mandated programs where the standards and level of service, and therefore the costs, are dictated by the Province of Ontario. Ontario is the only province in Canada where social programs are paid for through property taxes. In 2007 alone, more than $729 million was diverted from property taxes to the pay for these provincially mandated programs. Since amalgamation, the cost to Toronto taxpayers has been more than $4 billion. Another third of the budget is dedicated to paying the cost of the three emergency services and transit. As a result, the budget reductions announced today come primarily from the portion of the City's operating budget dedicated to core municipal services.