Toronto faces nearly $900M hole in its 2021 budget due to COVID-19
The exterior of City Hall in downtown Toronto is seen. THE CANADIAN PRESS/Chris Young
Published Thursday, January 14, 2021 11:12AM EST
Last Updated Thursday, January 14, 2021 3:55PM EST
Toronto’s proposed budget for 2021 relies on nearly $900 million in assumed funding from other levels of government as the city’s finances continue to be ravaged by the COVID-19 pandemic.
Staff say that they embarked upon this year’s budget process facing a staggering $2.2 billion shortfall but were able to reduce that number after finding $573 million in efficiencies, including tens of millions of dollars from freezing the salaries of non-unionized employees.
They say that the remaining $1.6 billion in financial pressures related to the pandemic can be offset through $740 million in Safe Restart funding that has already been secured and another $856 million in assumed funding that the city hopes to receive from other levels of government in 2021.
The city is also assuming that the federal government will come to the table with $61 million in funding to help cover the cost of providing shelter for refugees and that the province will provide it with an additional $16 million in funding for supportive housing.
In total, the shortfall equates to nearly seven per cent of the $13.95 billion operating budget released publicly for the first time on Thursday morning.
Staff say that if the federal and provincial governments don’t come to the table to help fill the hole, the “backstop” would be a combination of cancelling or deferring capital projects and borrowing from reserve funds.
The city is required by law to balance its budget and cannot borrow money to finance its operating budget.
“Very clearly our strategy is to balance the budget by asking for further financial assistance,” City Manager Chris Murray said during a budget committee meeting. “The alternative to this is to look very directly at our reserves and our capital program and take that kind of money from those areas. That also doesn’t rule out the possibility of higher taxation and other measures that might be needed if we are not able to get the provincial and federal governments to support us.”
The city faced $1.8 billion in operating pressures in 2020 due to the COVID-19 pandemic but was able to fully cover that loss through $534 million in savings that it found on its own and funding from a $19 billion federal fund to help provinces and municipalities restart their economies.
Staff say that in 2021 the TTC alone will face an additional $796 million in financial pressures due to the pandemic. The city will also have to fork out an addition $281 million in order to help maintain phsyical distancing in its shelter system.
“I don't have to stress with what has happened over the last year that this will be probably our toughest budget season we have seen or many of us have seen in recent memory,” Budget Chief Gary Crawford warned at the outset of Thursday’s meeting. “A lot of work has been done to make sure we are holding the line on tax increases while at the same time preserving services that our residents rely on.”
Inflation-based tax hike
The proposed budget for 2021 includes $56 million in new investments, including money to pay for the continuation of the city’s ActiveTO and CafeTO programs and expand the eligibility for the TTC fare pass program.
The budget also includes an inflation-based 0.7 per cent residential tax increase, which would be the smallest tax hike passed during Mayor John Tory’s tenure.
It should, however, be noted that the increase goes up to 2.2 per cent when you tack on a 1.5 per cent hike to the city building levy that was approved back in 2019.
Staff say that as a result the owner of an average priced home valued at $698,000 will pay an additional $69 in 2021. The average property tax bill would total $3,201.
In a statement released on Thursday morning, Mayor John Tory said that the budget is a “responsible” one given the circumstances that “protects all city services and invests more in key frontline services responding to the COVID-19 pandemic including Toronto Public Health, shelters and supportive housing, and seniors and long-term care.”
He also defended the decision to hold the line on taxes, noting that residents "cannot afford significant tax increases to cover our shortfall” right now.
“My work to secure a Safe Restart 2.0 agreement is underway and I am confident that we will be successful in bringing all governments to the table to renew and extend this partnership for Toronto and all cities across Canada,” he said. “This is the best way to make sure municipalities can continue to respond to this unprecedented pandemic and continue to make needed investments in major capital projects – which create jobs and help renew vital infrastructure that will be crucial to any successful economic recovery.”
Staff say that the property tax hike will raise an additional $23 million and another $41 million will be added to the city’s coffers through property tax assessment growth.
Meanwhile, the budget warns of financial challenges that are likely to continue into 2022 due to COVID-19, even with the expected widespread vaccination of Torontonians.
Staff say that they are expecting an opening shortfall of between $1.1 and $1.8 billion in the city’s 2022 budget, including a minimum $387 million operating pressure faced by the TTC that could go as high as $796 million.
“We are experiencing a challenge right now which will not just end abruptly,” Murray said during Thursday’s presentation. “It will continue to present challenges for us. But I you are going to bet on a city in this country and in the world I would be betting on Toronto.”
The city has relied on assumed funding from others level of government to balance its budget before, most recently in 2020 and 2019 when it passed its budget despite outstanding requests to the federal government for $77 million and $45 million in funding to help cover the cost of resettling refugees.
In both cases, the money was eventually conveyed.
Public consultations on the budget will take place on January 25 and 26. It will then go to city council as a whole for final approval during a meeting scheduled to begin on Feb. 18.