The Big Freeze

August 20, 2012

Good news, Toronto!

Looks like the city’s not going to face a what-the-hell-let’s-just-go-for-a 10% cut across the board in fiscal year 2013. Nope. Things are looking up. We’re just going to have to deal with a 0% budget freeze. So already put upon departments, services and programs will merely grind to a further halt through attrition and more sprung leaks rather than amputations and major blood loss.

Along with a spending freeze, the Globe and Mail reports that city manager Joe Pennachetti has also called for ‘a ban on new service initiatives’. So, it’s all stand pat and hope for the best. We just can’t be too sure how big our surplus is going to be next year.

It’s difficult to keep your head above fiscal choppy waters when you insist on swimming with only one arm. Mayor Ford’s proposed 1.75% property tax increase barely covers the rate of inflation, never mind any of the wage settlements various city workers are scheduled to receive. Instead of exploring other sources to generate more revenue, it’s all about further reducing services until…

Well, that’s the $123 billion infrastructure deficit question.

You see, fiscal conservatives on council will tell you that we need to reduce the $400+ million spent annually on paying down our debt principle and interest. When we get rid of that, well then, the sky’s the limit. We can start dishing out for all those nice-to-haves everybody loves so much but doesn’t really want to pay for.

Like a properly operating public transit system. Serviceable roads. Bridges that don’t fall down in chunks. Libraries with computers and books other than trade paperbacks.

Until such time when this city is debt free, we’ll all have to just get by. Make do with less. Show the kind of discipline the likes of Councillor Denzil Minnan-Wong is so proud of when he votes to cut everything Mayor Ford says needs to be cut.

Discipline and courage.

“I am doing this for everybody’s future,” fiscal warrior and city budget chief, Mike Del Grande proclaimed. “Unfortunately, they want me to be the bad guy.”

No, that’s not true, councillor. What we really want you to be is a better budget chief. One who realizes that miserly penny-pinching and refusing to have a sensible discussion about the true costs of maintaining a healthy city now doesn’t in the least leave a prosperous future for the coming generations. It just leaves a mess that they have to clean up and you don’t have to pay for.

In reality, it’s kind of the exact opposite of courage and discipline.

I don’t know how much latitude senior bureaucrats like Mr. Pennachetti have with the elected official they deal with. Certainly the fate of Gary Webster must serve as a cautionary tale about dealing with the Ford administration. But this budget freeze/no new service initiatives mode he’s adopted for the upcoming year is at odds with the city manager I saw speak at the Institute on Municipal Finance and Governance this spring about Toronto’s fiscal health. He boasted about our double-A credit rating. He suggested there was probably no more than $100 million still to find through efficiencies. Further cutting wasn’t going to solve any looming crisis that may be waiting up ahead for us.

And make no mistake, Mr. Pennachetti is now proposing further cuts to departments and agencies that he has already taken a knife to in the past couple years. Zero increases mean less money. Even our current budget chief can do the simple math from that.

As long as the city manager insists on making these kinds of austerity demands, he continues to play accomplice to those who aren’t really all that interested in being fiscally responsible. He offers cover to their claims of being brave and disciplined. He’s insisting on further hardship for those already hard hit by previous cutbacks for the sake of those operating under the faulty premise that they’re hard done by.

Our city manager’s already done much dirty work for Mayor Ford. It’s time he starts looking out for the best interests of those who’ve paid a hefty price for their collaboration.

– impatiently submitted by Cityslikr

5 Comments | Budget, City Building, City Council, Municipal Politics, Newspapers, Press coverage, The Globe and Mail | Tagged: , , , , , , , , , , | Permalink
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Budget Chief No

May 29, 2012

As we head into today’s abbreviated budget committee meeting with news of a $90 million surplus for the first 3 months of 2012, Budget Chief Mike Del Grande announces what any good, prudent, sane fiscal manager would. Hey, everybody! It’s party time! Let’s roll us back some sources of revenue. Woo-hoo!!

Or, as Elizabeth Church in the Globe and Mail phrases it: “He [budget chief] plans to push for a reduction of the land transfer tax in 5-per-cent increments beginning next year.”

Huh.

What?

Could you elaborate a little further, Mr. Budget Chief?

“He [budget chief] plans to push for a reduction of the land transfer tax in 5-per-cent increments beginning next year, arguing that the city cannot continue to rely on a revenue source that is tied to the fortunes of the real estate market…Mr. Del Grande says the city’s continued reliance on the tax will leave a ‘massive shortfall’ in its budget when the real estate market cools. ‘The land transfer tax is giving us a false sense of security’.”

O… K… Let me see if I follow the budget chief – who is a chartered accountant, don’t you know – follow his logic here. Because Toronto is experiencing a particularly hot real estate market, despite all the fear-mongering that the land transfer tax would kill people’s ability to buy a house, and is thus generating higher than expected revenues for city coffers, we need to start eliminating the source of revenue in order to wean ourselves off the LTT bounty in preparation for the time when we’re making less when the market cools? Sort of a voluntary reduction before the inevitable enforced one sets in?

Hmmm…

We really need to question Budget Chief Del Grande’s motivations. Or his competency.

Regardless of your position in life, whether a public sector budget chief, a private sector financial controller, an individual homeowner, in gazing into the future and spying a possible economic downturn on the horizon, who reacts with the suggestion to cut revenues? Batten down the hatches everyone! We need to start making less money now in order to be used to making less money later!

It makes no sense.

Don’t believe me?

Ask the city manager, Joe Pennachetti, himself a chartered accountant although, evidently, he secured his credentials at an entirely different school (of thought). In a talk delivered a couple weeks ago at the Munk School’s Institute on Municipal Finance and Governance and one we wrote about here and here, and Matt Elliott wrote here (yes, I do think it’s an important enough point to flog over and over until everyone knows it by rote), Mr. Pennachetti suggested that, while there were still efficiencies to be found, it was revenue generation that we needed to be talking about going forward. City building, whether infrastructure, transit, couldn’t be done through cuts or further efficiencies. Toronto, like every other city in this province, country, continent, needs new sources of revenue.

Of course, city building is not part of our current budget chief’s vernacular. I don’t think it too off the mark to suggest he’s more of the Grover Norquist/starve the beast type of politician. Taxation is bad. Therefore government spending is bad. Widows and orphans be damned.

Only hardcore right wing ideologues would suggest that, in this age of austerity, government look to reduce revenues.

Even if the budget chief demanded that any surplus be used to pay down capital debt, he’d gain some traction as trying to have a reasonable argument although not much of one. The city’s debt level is just fine, thank you very much. Credit rating agency Moody’s thinks so. The city manager thinks so (with one caveat: our social housing repair backlog). Any attempt to compare our situation to that of Greece automatically disqualifies you as a serious participant in this discussion.

Instead, Budget Chief Del Grande only raises the spectre of our capital investment debt to argue against both government revenue and spending. This year it’s: “Councillors who want to spend the surplus are forgetting the huge capital costs facing the city,” he [Del Grande] said, “including the multimillion-dollar tab for refurbishing the crumbling Gardiner Expressway.” Last year we had to cut services and programs in order to pay down the debt.

The budget chief needs to start coming clean with us and simply admit that he doesn’t think government should be in the business of governing. That way, we could cease pretending to have a rational debate on this point with him and get on with what we really should be discussing. Mike Del Grande’s unfitness to be overseeing our city’s finances.

– fit of piquely submitted by Cityslikr

13 Comments | Budget, City Building, City Council, Municipal Politics, Newspapers, Press coverage, The Globe and Mail | Tagged: , , , , , , , , , , , , , , , | Permalink
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Crisis? What Crisis?

May 17, 2012

It was surprisingly calm, Joe Pennachetti’s talk yesterday afternoon at the Institute on Municipal Finance and Governance. Serene, even. Reflections on Toronto’s Fiscal Health and the Decade Ahead: A Discussion with the City Manager. Toronto’s Fiscal Health? I mean, isn’t that sort of an oxymoron?

Nope, according to our City Manager we’re doing just fine, thank you very much. Still got that Double A credit rating. Our debt, hardly runaway, will peak at about 10% of our assets in 2015, a financial situation most of us personally would consider top notch. “We have a very healthy financial city at this point of time,” Pennachetti stated.

It belied the hysteria and apocalyptic noise we were subject to during last year’s budget process. And the year before that. And during the 2010 municipal campaign.

Come to think of it, Pennachetti’s presentation quietly pulled the carpet out from the raison d’être of the Rob Ford mayoralty. We have a spending problem, folks, not a revenue problem. Time to tighten our belts and Stop the Gravy Train.

(Are you as bored reading that as I am writing it?)

Now to be sure, the city manager was not averse to finding efficiencies, trimming whatever fat there was to be trimmed. The KPMG Core Services Review was his idea. Long overdue in fact. He thought it should’ve been carried out over two years not one (another sign there was never any need to hit the panic button the mayor and his allies so wanted push). Pennachetti was also onboard for the aggressive negotiating tactic we saw with the city’s workers earlier this year. Like the Deputy Mayor, he felt the city needed more control over scheduling and back end things like benefits.

Here’s the thing. If I heard the numbers right, the Core Services Review netted the city a savings of about $24 million. The labour savings? About $20 million. That’s on an operating budget north of $9 billion. Or about .5%.

I know everyone has different lines they draw. Count the pennies and the pounds take care of themselves. What’s 44 million when you’re talking billions? But a million here and a million there eventually adds up, etc., etc.

The point I’m trying to make here is those are numbers that don’t correspond to the tumult we witnessed arriving at them. No one’s suggesting finding $44 million in savings wasn’t valuable but was it worth the cost, not just in terms of money but the psychological and political warfare that preceded it? Forty-four million is simply a far cry from last October when the mayor in a speech to the Empire Club warned, Toronto’s financial foundation is crumbling. If we don’t fix the foundation now, our dreams for the future will collapse.

Mr. Pennachetti did want the assembled crowd to know that the $774 million number being thrown around at the beginning of last year’s budget debate as a spectre of this crumbling financial foundation was real. Yeah Joe, nobody ever disputed the veracity of that amount as an opening pressure. There was just a whole lot of disingenuousness in using it as the amount that needed to be cut from the budget, the shortfall needing to be made up. The number was nothing more than a scare tactic used by those wanting to cut more, to cut deeper.

Admittedly, it’s not all chocolate and roses. There are a couple ‘smoking guns’ as Pennachetti referred to them that the city needs to deal with to maintain the current fiscal balance. One is the ever increasing chunk of the budgetary pie taken by emergency services (TPS, EMS and fire department) and the TTC. The other is social housing, especially the eye-popping outlay of cash needed for the repair backlog at the TCHC, roughly three-quarters of a billion dollars.

But as the city manager pointed out, these are things we won’t be able to efficientize™ (Lucas Costello) or rationalize under control. In fact, in one moment of surprising frankness, Pennachetti expressed doubt there was more than $100 million in service efficiencies left to be found in the budget. There would be no cutting our way to a brighter, more prosperous future.

Which is where the 2013 budget debate (coming soon to the airwaves near you) is going to get really interesting. With precious left to cut, the city will be facing the need to approach balancing the budget in two ways Mayor Ford abhors. Going cap in hand to the senior levels or, as some might refer to it, hitting up a couple of fucking deadbeats for the money they owe us. Or we’re going to have to look at generating more revenue, ie raising taxes.

Consider these numbers.

If the province finally re-uploaded the cost of social housing and their half of the TTC operating budget — two things they used to be able to find the money to do – that would free up $550 million for the city which is nearly $100 million more than the estimated opening pressure for 2013. We would then start the debate in positive rather than negative territory. Any talk of cutting services, shuttering programs, finding efficiencies, layoffs would be moot.

That’s not going to happen, of course. Somehow we have found ourselves, alone in the developed world, in a position where senior levels of government contribute precious little to the well-being of their municipalities. They seem to believe that we’re not their problem and serve as little more than piggy banks, sending off money and getting nothing near the value for it.

That leaves us with no alternative but to look at different ways to generate revenue. Yes, raising taxes. This runs contrary to the mayor’s view that we don’t have a revenue problem but, let’s face it, that was an empty rhetorical tic from the get-go. Nothing more than wishful thinking on the part of a sizeable majority of Torontonians who let themselves be convinced that we were overburdened with taxation and under-serviced.

(Interesting observation from the city manager yesterday who said that if we took a picture of an average street corner, we could see at least 20 services the city provides us. Check out slide 4 of yesterday’s presentation to see just all the things you receive in return for the local taxes you pay.)

While the last two budget cycles have been all about austerity and cutting, there is very little left to excise — outside of perhaps the police services which is another topic the mayor will likely be unwilling to broach — without causing serious, irreparable pain that starts diminishing the quality of life in Toronto. It’s now time to start talking about building and growing and figuring out exactly how to pay for it. That’ll include some unpleasant words Mayor Ford doesn’t like to hear but it’s the direction he’s unwittingly taken us in.

– supertramply submitted by Cityslikr

3 Comments | Budget, City Building, City Council, Elections 2010, Municipal Politics, Province of Toronto, Provincial Politics, Race 4 Mayor, TTC | Tagged: , , , , , , , , , , , , , , | Permalink
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