Sometimes A Surplus Is Just A Surplus

September 19, 2012

Gather round, all ye loyal readers, and prepare your ears to hear that not heard in these parts muchly. Tis an admission of error on our part. We here at All Fired Up in the Big Smoke were wrong. Wrong, wrong, wrong.

For some time now, pretty near since our inception over two and a half years ago, we’ve suggested that the mayor and his fiscal conservative ilk have budgetary issues, let’s call them. That their numbers rarely add up. In fact, they are an assault upon reason itself.

But the problem, dear readers, may lay with our abacus not theirs. Our eyes blinded by the ideology of government spendthriftry and the love of dwelling in a gravy slathered city. We are wanton with the money of others when restraint is something near godliness. Affix the letters D P E in brightly stitched pink to our breasts and take the keys to the safe from our sweaty, grubby hands and greedy, bleeding hearts.

For you see, yesterday a word was spoken in the halls of City Hall that has seldom been uttered anywhere near that vicinity if uttered at all. A word so delicious to those hungering for the twin notions of fiscal sanity and respect for the taxpayers that all they could do was but to gobble it up, swallow it whole. That word, curious readers?

Surplus.

Ohhh, sweet, sweet surplus. How we have longed to embrace you all these dark, dank days filled with deficits and debt. Let us never part again, shall we? Not? That is to say, tongue tied as I am in your magnificent presence, may we be together forever and never leave each other’s sight. Ever.

How long has it been, dearest one, since your name upon our lips last passed? Last year? 2010? 2009? 2008. 2007. 2006. 2005. 2004… Every fucking year, year after fucking year, Toronto has a surplus. It pretty much has to since the province mandates against municipalities running any sort of deficit on their annual operational side. It would be news only if we didn’t have a surplus not when we do. Because we always do.

No, any surplus news should involve how we went about achieving said surplus. Increases in revenues? Decrease in costs? A healthy mix of both? An unhealthy mix?

For a couple reasons that angle’s not really in the best interest of our current administration. One, while very revenue generating shy (or tax hating in the common parlance), Team Ford would have to accentuate their approach to surplus delivery has not made them wildly popular. Call it ‘finding efficiencies’ or ‘service adjustments’ all you want, it still strikes some especially those directly affected as the exact same as service and program cuts, user fees replacing tax increases. Things Mayor Ford campaigned on never implementing.

More importantly however, any talk of operating budget surpluses being par for the course in Toronto lays waste to the claim that brought the mayor and other hawks to power. It was all about out of control tax-and-spending, costly union appeasing, money burning on sweetheart deals, complete and utter breakdown of order on taxpayer respecting. “Toronto’s financial foundation is crumbling,” Mayor Ford pronounced, not long after using hundreds of millions of surplus dollars from the Silly Socialist David Miller regime to stuff holes in his first budget.

Hold on there, bucko. A David Miller surplus? Hardly. A one-time savings is all. An annual savings that happen every year. Don’t count on that regularly.

Besides much of that repeated one-time savings comes from the loathed Land Transfer Tax and, based as it is on real estate, we know how volatile that is. So undependable we need to get rid of it altogether to free ourselves from such instability. Once we do that, then we can start talking about a strong, stable surplus.

Maybe.

Unless of course widows and orphans come knocking at our door, thinking we’re suddenly flush with cash to spend on their little ‘nice to haves’. Budget Chief Mike Del Grande will know just what to say to nip that in the bud. “I don’t call it a surplus, I call it a positive variance.” Words matter. So get the hell off my lawn.

To ensure all hatches are battened down on the HMS Tightfisted, council’s surplus deniers also delight in pointing out the capital side of things. Plenty of unfunded liabilities there, folks. Any surplus—I mean, ‘positive variance’–must be rolled over onto capital expenses. Otherwise… otherwise… Even former Ford chief of staff and campaign honcho, tough as nails Nick Kouvalis wets his pants at mention of our capital budget outlook. “What’s the Capital Budget deficit,” he tweeted. “Why do reporters not talk about the real issues?”

OK, Nick. Let’s talk about real issues. Let’s talk about our capital budget.

Yeah, it’s big. That tends to happen when big cities need big capital projects like public transit and infrastructure. Just comes with the territory.

It may appear insurmountable to those whose politics are defined exclusively by lowering taxes and cutting spending. So I get why you blanch at those numbers. How the hell can we afford everything that makes a city liveable and prosperous?

Well, we certainly can’t cut our way there. The city manager, Joe Pennachetti said as much earlier this year, suggesting there’s not more than $100 million left in efficiencies to find in the budget. How many subways stops will that buy us? Contracting out some of the city’s waste collection might, might, save us $11 million a year. Contracting out cleaning services looks to save another $800 000. Won’t make a dent on capital costs.

Senior levels of government have largely walked away from their obligations to cities and caught up as they are in the downward spiral of austering us from rocky economic times shouldn’t be expected back any time soon. That well is as good as dry for the time being.

So we’re going to have to figure this out on our own. Operating budget surpluses or one-time savings or positive variances, whatever you want to call them, is the easy part. Everyone does it. Everyone has to. That’s not newsworthy.

What I want to know is how you’re going to spend the money necessary to keep Toronto from collapsing under the weight of small-minded frugality masking as rock solid fiscal stewardship.

– unimpressedly submitted by Cityslikr

1 Comment | Budget, City Building, City Council, Municipal Politics, Newspapers, Press coverage, The Toronto Sun | Tagged: , , , , , , , , , , , , , , | Permalink
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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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Swimming With Sharks

July 10, 2012

Is there a term or phrase that refers to the period of time after somebody jumps the shark? That vast pool of ridiculousness when jumping the shark has become the general rule rather than an exception. Suspension of disbelief is simply too, too difficult to maintain; the only proper response: Oh, Come On!

I can’t support taxing the taxpayer.

Seriously.

That’s what Mayor Ford said yesterday in response to the One City transit proposal.

I can’t support taxing the taxpayer.

Oh, Come On!

It’s like we’re witnessing some increasingly deeper, darker performance art piece. Dada Mayor Dada. What he says next will confound and amaze you! I’m half expecting Andy Kaufman to burst from a fat suit and begin singing the Mighty Mouse theme song.

Here I come to save the day/So taxpayers will never pay!

But just in case you think it’s all some sort of stale joke, a sitcom relying solely on stunt casting at this point, the man purporting to be mayor has fired off a written request to City Manager, Joe Pennachetti, angling for a property tax freeze for both 2014 and 2015. Combined with a 2011 property tax freeze and followed by a modest 2.5% increase in 2012 and an even lower proposed one of 1.75% in 2013, that totals a 4.25% increase in property taxes during Mayor Ford’s term, in all likelihood below the rate of inflation during that period. That math basically works out to less money to pay the increased costs of running this city.

Can you say, No Service Cuts, Guaranteed?

The mayor’s road to re-election has him on a collision course with reality. Something’s got to give and pretence ultimately crumbles in the face of the facts on the ground. At least, in the long run it does. As the administration struggles and snorts to the halfway mark of its term, the vacuity of its political philosophy is on full display. It’s irresponsible. It’s petulant. It’s pandering not governing. To suggest all taxes are evil, as the mayor’s brother and councillor-consigliere did earlier this year is to admit you don’t actually know how government works and that you’re wholly unqualified to be in the position you’re in.

By now, none of this should come as a surprise. God knows, we’ve talked endlessly about it here. Still, it’s always surprising to listen to what comes out of the mouths of hardcore right wing ideologues and their steadfast belief that what they’re saying actually makes any sense. More surprising is that there remains any core of support for this monotony of mindless summer reruns. (Albeit, an ever shrinking core of support if the liberal media is to be believed.)

A city does not operate on wishful thinking and a tip jar. Why do people really think they should pay less and get more? I understand residents were angry at something back in 2010 and thought they found a vehicle in Rob Ford that would right the injustices that caused them such misery. It would all be so simple. Find efficiencies here. Restructure there. You wouldn’t feel a thing, folks.

Ooops.

The truth, as it usually does, turned out to be a little more complicated. Toronto faces difficult choices and can’t afford to rest on whatever laurels it once had. A refusal to acknowledge that and pretend the future will happen without us having to contribute anything to it is… how did Councillor David Shiner refer to the original design of the Fort York bridge?… a little fancy, a flight of fancy.

Electing Rob Ford mayor may’ve seemed like a good idea at the time. The comedic sidekick character given a starring role in an exciting new spin off. Not to worry. His one note schtick wouldn’t become quickly tiresome. He’d grow into the role. Really. It would be a huge hit.

Guess the shark jumping happened right at the get-go, back in October 2010.

– fonziely submitted by Cityslikr

1 Comment | Budget, City Building, City Council, Elections 2010, Municipal Politics, Newspapers, Press coverage, Race 4 Mayor, The Toronto Sun, Toronto Star | 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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Fiscal Discipline

May 22, 2012

Fiscal discipline.

The term screams of denial, restriction, restraint, asceticism even.

So it plays easily into the language of those ideologically bent on cutting our way back to prosperity. Anti-government types who see any public sector spending as inherently wasteful. A discipline of living within our means by way of making due with less.

But what if we interpret fiscal discipline through another lens?

Not one that suggests some sort of punitive action but one that provides a ‘training expected to produce a specific character or pattern of behavior, especially training that produces moral or mental improvement.’ A discipline that teaches the value of our tax dollars spent rather than the simple cost to each of us individually? To train a larger community into seeing that paying less inexorably translates into doing with less. You get what you pay for, folks, and demanding city service levels be maintained (or even improved in the case of transit) while insisting on paying less is the exact opposite definition of ‘discipline’.

Self-indulgence, perhaps?

With Moody’s maintenance of Toronto’s Aa1 credit rating last week, Mayor Ford and his allies hailed their curtailing of expenditures as the kind of fiscal discipline the city needs, conveniently ignoring the fact it’s the same level rating we’ve had for 10 years now. Wait. You mean during the 7 years chief tax-and-spender David Miller was mayor we had an Aa1 credit rating? Doesn’t that give lie to the entire underpinning of Mayor Ford’s reality? That the city was an out-of-control financial train wreck waiting to happen? We’ve borne the brunt of unnecessary cuts owing to a hysteria generated by a misguided but successful municipal election campaign in 2010.

On their radio show yesterday, the mayor and his councillor-brother hosted the city’s budget chief, our own resident Droopy Dog, Mike Del Grande who bemoaned the fact our credit rating hadn’t been upgraded a step to AAA, the highest level Moody hands out. I mean, what’s a guy gotta do to get a AAA around here? How many widows and orphans do we have to ignore before we’re awarded best in class?

“We need firm discipline,” the budget chief said at an Executive Committee meeting last year. “I get a little concerned when we start making arguments about the widows and orphans. Negligibles add up. We cannot afford to do everything that everybody wants us to do…the 2011 budget is cupcakes. We tend to spoil everybody. We need to learn to say ‘no.’”

Yet, we read this from the Moody’s report: “Toronto’s rating relative to other Canadian municipalities reflects a low debt burden and high levels of liquidity, balanced by operating budget challenges typically not experienced elsewhere.”

Huh. Low debt burden and high levels of liquidity. So why is the solution to our operating budget challenges from Team Ford only consisting of saying ‘no’ to government spending and paying down an already low debt burden? Oh, right. Fiscal discipline as a form of abnegation. No cupcakes for you, widows and orphans!

If we want an improved credit rating, Moody’s offers a solution. “Continued fiscal discipline, including a permanent solution to the existing operating budget pressures, [bolding ours] along with a continued strengthening in financial position, could exert upward pressure on Toronto’s rating.”

That would be fiscal discipline with a caveat from Moody’s. To ‘exert upward pressure on Toronto’s rating’ (arguably a necessity at this particular time) the city needs to find ‘a permanent solution to the existing operating budget pressures – in itself a challenge ‘typically not experienced elsewhere’. According to city manager Joe Pennachetti in a talk at the Institute on Municipal Finance and Governance last week, there’s maybe $100 million more in efficiencies to be found which is roughly 1% of a $9 billion operating budget. In other words, we’ve about maxed out in the amount of cutting as a source of fiscal discipline we can do without unnecessarily harming our ability to deliver adequate services.

Now we must talk about generating revenue. It’s hard to believe that any credit rating agency would seriously consider an upgrade until we begin to show that type of fiscal discipline. A willingness to consider and implement new ways to pay for all the services and programs we say we want. Or, what the city manager referred to as city building.

As we ramp up to the 2013 budget debate, starting sometime next month, this should be the direction the conversation goes. The slash-and-burn disciplinarians have had their way, exploiting a faux crisis of their making, not only succeeding at hacking away at services and programs but eliminating vital sources of revenue the city needs to properly develop and grow healthily going forward. That is only one aspect of fiscal discipline and, as it turns out, the least effective.

“The [Moody’s] high investment-grade rating also reflects a large and diversified economy, which remains a source of credit strength, providing access to a broad tax base.”

How to fairly and efficiently tap that ‘broad tax base’ should be the starting point of next year’s budget discussion. It’s one we’ve long avoided having as it’s fraught with political implications and easy prey for those too undisciplined to make difficult decisions. Discipline doesn’t have to mean simply doing without. It can also represent learning how to contribute to a wider good.

– floggingly submitted by Cityslikr

1 Comment | Budget, City Building, City Council, Municipal Politics, Newspapers, Press coverage | Tagged: , , , , , , , , , , , , , , | Permalink
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