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Introduction
The new City of Toronto was created on January 1, 1998. The amalgamated city was the result of legislation passed by the Province of Ontario merging seven municipal governments into one. With a population of 2.5 million people, the unified Toronto is the largest city in Canada and the fifth largest in North America. The municipal government's gross 2000 operating budget of $6.3 billion is larger than the budgets of the majority of Canadian provinces.

The announcement by the provincial government in the fall of 1996 of its intent to amalgamate Toronto, followed by legislation passed in the spring of 1997, left very little time to prepare for formal amalgamation in January 1998. Nearly all key elements of the new Corporation have had to be built by the new city. This has presented extraordinary challenges for the organization over the past three years.

The Corporation has also had to respond to a number of other significant issues during this period. These included:

• taking on additional responsibilities and costs resulting from a realignment of provincial and municipal services (provincial downloading)
• responding to the introduction of a new property reassessment system
• undertaking immediate action on year 2000 technology issues
• addressing the budgetary impact of implementing a zero property tax increase for three consecutive years.

At the same time, Council began city building initiatives in many areas including environmental, social, public health, urban planning and economic development matters. It has taken leadership on complex, multi-year undertakings such as the proposed redevelopment of the Toronto waterfront.

Even as it was undergoing major internal change and addressing external challenges, Toronto's municipal government has continued to deliver regular services to the public in a wide range of areas. Surveys on citizen satisfaction with municipal services have continued to show high ratings during this three-year period.

In July 1999 the Office of the Chief Administrative Officer published Building the New City of Toronto, an 18-month status report on amalgamation. That report outlined progress to date on the complex merger of the seven municipal corporations. This report builds on the earlier one and presents a three-year perspective on Toronto's amalgamation.

Governance issues
Toronto has faced many governance challenges since amalgamation. The first 18 months included: deciding on a seat of government; defining and refining the council-committee structure; clarifying the role of Community Councils; and addressing issues of citizen participation.

Prior to amalgamation there were 106 Toronto municipal elected officials. This number was reduced nearly by half as a result of amalgamation. A major recent change has been the provincially-mandated further reduction in the size of Toronto Council from 58 in the first term to 45 in the second. That term began December 2000. This decision triggered related changes to: ward and Community Council boundaries; restructuring Standing Committees of Council; and revamping Council-related space within City Hall. It impacted on the Corporation's work agenda during 2000 since these issues had to be resolved prior to the second municipal election.

In 2000 Toronto Council requested enactment of a City Charter for Toronto by the provincial government. The purpose was to redefine the relationship between the city, the province and the federal government. This need has arisen as a result of municipal restructuring and the expanded scope of responsibilities from the realignment of provincial - municipal services.

As part of its city-building efforts, Toronto has launched an initiative on civic engagement. The city has adopted four key principles: collaborative decision-making; accessibility; continuous improvement in achieving citizen participation; and community capacity building.

Toronto's governance model is still evolving. While a local government in name, it can no longer easily govern itself as a small city or county. The challenge is to ensure the development of an effective governance framework that will best serve the citizens of Toronto.

Administrative restructuring
Departments spent a considerable amount of time in 1998 and 1999 developing management structures and recruiting staff. This was as a result of the Toronto Transition Team (TTT) having recruited less than a dozen senior officials prior to amalgamation, all towards the end of the TTT's term. The organizational structure of the new City of Toronto consists of six departments headed by six Commissioners reporting to the Chief Administrative Officer.

Concurrent with amalgamation restructuring, the City has also had to review organizational structures as a result of newly downloaded responsibilities from the province.

Refinements and adjustments to departmental organizational structures will continue to meet service and program requirements. A major review of the overall organizational design will occur during the second term of Toronto Council. This was directed by Council when it approved the original structure in 1998.

Human resources integration
The integration of staff and human resources systems, policies, procedures and practices of the seven former municipal governments has been one of the greatest challenges of the Toronto amalgamation. In 1997 the former municipalities employed a total of approximately 46,000 full time equivalent (FTE) staff, including those working for agencies, boards and commissions. This number included those working in amalgamating programs as well as those working in previously amalgamated services under the former Metro government.

There have been five key areas of human resources integration: organizational design and management recruitment; first collective agreements; job and wage harmonization; harmonization of human resources policies and programs; and systems consolidation.

The initial round of management restructuring and recruitment was completed within the first 18 months of amalgamation. The new City also had to consolidate 56 collective agreements inherited from the former municipalities. Major first agreements have now been signed with the two main unions representing inside and outside workers. Work is proceeding on developing a harmonized compensation plan for management and non-union staff. Work is also underway to harmonize over 2,700 unionized job classifications inherited from the former municipalities.

Harmonization of human resources policies is proceeding on a number of fronts. Work includes developing policies on: health and safety; pay and benefits; human rights and employment equity; staffing; absence from work; training and development; and the working environment. Human Resources priorities are also increasingly focused on designing programs to develop a strong municipal service and to create a unified corporate culture.

Consolidation of services & operations
Toronto inherited thousands of services and programs from the former seven municipalities. There were very few cases in which a non-amalgamated program or service was provided in exactly the same way by each government. The harmonization of services, programs and operations has presented a major challenge for the new Council and administration.

In 1999 Council addressed a series of major harmonization decisions, particularly those that had significant impact on the city's operating budget. These included: solid waste collection and recycling; winter maintenance activities; public health services; library services; recreation user fees; and boulevard and parking fees.

Significant progress has occurred in all departments in harmonizing services and rationalizing processes. However, given the scale and magnitude of the undertaking, there remain many areas that still need to be integrated. This will take time to complete.

Corporate amalgamation initiatives
Three amalgamation initiatives with significant corporate impact are: bylaw harmonization; consolidation of office space and consolidation of the city's operational yards. The new city inherited approximately 160,000 municipal bylaws from the former municipalities. Harmonization presents many challenges such as: standardizing definitions; reconciling differing legal interpretations of the Ontario Municipal Act; and linking the bylaws of the former area municipalities with those of the former Metropolitan government. While a considerable amount of work has been accomplished during the first three years, a significant amount still remains to be completed.

The consolidation of office space has been one of the most complex and challenging aspects of Toronto's amalgamation. It impacts on how services and programs will be delivered and where staff will be located. In 1999 Toronto Council approved a Master Accommodation Plan (MAP). This provides strategic directions for the consolidation of office space. A key aspect of MAP includes the adoption of a four-district model for the provision of municipal services. The model includes locating four district service centres within these districts.

Both the Works and Parks and Recreation Divisions base operations in a number of yards across the city. There is a wide range of yard types and locations, including a number of multi-functional shared facilities. By the end of 2000, the number of pre-amalgamation Works yards had decreased from 47 to 35 locations. Parks and Recreation also closed two yards. Further work is continuing on yards consolidation.

Information technology systems integration
Amalgamation has presented many challenges and opportunities for establishing state-of-the-art information and technology (IT) capacity for Toronto. Many IT initiatives have been completed or are underway. These include: the integration of communication systems including the linking of 430 networked computer locations; the integration of 21 different financial, human resources and payroll information systems into a single unified system; and the migration of many systems dealing with development approval, permitting, municipal standards and licensing processes to the Integrated Business Management System.

In 2000 Toronto Council approved capital budget funding of $20 million over a five-year period for six major IT projects. These will create a central database, link different municipal departments to this database and to each other, and allow citizens access to public services on the Web.

Status of special purpose bodies
Since the beginning of amalgamation, Toronto has adopted the principle that all bodies belonging to the city would continue to operate until the city had reviewed them and determined what was required for the new organization. The 18-month status report on amalgamation outlined the status of various governance reviews. These included: quasi-judicial tribunals; arts and heritage bodies; external service boards; city service boards; business improvement areas; recreation boards; and financial administrative bodies. In many areas reviews had been completed by mid-1999. By the end of 2000 additional reviews had been completed, while some were underway or awaiting political direction.

Financial issues
The first three years of amalgamation have been very challenging from a financial perspective. The fiscal constraints under which the city has operated have translated into limited or lost opportunities. The city simply has been unable to pursue initiatives which require large up-front capital investment. It has meant considerable stress on an organization trying to do more with fewer resources.

The extent of this stress became apparent in 2001 with a significant budget shortfall of over $300 million. This shortfall will be addressed in the short-term through a combination of three elements: prioritizing services and adjusting service levels, seeking provincial assistance, and increasing property taxes and user fees.

Toronto's sole source of tax is the property tax. This tax constitutes only 4.8% of the total taxes paid to all levels of government by an average family in Toronto and Ontario. Given the static nature of property tax relative to income and other taxes collected by the federal and provincial levels of government, Toronto's municipal government has not benefited financially from a strong economy. At the same time, additional responsibilities and costs have been downloaded to the city by the province as part of the realignment of services. These additional costs are estimated at $276 million in 2001 alone.

Amalgamation savings and costs have been major elements in the overall discussion and evaluation of the results of amalgamation over the first three-year period of the new city. However, amalgamating programs constituted only 27%, or $1.5 billion of the city's gross expenditures. Seventy-three percent of gross expenditures were for previously amalgamated services of the Metropolitan government - major ones being social services, police and public transit services. The financial analysis of amalgamation has been significantly complicated by the concurrent provincial - municipal services realignment (provincial downloading).

By 2000 the city had realized $136.2 million ($153.5 million including rate-supported operations) in annual savings as a direct result of amalgamation. The majority of these savings was achieved through a reduction in staff positions. A total of 1,753 positions (1,935 including rate-supported operations) have been eliminated. These reductions represent a 9% reduction in gross expenditures and staff positions in amalgamating programs. This is a significant reduction given that for nearly a decade prior to amalgamation, the former municipalities had been reducing staff and maintaining or decreasing expenditures.

Amalgamation costs can be distinguished between one-time transition costs and annual costs. One-time transition costs are estimated at the end of 2000 to be $275 million. This is comprised of: staff exit costs; retraining costs; business information systems; facility modifications; and other costs including consulting studies and implementation of new collective agreements

Pure amalgamation costs are difficult to distinguish in certain high cost areas such as facilities and business systems applications. Here the former municipalities had deferred expenditures. The reasons for this deferral included: the budget constraints imposed by these municipalities since the early 1990s as a result of the economic recession and declining assessment base; provincial cost control programs; and deferral of normal business expenditures once the province announced its intent to amalgamate. Therefore these amalgamation costs include a 'catch-up' component.

A key area of on-going amalgamation costs relates to service and user fee harmonization. Net service harmonization costs to the end of 2000 for major cost services (i.e. solid waste collection and recycling, winter maintenance, recreation fees, public health services and boulevard and parking fees) are estimated at $17.8 million, once fully implemented. These additional costs represent 1% of the gross expenditure budget for amalgamating programs of $1.5 billion. This is modest by historical standards which have tended to see service levels rise to the highest level of amalgamating municipalities, thus significantly increasing costs. This has not been the case in Toronto.

Service and user fee harmonization needs to be viewed in the context of ensuring that all parts of the new city receive an appropriate standard of service. This addresses a service equity rather than an efficiency issue. Service equity does not, however, mean that all parts of the city must receive exactly the same service. Service levels can and should vary based on recognized objective criteria. These could include the socio-economic and physical needs of a community or the volume of demand.

Wage harmonization is one of the most sensitive issues that the new city faces. Moving to a single city resulted in employees who were doing similar work being paid at different rates. The costs for harmonizing wages for management and non-union staff are estimated at $2 million. The harmonizing of firefighter salaries is estimated at $3 million per year based on a March 2001 decision by a provincial arbitrator. The harmonizing of other unionized positions is being undertaken jointly with the other affected unions. No estimate of costs is currently available. While these costs could be significant, it is expected that they would be phased in over a number of years.

While certain aspects of wage harmonization can be attributed directly to amalgamation, in many cases, amalgamation has served as a catalyst to review wages that had been frozen or received very limited increases since the early 1990s. This situation was due to: significant budget constraints; provincial expenditure control programs; and the inability of some of the former municipalities that had a smaller commercial/industrial assessment base, to offer wages competitive with their immediate neighbours.

One-time amalgamation transition costs as of the end of 2000 are estimated at $275 million. Annual costs to finance these one-time transition costs are estimated to be $28 million for 10 years.

In 1996 the province commissioned a study to estimate the potential savings and costs associated with amalgamating Toronto. A comparison of the estimated costs in the study relative to Toronto's actual experience reveals: an under-estimation of savings as a result of consolidation; an over-estimation of immediate savings as a result of efficiency gains; and an under-estimation of the one-time and annual costs associated with amalgamating seven large corporations.

Final figures on costs and savings will not be determined for several more years when all aspects of the amalgamation are complete.

Building the future
Toronto has launched a number of initiatives to establish long-term future directions for the city. In 1998 Toronto Council began development of a Strategic Plan to develop its vision for the community. In 1999 Council adopted Part One of the Plan which stresses the municipal government's role in championing the economic, social and environmental vitality of the city. In 2000 Council adopted Part Two of the Plan. This builds on the city directions of the earlier document and describes the various roles the municipal government should play as a: catalyst/leader; provider and funder of public services; policy-maker and regulator; and facilitator, partner and advocate.

The Strategic Plan is the umbrella document under which more detailed sectoral plans have been developed. These include: the Official Plan, the Social Development Strategy, the Environmental Plan, the Economic Development Strategy and the Fiscal Sustainability Plan. Reports have been published for each of the first four areas. The Official Plan and Social Development Strategy are currently under public discussion. The Environmental Plan and Economic Development Strategy are currently focused on implementation elements. The Fiscal Sustainability Plan will inform the city's budget processes and financial priority-setting.

Council's Strategic Plan and the sectoral plans will form the basis for implementation of the administration's Corporate Management Framework. The Framework translates Council's emerging strategic goals and directions into the planning and delivery of services. The Framework has four components: development of Council's vision; establishment of multi-year program plans; budget plans to operationalize the program plans; and individual performance plans.

Major challenges continue to confront the city. These include: strengthening the fiscal capacity of the Corporation; addressing difficult choices with respect to core programs and service delivery options; completing the harmonization of service levels, jobs and wages; and integration of operations; further consolidating corporate assets including yards and facilities; and further streamlining selected agencies, boards and commissions.

Three significant areas that need to be addressed include: ensuring alignment of the strategic and sectoral plans to the city's fiscal capacity; focusing on improving employee morale, with completion of job and wage harmonization as a key element; and further improving customer/citizen service.

Citizens judge amalgamation
The citizens of Toronto are the most important judges of the success of amalgamation. When the amalgamation announcement was first made by the province in 1996, there was considerable public opposition. In a referendum held by the former municipalities in the spring of 1997, over 70% of citizens voted against the amalgamation proposal.

During the first three years of amalgamation, residents have been asked regularly their opinion on amalgamation and the city's quality of life. Consistently polls have shown that Toronto residents are satisfied. For example, 87% of residents polled in October 2000 believed that amalgamation was the right decision for Toronto. Sixty-six percent believed that amalgamation of the former municipalities provides better government than the previous two-tiered system (Toronto Star/EKOS).

Amalgamation has presented many challenges to, and made extraordinary demands on, Council and the new administration. Notwithstanding these challenges, the unified Toronto has continued to move ahead. Citizens have continued to receive high quality municipal services, even as significant changes were underway behind the scenes. These changes have included massive management restructuring; consolidation of major operations; introduction of new technological systems; and harmonization of a myriad of policies and procedures. As noted earlier, the city has also had to respond quickly to provincial downloading, Y2K technology issues, the introduction of a new property reassessment system and Council's three-year commitment to a zero property tax increase.

It is a testament to the dedication and capabilities of the men and women who guide, manage and work for the City of Toronto that so many changes have been undertaken and completed in such a short period of time.

The first three years in the history of the new Toronto have focused on laying the foundation for creating a unified 21st century city. While significant work remains to be done, the stage is set for seizing new opportunities. These opportunities can only be achieved through a redefined role for Canada's largest city, within a provincial, national and international context. This is the challenge for the years ahead.

Summary
The amalgamation of Toronto has been, in itself, an urban success story. The largest restructuring in the history of Canada's cities is working. Citizens report that programs and services have not been interrupted. They have been enhanced in several key areas.

But local services realignment is not working. This is not Toronto's position alone. It is the consensus of cities across Ontario. Downloading is jeopardizing the success of Toronto's amalgamation.

In order to realize the full benefits of amalgamation, there must be proper alignment between increased responsibilities and financial capacity. An effective partnership, a new relationship between the federal, provincial and city levels of government is required. It is critical to acknowledge that the largest city in Canada, with its national economic impact and unique requirements, needs a new financial arrangement.

Continuous improvement on the part of City operations, alternate ways of delivering services, appropriate service standards, sound long-term planning and an appropriate balance of taxes and user fees are also required.

But the new relationship is the most critical need. The city's financial situation is not sustainable. If Toronto is to prosper and compete effectively on the international stage, the city must have the long-term financial capability to fulfill its responsibilities and realize its full potential.