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At the City of Toronto's Budget Committee meeting on February 10, 2011, City staff presented a 2012 Outlook and Long Term Fiscal Plan update to help the Committee and City Council plan for next year in a sustainable, affordable and well-managed way.
2012 Outlook and Long Term Financial Plan Update
An update to the Long Term Fiscal Plan was made at Budget Committee on March 12, 2010. The Updated plan continues to support City Council's vision for a fiscally sustainable City with significant progress achieved since the 2005 report.
City Council unanimously approved the Long-Term Fiscal Plan at its meeting on April 12, 2005, as recommended by the Ad Hoc Committee to Develop a Long-Term Fiscal Plan. This page outlines the plan, and provides links to related documents.
The Long-Term Fiscal Plan Update
The City has made much progress since introducing the comprehensive Long-Term Fiscal Plan (LTFP) in 2005. City Council has taken many steps to implement the recommendations of the Plan, while working with other orders of government to improve the funding of capital programs such as transit, and provincial cost-shared programs.
Structural Funding Shortfall
The City has a structural funding shortfall made up of two parts: accumulated shortfall resulting from the use of one-time funding every year to balance the annual budget, and a continuing annual funding shortfall due to annual operating shortfalls.
Simply put, the City is funding certain programs with funds from property taxes, or supporting programs typical of a large mature city that should be funded by the other orders of government or revenues other than property taxes.
There are also annual cost pressures from population growth, service enhancements, funding requirements for capital repair of ageing infrastructure and growing liabilities. However, these cost pressures are not offset by revenue growth because the City’s main revenue stream – property tax – does not grow with the economy, and is reduced by business tax relief to enhance jobs. These have largely contributed to an annual funding shortfall and the use of one-time funding, which has built up over time - presented in the 2010 Operating Budget. On average, the net shortfall ranges between $75 million to $100 million a year.
Despite Council’s efforts to constrain salaries and benefits and restructure debt, and despite the important but largely pending phase out of social assistance and court security costs by the Province, the shortfalls continue.
Shortfalls have been offset in each operating budget using one-time revenues such as ad hoc provincial transit funding and reserve draws, however the complete permanent funding solution has not yet been achieved.
The Road to Fiscal Sustainability – Vision 2020
The City needs to eliminate its annual structural funding shortfall through the following actions in the next ten years:
Expenditures:
- Continued actions on efficiencies, salary and benefit restraint
- Rationalization of selected services
Assets and Liabilities:
- Maximize corporate asset values and pay down debt, continue to increase pay-as-you-go capital financing and further actions to reduce unfunded liabilities
Revenues:
- Continued actions to grow tax base: Improved business competitiveness, population growth and through land use intensification as laid out in the Official Plan
- Multi-year strategies for User Fees
- Seeking sustainable permanent partnership funding from other orders of government:
- 50 per cent transit operating funding
- National Transit Strategy
- Upload of social housing costs and a National Housing Strategy
- Share of sales tax revenues (equivalent to 1 cent of 13 cent HST)
Meeting the Plan
If the City does not get sustainable permanent funding from the other orders of government as described above, it will be forced to monetize more assets such as City owned companies, and make significant service adjustments.
Asset monetization is a one-time solution and does not address the structural funding shortfall, as it simply provides bridge financing to allow time for long-term financial strategies to be implemented. The alternate solution ― significant service adjustments ― will no doubt impact the liveability and opportunity for all Torontonians.
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