Message from Rob Rossini, Deputy City Manager and Chief Financial Officer
Toronto City Council has approved a balanced 2014 Tax Supported Operating Budget of $9.6 billion and 10-Year Capital Budget and Plan of $18.6 billion that makes significant investments in key strategic priorities for the City’s future. The Budget continues to strengthen the City’s fiscal health and for the second year in a row, the Budget was balanced without the use of the prior year’s surplus.
In order to balance the City’s 2014 operating budget the City implemented various sustainable cost savings and revenue sources including a $60 million reduction in spending through savings from efficiency measures and cost reductions and increased revenues of $129 million comprised of MLTT($35 million), increase in TTC ridership ($7 million), TTC fare increase ($23 million), user fee changes ($11 million), housing reserve draw ($28 million) and assessment growth of $25 million combined with a modest municipal property tax increase to close the operating budget shortfall. The cost savings and service efficiencies have enabled the City to maintain its core services that residents value.
The Tax Supported Operating Budget includes a moderate Toronto Transit Commission fare increase of 5 cents and a 1.1 per cent average tax levy increase over the 2013 budget which is below the general rate of inflation. The City’s tax rate increase has been lower than the general rate of inflation 4 out of the last 5 years. In fact, Toronto’s tax rate is the lowest in the GTA and our average residential taxes are $1,100 or 30 per cent lower than the GTA average. Based on the City’s tax policy, this results in a 1.73 per cent residential and 0.58 per cent non-residential property tax increase for the 2014 Budget.
City Council also approved an additional tax increase for the Scarborough Subway construction (0.5 per cent residential and 0.17 per cent non-residential) which increased the overall property tax increase in 2014 to 2.23 per cent for residential and 0.74 per cent for non-residential, excluding policy shift. This translates into an increase of about $57 for the average residential property assessed at $499,521, which will pay $2,598 in municipal taxes in 2014. Included in the increase is dedicated funding of $12.70 (0.5 per cent increase) for construction of the new Scarborough Subway.
As part of its overall strategy to enhance Toronto’s business climate, the City continues to reduce its tax rates for commercial, industrial and multi-residential. This will result in an additional 0.48 per cent or $11.93 for residential properties to make the total tax increase 2.71 per cent or $68.59. The total average increase for non-residential properties, which include rental apartment buildings, is 0.30 per cent.
The 2014 Tax Supported Operating Budget maintains all current programs and services and provides funding for important new and enhanced services including:
- Investments in more front-line paramedics and additional fire prevention officers,
- Re-starting the hiring of new police officers,
- Expansion of the Student Nutrition Program,
- Increased child care spaces,
- New recreation centres, additional recreation youth spaces and priority centres,
- New libraries and expanded library hours,
- Restored funding for the High Park Zoo,
- Additional $12 million in funding to meet public transit/TTC growth needs,
- Extra resources for City Planning,
- Begin the significant work to restore the City’s tree canopy after the ice storm, in partnership with the provincial and federal governments, and
- Increased support for Arts and Culture.
Looking forward, the City will continue to face budgetary pressures. Preliminary estimates indicate the outlook pressure in 2015 and 2016 is $333 million and $204 million respectively; after taking into account potential revenue, tax, and TTC fare increases. Pressures are primarily due to the elimination of the Provincial Toronto Pooling Compensation funding loss of about $43 million per year or $129 million over the three years from 2014 to 2016, inflation and salary cost of living (COLA) increases, growth in service volumes, increasing debt charges, and depletion of reserve and reserve funds.
City Council also approved a Capital Budget of $2.212 billion for 2014 and $18.613 billion for its 10-year Capital Plan. The 10-Year Capital Plan continues to advance the City’s long-term fiscal plan objectives and focuses on infrastructure rehabilitation to protect the health and safety of our citizens and maintains the City’s infrastructure in a state of good repair to support cost-effective service delivery.
The 2014-2023 Capital Budget and Plan includes:
- An additional $3.437 billion for the Scarborough Subway,
- An additional $137 million for transportation including road resurfacing and reconstruction and key capital projects to address traffic congestion,
- $535 million over the next 10 years to repair and maintain the Gardiner Expressway,
- An additional $286 million for Parks, Forestry and Recreation to address the state-of-good-repair backlog for a total of $439 million over the next 10 years, and
- $6.3 billion over the next 10 years for the TTC to address ridership growth, as well as repair infrastructure and replace aging subway and streetcars.
Included in the approved Capital Budget and Plan is a strategy to hold the line on debt by injecting $1.9 billion of non-debt financing from future year-end surplus funds according to its surplus management policy, sale proceeds from the monetization of City assets and real estate, development charges, investment returns and expected funding from federal and provincial funding programs.
The strategy will also ensure that the City’s debt levels remain below its 15 per cent threshold relative to property taxes and restrict the cost of interest charges from borrowing, which is paid for through property taxes in the operating budget. Currently, debt charges remain as the third largest expense on the average property tax bill in Toronto, following police services and the TTC.
The 2014 Toronto Water Budget includes a 9 per cent water rate increase; this is a planned increase and part of a multi-year budget and infrastructure renewal program to reduce a repair backlog from $1.641 billion at the end of 2013 to $92 million by 2023. The plan calls for an annual 9 per cent increase each year, from 2006 up to and including 2014.
The 2014 Solid Waste Operating and Capital Budgets include a 3 per cent increase in 2014 for Solid Waste Volume-Based User Fees to offset to maintain the financial viability of the Diversion Programs and address reserve fund sustainability.
The Toronto Parking Authority (TPA) is a rate-supported budget and is not funded by the City’s property tax base. In 2014, TPA will generate approximately $64 million of net revenues for the City, of which 75 per cent will support general City services and the remaining 25 per cent will help fund TPA capital requirements.
The 2014 Operating Budget has succeeded by investing in the City’s future by focusing on key strategic priorities to enhance the City’s economic vitality and support social development for our diverse and vulnerable residents; and strengthen our fiscal health and sustainability by eliminating the use of prior year’s surplus and ensuring property tax increases are below the general rate of inflation.
As the City continues down its road towards fiscal sustainability, I would like to thank the City Finance team for their resilience, endurance and commitment as financial custodians. Their dedication, in the face of many challenges, has inspired me throughout the past budget process, and it is with great pride to have led this professional team as Deputy City Manager and Chief Financial Officer.
Deputy City Manager and Chief Financial Officer