Rocky road to recovery
Toronto faces a projected budget shortfall of $1.5 billion in 2021 because of the pandemic. A 270-page report on how to move forward doesn’t recommend a tax hike but outlines an uncertain financial future
Despite the pandemic highlighting a lack of power for Toronto to chart its own course — city officials spent a week trying to persuade the province to implement stronger public health measures — a plan for recovery released Wednesday doesn’t recommend immediate changes to taxation or seeking new powers from the province.
Cities are at the front line of rebuilding, says the new report, designed as a “road map” to Toronto’s recovery from the COVID-19 pandemic. The result is a 270-page report with 83 recommendations on moving forward — from changing planning rules to encouraging more affordable housing to making new bike lanes permanent.
But the country’s largest city faces an increasingly uncertain financial future, as is spelled out in a covering report to council from city manager Chris Murray that accompanies the road map.
With an economic downturn on a scale not seen since the Great Depression, growing inequities for racialized, low-income and other marginalized groups, and an estimated $1.5-billion budget gap next year alone, the pandemic has only exposed existing problems and made them worse.
“Municipalities … were designed for another era — from our urban form, governance, financing and partners — everything we knew pre-pandemic has either been magnified or changed,” Murray says in his report.
“No longer can we make the significant contributions to so many programs and services that benefit not just Torontonians but the region as well, with limited abilities, resources, authorities or control over the things that matter most to our residents — equity, prosperity, health and well-being.”
Saad Rafi, a former provincial bureaucrat, is leading Toronto’s Recovery and Rebuild Strategy and is one of the authors of the road map.
Rafi said they did consider raising taxes as an immediate step as part of their recommendations.
“Increasing taxes on those that are already in very, very challenging economic conditions was examined and thought not to be as effective,” said Rafi. He added that current provincial legislation governing what the city can and can’t do places “significant limitations” on how money can be collected.
Currently, the city’s most lucrative taxation powers are property taxes and the municipal land transfer tax. But under COVID-19, homeowners and businesses face their own financial challenges.
Instead, Rafi said, the report has focused on ways to create more spending ability for the city — which by law has to balance its budget — by pushing to increase funding from other levels of government.
On top of a projected $1.5 billion in losses and increased costs in 2021, the city is still facing a year-end shortfall in 2020 of $673.2 million, the reports point out — the largest gap in recent memory.
The reports also note that funding from the provincial and federal governments — outside of a pandemic — has not kept pace with inflation, dropping from $1,100 per person in 2010 to $830 in 2020.
That is largely explained by downloading the cost of social housing and other social services on the city’s books, according to the reports.
Coun. Josh Matlow (Ward 12 Toronto—St. Paul’s) has advocated for a city charter as a way to increase Toronto’s ability to control its own destiny.
Several U.S. cities, such as New York, have “charter city” status, which gives them legal jurisdiction to manage their own affairs free from state interference.
Matlow said Wednesday it is an idea needed now more than ever. “This pandemic has demonstrated very clearly how the tool box that Toronto needs to provide services to residents and have the agility to address pressing public health priorities is different than Sault Ste. Marie and Wawa,” Matlow said. “And the tools that the province provides us need to reflect this reality.”
He said it matters to the city’s ability to address a housing crisis, ongoing opioid epidemic, community planning and future unexpected deficits.
Currently, the city’s powers largely exist under the provincial City of Toronto Act, which can be changed at any time by the province, as when Premier Doug Ford unilaterally cut the size of council in half during the 2018 election. That move and the city’s status as a “creature of the province” are subject of a pending Supreme Court of Canada fight.
“Cities throughout the United States don’t have to wait for their states or federal governments to be able to act on a number of basic priorities that Toronto has to go cap in hand to Queen’s Park to request,” Matlow said.
He added that the pandemic proved the ability to act quickly on our own may matter, pointing to the week delay in the province responding to the city’s request to implement measures to slow virus spread as cases climbed in Toronto.
“Time will tell the impact on public health that an entire week had, while we waited on the province to respond to our request to ban indoor dining,” he said, adding the mayor and council should be “empowered” to act on the city’s priorities in a timely way.
Murray is due to report to council on a charter and options for greater city autonomy and said Wednesday he expects that to be a part of the conversation going forward.
Dr. David Mowat, the province’s former chief medical officer of health who is heading the city’s public health strategy, said problems of autonomy existed before the pandemic and still need to be resolved.
He noted that immediately before the pandemic started, the province moved to cut public health funding, including Toronto Public Health, and make changes to governance “which threatened to take away alignment between public health and the rest of city services.”
It also, he said, threatened to remove public health from having a say in policy, which he said is “essential” to address shortterm goals of reducing infection, but also addressing social determinants of health.
He said it’s important the old structure for public health be allowed to continue unimpeded.
“I would like to see, after we have got through this acute phase, a reopening of that discussion and a reconsideration by the province of their prior plans for the future of public health infrastructure in this province.”
Murray, the city manager, said as of Wednesday the city had no guarantee from other levels of government they could promise funds by year’s end, but he remained hopeful that more money would be coming in phase two of the provincial Safe Restart plan that provided $668.6 million in the first phase.
Murray’s report says the upcoming budget debate will require “difficult decisions.”
Asked Wednesday, he said he could not rule out dramatic service cuts posed earlier in the pandemic.
His report also outlines that Toronto was in bad financial shape to begin with and the pandemic only “exacerbated the city’s structural financial challenges, especially the misalignment of revenues and responsibilities.”
“We will be taking a very drastic look at the 2021 budget if we don’t have the support that we need, ultimately, again from the federal and provincial government,” Murray said. “I think there is certainly great interest on our part in getting some clear indication as to what the art of the possible is for 2021.”