Saturday, September 22, 2018Canada's Leading Online Business Magazine

Toronto’s Budget Crunch – Ford Finding the efficiencies

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Contrary to left-wing belief, the sky is not falling. Nor is the City of Toronto in a state of destruction, inferno, or moving away from its status as a “world class city.”

In the midst of balancing next year’s municipal budget—required by provincial legislation—City of Toronto Mayor Rob Ford has heard it all. While Ford and his administration consider financial savings and monetary cleaning up in seemingly all areas, the rolling ball seems to stop there. The message from the hundreds upon hundreds of deputation lined up at Toronto City Hall, voicing their concern, is simple, but falls short of economic reality: it is simply not possible to reduce spending by 10 per cent. To this group, every service and every personnel is precious.

But with a balanced budget required, and with a logical refusal to stick Torontonians with a double digit tax increase to find those dollars, the Ford administration has proposed a modest, sensible budget for 2012. City council will vote on the budget early in the new year.

Financial foundation

Ford’s 2012 budget proposal includes a modest 2.5 per cent tax increase. The deal also sees about 2,300 jobs cut from the City of Toronto, through a combination of voluntary separation packages, attrition, layoffs, and not filling already vacant positions. The proposal also includes a 10-cent fare increase to TTC riders, and a reduction in the number of grants handed out by the City.

The voluntary separations (read: buyout applicants) will cost the City a one-time payment of $41 million, with each departing employee receiving up to six months of severance pay. Following the one-time payment, the long-term savings are more than $60 million per annum each year going forward.

“Our 2012 budget is a smart budget, it’s a responsible budget, and it is a budget that slams the door on out-of-control spending—that’s what the taxpayers want,” Ford said. “It is a budget that begins to rebuild our fiscal foundation.”

This entire process began by basing many budget balancing proposals and efficiencies on several reviews, which included city councillors, committees, and public input, particularly input at City Hall, the most public consultations in budget history.

The Core Services Review, conducted by outside consultant KPMG, concluded that more than $93 million in permanent, long-term savings could be realized for the City of Toronto. These savings, in whole or in partial, can potentially be approved for inclusion in the 2012 budget and for future savings for the City. The second phase, known as the Service Efficiency Studies, highlighted “permanent efficiencies to eliminate our structural deficit.”

“If we don’t tackle our deficit this year, we will have to tackle it next year. But next year, it will be even harder. We can’t afford to wait. Every year the [deficit] gap gets harder and harder to fill. Today, this deficit threatens the very foundation of our city,” Ford said. “To create opportunities for a brighter, better Toronto, we must build on a sustainable, affordable foundation that will last long into the future.

“We must work to build a Toronto that gets the biggest bang for every taxpayer buck, by keeping costs down and running an efficient government with a smaller, more innovative civil service. We must build a Toronto that generates a significant and growing portion of its revenues from non-tax sources that grow as fast as our expenses.”

Full-scale, budget-balancing taxes did not get Ford elected, especially when that revenue already exists within City Hall, and is simply misused.

That includes Mayor Ford’s pledge to never raise taxes above the rate of inflation. His proposal for a 2.5 per cent tax bump stays in tune with that promise.

Ford added, “We must build a Toronto that uses property tax increases only as a last resort to deal with inflationary pressures.”

Amalgamation failure

For the first time since Toronto’s 1998 amalgamation, a move that combined bordering municipalities Etobicoke, Scarborough, York, East York, North York, and Old Toronto into one mega-city, the upcoming annual operating budget is smaller than its predecessor, with less projected spending in 2012 than 2011, an “unheard of” accomplishment, according to Mayor Ford.

Amalgamation, a proposal that, among other things, intended to reduce overhead costs for the municipal government, has in fact had the reverse effect on Toronto.

City Hall is infested with bureaucratic bloating. As an example, to compare the City of Toronto to Chicago, Ill., a city with very similar land area and population totals to Toronto, the one area where the two cities differ greatly is at the public purse. The City of Chicago runs on just over half of Toronto’s total public employees. Toronto has more than 53,000 civil servants on payroll, where the average salary exceeds $90,000. Amalgamation was supposed to incorporate services and reduce costs, but spending has only increased over that time.

In an effort to managing these costs, Ford and his administration have targeted privatization and service efficiencies in order for the City to become more financially prudent. The City’s garbage collectors have already felt the brunt of this as, beginning in August 2012, all garbage collection west of Yonge Street will be handled by Green For Life Environmental. The private sector garbage collector will contract the job for $17.5 million, a far cry from the civil servant cost which exceeded $30 million. In fact, the remaining four bids all came in at a more affordable level than that of the City by at least $5 million. The move will send 300 temporary city workers to the sidelines, while other full-time staff will, at least temporarily, be shifted to another department. And in the end, it’s a clear victory for the Torontonians who had to live through 2009’s less-than-pleasant public garbage strike that lasted 39 days.

The Budget Chief

Elected with a mandate to stop the wasteful spending, Mayor Ford is doing just that. As is his Budget Chief, Scarborough-Agincourt councillor Mike Del Grande.

Del Grande was the one much in charge of crunching the city’s numbers and its accounting headache, highlighting the best and more feasible areas where ‘cuts’, if we want to call them that, to unnecessary expenditures would go virtually unnoticed. One example is reducing City-managed wading pools by five, still leaving 100 for public use.

“Nobody should be untouchable,” Del Grande told the Toronto Sun. “Everyone wants more, not less. People would rather see someone else’s ox gored. We got here together and we must get out of this together.”

Still, most money-saving ‘efficiencies’ will be found within the workforce at City Hall. The easy and logical answer, yet the toughest to pull off, is to continue minimizing the City’s middle managers, as well as staff at its various agencies, boards, commissions, and departments (ABCDs). Too often at City Hall, worker unions, seniority, and special interests trump meritocracy, hard work, and common sense. To that end, reports indicate that a private sector worker in Toronto doing the same job as a public employee receives on average 27 per cent less salary. It’s simply not sustainable for Toronto taxpayers, the same group affording these inflated salaries of the public service.

Public workers, with their out-of-touch attitude, have pushed the City to the brink of bankruptcy. That point of wasteful spending was driven home in March of this year when Ford ousted the Board of Directors of the Toronto Community Housing Corporation (TCHC), after a spending scandal revealed frivolous abuse of expense accounts, nor had the directors been following proper protocol for awarding TCHC contracts.

“We need to find better ways of doing business. We need to trim our workforce down to a sustainable, affordable size,” Ford said.

“We are looking for ways to engage community groups or private companies who can help us improve results. And, we are looking for ways to increase non-tax revenues.”

Staying the course

It’s the message continuously heard from Ford supporters in frequent times of media hysteria: stay the course.

Much work remains ahead for the Ford administration, but much has already been accomplished, and the groundwork is about to be laid for the next series of fiscal accomplishments. The new year will put the budget to vote, while the next round of contract negotiations for the expiring Canadian Union of Public Employees is also rounding the corner as well.

In the end, the sky is not falling, and Torontonians have not been faced with any truly overwhelming changes. The true financial savings thus far have been discovered in the unnecessary expenditures. The Ford administration continues to chip away at the $774 budget shortfall, and that process of finding these savings will only continue in the new year.

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