Addressing the City of Toronto's flawed funding structure


Tuesday, June 7, 2005

Thank you for coming here today.

In the past 18 months, we have seen great changes to the way Canadian cities - Toronto in particular - are funded. The federal government now gives cities a full rebate on the GST, freeing up money to spend on local priorities. The provincial gas tax money has started to flow. We expect to have an agreement on the federal gas tax shortly.

As each of these new revenue sources have come on line, we have described them as "a good step."

It's time now for us to look at where all those steps are taking us. It's time to look ahead to our final destination, and to make a plan about how to get there.

Toronto's social and physical infrastructure gap is not measured in the millions of dollars. It's not measured in tens of millions. It is not even measured in hundreds of millions. Toronto has a shortfall of more than a billion dollars every year.

What does that mean? It means that every year, the demands on our city are a billion dollars greater than the resources we have to meet those demands. Not only that, but the gap grows every year.

This gap has been growing ever since amalgamation. It grows because our costs for labour and materials go up every year, but our resources remain the same. It grows because social programs have been imposed on us that simply cannot be funded through property taxes. It grows because our city grows.

For years, City Council has dealt with the consequences of this broken, unjust funding structure, but has not dealt with the structure itself. We have deferred dealing with the structural problems through an array of workarounds: We have gone further into debt. We have sold assets. We have depleted reserves. We have put off important investments in public transit, roads, and other city infrastructure.

We always knew these were temporary solutions. But now we can't wait any longer to start working on a sustainable solution.

We are here to announce two things. First, with this report, the Conference Board of Canada has provided the first clear and credible indication of the size of the problem Toronto faces. Second, the City has begun work on a plan for closing the gap.

This will not be easy. It will not be simple. There will not be a quick fix. We have a tough job ahead of us, but the task is far from impossible.

To put things in perspective, consider that 11 billion dollars in taxes leaves Toronto every year that we don't get back in programs and services. It would only take about 10 percent of that money staying within our city limits to ensure that Torontonians continue to have access to good roads, dependable transit, community services, clean, safe neighbourhoods, and all of the other services they expect from their city government.

Here is another way to look at the numbers. Toronto's economy grows every year, which results in hundreds of millions of dollars in new sales and income tax. The report we are releasing today predicts that Toronto's economic growth will result in 1.3 billion new tax dollars every year. Under the current structure, Toronto's government will not receive a penny of this growth - it all goes to other governments. If we had access to just the growth generated in our city, it would more than fill the gap.

Of course, a new funding structure will be more complicated, and will require us to match certain types of revenue with appropriate programs and services. My point is that we have a clear idea of the issues we face, and an understanding of the tools that will allow us to find a just solution.

I want to mention one other aspect of these structural issues, and that is the City of Toronto Act. We have always known that the new Act will not solve our financial situation. The Act will give Toronto the power to make certain policy decisions that would have financial implications for the city - things like user fees or land transfer tax, and so on. There are two important things to say about these types of tools.

First, whatever revenues are generated through the City of Toronto Act will not be enough to address our structural financial challenges.

Second and more important, any revenue we earn through new powers under the Act, should be used to fund local services, not to subsidize provincial income redistribution programs.

Certain services can only be funded through certain revenue streams. For instance, social programs like Ontario Works and the Ontario Disability and Support Program must be paid for through income tax. Every province other than Ontario does this, and it is the only just and practical way to fund such programs. As things stand, these programs put a strain on Toronto's budget to the tune of a half a billion dollars every year.

This strain can be solved either by the City having access to income tax revenue, or by taking the cost of these services off our books altogether.

On another front, there are services like the TTC that provide benefits to the entire region - not just the city of Toronto. The Province and the federal government have a responsibility to provide transit and other regional funding. I am pleased that both of these governments have acknowledged this responsibility, and have begun funding transit in Toronto once again.

As I said, we have taken some important first steps, but it is now time to map out the rest of the journey. The city is already stepping up to the plate. We have two major responsibilities:

One is to continue to find new efficiencies, and to use an appropriate mix of our own sources of revenue to fund local services effectively, accountably, and efficiently.

The other is to begin the conversation with the other governments to restore justice to Toronto's funding structure.

We have already begun to create models of how we can close our billion-dollar infrastructure gap. We have done so with the recognition that other governments face their own financial constraints, and that it will take time to get to a position where Toronto has sustainable, sufficient funding. That is why, in a recent letter to Premier McGuinty, I invited the Province to work with us on a five-year plan to put Toronto on sound financial footing.

We will also continue to work with the federal government, who also have an important stake in Toronto's success. Toronto's future is also the future of Ontario, and of Canada.

We have begun this conversation because these issues cannot be put off any longer. If we continue to defer dealing with Toronto's structural funding problems, our burden will only get larger. We are taking responsibility now, so that we don't have to pay more later.

In closing, I want to remind you that, while I have been outlining major challenges, we are really talking about a historic opportunity. This city has the potential to vastly enrich Ontario and Canada, economically and culturally. We can be - we must be - a leader among the modern cities of the world. We will need wisdom, diligence, and foresight to get it right, but this opportunity is well within our grasp.

I look forward to your questions, today and in the weeks and months to come.

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