WATCH: Dave Trafford reports on the huge $86 million shaped hole in the city’s budget.
TORONTO – Toronto has an $86 million hole in its fiscal plan after the province refused to budge on a request to maintain its funding support for social housing.
But it’s not like this withdrawal of funds came out of the blue. Queen’s Park informed the city back in May, 2013 that it would be reducing its funding at an accelerated rate.
The first reduced payment happened in 2014. But the city was able to cover the cost because the province had also forgiven an earlier loan to the city.
Not so in 2015. The city had no plan to cover the $86 million gap, except to say they were confident the province would come through.
Finance Minister Charles Sousa says the money was never on the table. There was no discussion about reinstating the funds and Mayor John Tory’s team knew that.
“They were well aware of that from the beginning. They always knew that the pooling numbers were going to be reduced over time. And as a consequence we proposed that we provide them with a $200 million dollar facility,” Sousa said.
It was effectively a line of credit but the city says it couldn’t live with the terms.
Mayor Tory says city staff has come up with an alternative.
“After detailed examination of their proposal, which would require among other things security of city-owned land, future provincial gas tax transfers put up as security, we have concluded that the city can do better on its own,” he said.
City staff is proposing the city shift capital funds to the operating budget and borrow to cover the difference. (The city can’t borrow cash to cover operating costs.)
The shortfall would be otherwise made up through cuts or an additional tax burden of 3.6 per cent. But Tory is dismissing both options.
Either way, this is a short term fix that will raise a number of issues at city council, including service cuts or tax increases.
Longer term, the reduction in provincial housing looms larger. Next year’s budget gap would be nearly $129 million. That would mean a 5.4 per cent tax increase.