Bringing Toronto's Gravity-Defying Budget Back to Earth

Mayor Olivia Chow just announced her plan to increase Toronto’s property taxes by 5.4 percent and the city building fund rate by 1.5 percent for 2025. A tax bill that cost a resident just $8,000 for the privilege of owning a small bungalow back in those happy, carefree days of 2024 will now cost more than $8,500. Although as bad as that sounds, it’s not nearly as awful as last year’s 9.5 percent increase.

With an annual budget that’s inching towards $20 billion, Toronto already spends more than roughly half of the United Nations’ 193 member states. Does the law somehow require annual increases? Is every single program really mission-critical and every single department squeaky-clean and cost-efficient? Are there no opportunities for savings?

After feeding it Toronto’s most recent financial report and budget summary, I posed those questions to my friendly neighborhood AI. I asked it to assume the existence of a financial crisis (when was the last time the City of Toronto wasn’t in a financial crisis?) that required a ten percent budget reduction. The goal was to do everything possible to ensure that the most critical programs are maintained with the least harm to the most vulnerable, while focusing on pulling the City back from areas outside its core operations.

Some of the details of my AI’s response aren’t practical enough to be applied in their current form. But in general it demonstrates that the way you ask the question goes a long way to determine what kind of answer you get back. Or, in other words, if all you have is other people’s money, everything looks like a spending program.

Here, in the spirit of The Audit Briefings, is the AI response:

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To achieve a 10% reduction in the City of Toronto's budget without raising taxes and while minimizing harm to the most vulnerable, I recommend the following approach:

1. Evaluate and Prioritize Core Services

• Core Activities: Focus on critical areas such as public safety (fire, police, paramedic services), affordable housing, and essential infrastructure maintenance.

• Non-Core Activities: Gradually divest from areas outside the City’s core responsibilities, such as:

  • Cultural and Recreational Grants: Scale back funding for certain festivals and non-essential arts initiatives, transitioning them to private sponsorships.

  • Economic Development Programs: Reassess and streamline initiatives that overlap with provincial or federal programs.

• Rationale: This focuses resources on critical services while encouraging other levels of government or private entities to take a more active role.

2. Administrative and Operational Efficiencies

• Shared Services: Centralize administrative functions across departments (e.g., HR, IT, procurement) to reduce redundancies.

• Contract Renegotiation: Renegotiate contracts with vendors and service providers to secure more favorable terms.

• Technology Upgrades: Invest in automation and digitalization for long-term savings, particularly in customer service (e.g., 311 services).

• Workforce Adjustments: Implement a hiring freeze for non-essential positions and evaluate the feasibility of attrition-based reductions.

3. Rationalize Transit and Transportation

• Transit Efficiency: Analyze underperforming transit routes for potential consolidation or service reductions.

• Transportation Projects: Delay or re-scope non-critical transportation capital projects.

• Vehicle Fleet: Transition to smaller, more cost-efficient vehicles and optimize fleet usage across departments.

4. Public-Private Partnerships (PPPs)

• Housing Initiatives: Partner with non-profits and the private sector to expand affordable housing.

• Recreation Facilities: Transition the operation of certain recreational facilities to third-party operators under performance-based contracts.

5. Revenue Enhancements via Non-Tax Mechanisms

• User Fees: Increase user fees for non-essential services (e.g., facility rentals, parking).

• Asset Monetization: Sell or lease underutilized City-owned assets such as land or buildings.

• Fines and Penalties: Adjust parking fines, by-law infraction penalties, and other charges to ensure compliance and revenue.

6. Eliminate or Restructure Programs with Limited ROI

• Special Programs Review: Reassess programs like the Toronto Atmospheric Fund and other specialized initiatives for potential consolidation or elimination.

• Event Subsidies: Scale back subsidies for major events that could operate independently.

7. Capital Budget Adjustments

• Deferral of Non-Essential Projects: Prioritize state-of-good-repair investments and defer expansionary projects.

• Green Bonds: Expand the use of green bonds to finance environmentally sustainable projects instead of using operational funds.

Example Cuts Based on Budget Breakdown:

• Economic Development and Culture (EDC): Reduce grants and non-essential cultural programming by 15%, saving approximately $30M.

• Parks, Forestry, and Recreation: Streamline maintenance and delay non-critical upgrades to save $40M.

• Governance and Oversight: Reduce discretionary spending by Council and Committees to save $5M.

• Non-Program Expenditures: Reallocate reserves judiciously, potentially saving $100M.

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Detailed breakdown of projected savings

The savings are categorized by area, with projected savings estimated based on the financial data from the documents you provided. These amounts aim to collectively achieve a 10% reduction from the current budget:

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1. Administrative and Operational Efficiencies

• Shared Services and Centralization:

  • Consolidating HR, IT, and procurement services: Save $50M.

• Contract Renegotiation:

  • Securing better terms on major vendor and service contracts: Save $30M.

• Workforce Adjustments:

  • Hiring freeze for non-essential positions and reducing by attrition: Save $70M.

Subtotal Savings: $150M

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2. Rationalizing Transit and Transportation

• Transit Service Adjustments:

  • Consolidate underperforming routes and optimize schedules: Save $30M.

• Fleet Optimization:

  • Replace aging and underused vehicles with cost-efficient options: Save $10M.

• Transportation Capital Projects:

  • Delay non-critical roadwork and infrastructure projects: Save $50M.

Subtotal Savings: $90M

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3. Public-Private Partnerships

• Recreation Facilities:

  • Transfer operations of select recreational facilities to private operators: Save $25M.

• Housing Partnerships:

  • Engage non-profits to assume roles in affordable housing initiatives: Save $20M.

Subtotal Savings: $45M

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4. Non-Core Services Reduction

• Economic Development and Culture:

  • Reduce funding for non-essential cultural programs and festivals: Save $30M.

• Specialized Programs (e.g., Atmospheric Fund):

  • Scale back or eliminate low-ROI programs: Save $10M.

• Event Subsidies:

  • Eliminate or reduce subsidies for events that can operate independently: Save $20M.

Subtotal Savings: $60M

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5. Revenue Enhancements via Non-Tax Mechanisms

• User Fees:

  • Increase fees for non-essential services (e.g., facility rentals, parking): Generate $30M.

• Asset Monetization:

  • Lease underutilized City-owned properties: Generate $20M.

• Fines and Penalties:

  • Increase compliance-related fines (e.g., parking, by-law infractions): Generate $20M.

Subtotal Savings/Revenue: $70M

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6. Capital Budget Adjustments

• Deferral of Non-Essential Projects:

  • Postpone non-critical expansions in infrastructure: Save $150M.

• State-of-Good-Repair Prioritization:

  • Focus on essential repairs over upgrades: Save $30M.

Subtotal Savings: $180M

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7. Governance and Oversight

• Discretionary Spending:

  • Reduce non-essential Council and Committee expenditures: Save $5M.

• Efficiency in Oversight Functions:

  • Streamline roles in oversight offices (e.g., Integrity Commissioner): Save $5M.

Subtotal Savings: $10M

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Additional Notes:

• The City of Toronto's 2024 Operating Budget is $17.12B; achieving a 10% reduction requires savings of $1.71B.

• This initial breakdown provides approximately $605M, targeting efficiencies and low-impact reductions.

• Further savings can come from expanding the scope of deferrals, streamlining further non-core activities, or deeper cuts in transit expansions and non-essential cultural programs.