Mayor Mel Lastman is threatening to shame the provincial government into providing a financial bailout to the city, which could see its budget deficit grow by more than $200 million (U.S. funds) and its property tax jump by up to 77 percent over the next six years.
However, the Ontario provincial government has launched its own public relations war aimed at shaming the city into dramatically cutting its operating costs and selling off its unused assets.
Toronto Treasurer Wanda Liczyk and Chief Administrative Officer Michael Garret told city councilors Wednesday that Toronto's $670 million (U.S. funds) debt would jump by another $204 million, forcing a property tax increase of up to 32 percent this year.
"There are many people who think there is a magic rabbit to be pulled out of the hat," Liczyk said. "I'm here to tell you there isn't. The cupboard is bare."
Toronto's financial woes are the result of several factors, she explained.
From property taxes alone, the city must pay for all the normal services, plus all its public transit, along with the housing and welfare costs dumped onto the city by the provincial government three years ago.
Though other Ontario municipalities run the same way, Toronto faces higher costs because it has a much larger share of new immigrants and the poor and must pay more for services such as snow and garbage removal.
But while Liczyk and the provincial government estimate the city's additional costs at about $30 million (U.S.), Lastman puts the cost at nearly $170 million. As a result, he is demanding the province come up with about $100 million a year for the next six years to keep the city in business.
Tony Clement, the Ontario minister of municipal affairs, shrugged off Lastman's dire forecast.
"Toronto and its Council are the authors of their own challenges," he said, adding that Toronto should find efficiencies and sell off surplus land. "Raising taxes should be the last place the city looks."
So far, the province has offered the city a one-time payout of $30 million, provided the city gets its spending under control and sells off surplus property.
Clement said he doesn't believe the mayor would raise taxes 32 percent, "not in a million years."
Indeed, after the meeting, Lastman began to discuss the possibility of a 5 percent tax rate increase.
The biggest extra cost in Toronto's $3.7 billion budget is the $72 million it will pay in higher salaries and benefits. Those costs are contained in the new contracts it gave unionized workers who came under Toronto's auspices when the province merged six municipalities into Toronto three years ago.
These agreements, with firefighters and other employees of the old municipalities, were "averaged up to the highest denominator," said Walter Robinson, federal director of the Canadian Tax Foundation, a taxpayers lobby group.
"And Mel (Lastman) brokered several of those deals himself," he added.
Even if the city meets this year's shortfall, Garrett warned, that won't solve the problem.
"If you think things are going to get better in 2002 and beyond, they're not," he said.
Indeed, the Standard & Poor's bond rating agency responded to the news by lowering the city's credit-worthiness from AA-plus to AA, meaning that Toronto will pay a higher interest rate on the money it borrows.