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What We Do Is What We Fund
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The 5th Annual IMFG Toronto City Manager’s Address
Peter Wallace
October 17, 2016
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Context
Greatcity
• Themosttaxcompe33vecityforbusiness(KPMG)
• Thirdbestcityforopportunity(PwC)
• Fourthmostlivablecity(Economist)
• Fourthmostgloballycompe33vecity(KPMG)
Economicallyimportant
• ThecityofTorontoishometo2.8millionpeopleandnearly90,000businesses
• Canada'slargestcityandthefourthlargesturbanareainNorthAmerica
• 8.2%ofCanada'sworkforce• Toronto’sgrossdomes3cproduct(GDP)accountedfor26%ofOntario'sGDPand9.5%ofCanada'soutputin2014.
PublicservicesmaVer
• TheCityprovidesover188uniqueservices
• ResidentsandbusinessesexpectandvaluetheservicesprovidedbytheCity
• Increaseddemandforpublicinvestmenttooffsetconges3on,carbon,andthreatstopoverty
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Sources:CityofTorontoEmploymentSurvey(2015)andFinancialReport(2015)
Sources:KPMGFocusonTax(2016);PwCCi3esofOpportunity7(2016);EconomistIntelligenceUnit–LivabilitySurvey(2016);KPMGCompe33veAlterna3ves(2016)
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ConGnuous improvement and progress
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Servicereinvestment
PovertyReduc3onStrategy
TransitPlan/SmartTrack
SharedServices
Alterna3veServiceDelivery
RealEstateReview
Openanddigital
governmentDirectconversa3onaboutfiscalsustainability
Businesstransforma3on
TorontoCommunityHousingTaskForce
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This Gme last year (4th Annual IMFG Address)
Consistentwithevery
CityManagersince
amalgama3on
Revenuemustbepartofthe
solu3on
Issuesarestructuralandresultfromlong-standingapproaches
Gapbetweenexpecta3onsandfunding
Governmentissmaller–realandper
capitaadjusted
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Thoughtexperimentatfairlyabstract,highlevel
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Matchinglong-termpolicyvisionandexpectedservicelevelswithfiscalcapacity
Now, more clarity
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ThreekeychallengesInterrelatedandoverlap
Makingthe2017and2018budgetswork
Long-TermStructural
CityBuildingCapital
2017and2018Budget
Gap
Financingexis3ngand
newcommitments
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Need to be realisGc about policy opGons
• Savingsandefficienciesarecri3cal,butinsufficient
Austerityfocus
• Limitedlegalauthori3es• Allmeasuresarechallenging
Availableandacceptablerevenueapproaches
• Cannotrelyonnarra3veregardingfuturerevenuesourcesoropera3ngfundingfromothergovernments
Assump3ons
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Austerity
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0%
5%
10%
15%
20%
25%
30%
35%
40%
45%
50%
-
100
200
300
400
500
600
700
800
900
2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016
$(M
illions)
Annualsavingsvsopeningbudgetpressure
Savings(costreduc3ons,servicechanges,andefficiencies) OpeningPressure CostSavings%ofPressure
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Revenue framework
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1.Taxesonrealproperty
Propertytax
Propertytaxclasses
Municipallandtransfertax
Developmentcharges(capitalonly)
Parkinglevypoten3al
2.SpecialtytaxesunderCOTA
Personalvehicletax
Alcoholtax
Tobaccotax
Amusementtax
3.Userfees
TTC
CommunityCentres
Regulatorycharges
Waterandsolidwasterates
Fullcostpricingofpublicgoods
4.RequireMajorProvincialPolicy
Change
Municipalsalestaxes
Municipalincometax
Hotel
Increasedtransfers
• Availableandfeasible
• Yield
• Timing
• Stability
• Matchbeneficiarytopay(broadtaxesforbroadexpenses)
• Minimizeeconomicdistor3on
• Lowercompliancecostforpayers
• Acceptableadministra3vecosts
• Minimizeunintendedconsequences
• Generateposi3veexternali3es
• Visibilityandaccountability
• Poli3calacceptance
Decisioncriteria
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AssumpGons / narraGve
Needtoberesponsiblewithbasicrevenueandexpenseforecast
Provincialresourcesarefiniteanduploadsarereachingmaturity
MLTTis3edtotherealestatemarket
Immediateimpactsofprioropera3ngdeferralsmustbeaddressed
Cannotmerelyrequestopera3ngfundingfromotherordersofgovernment
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Chance to get real and make real progress
“Toaddresstheseon-goingopera3ngcosts,I'mgoingtobehonestaboutwhatisnecessary;Iwon’tjustpretendwecancon3nuecompletelyrelyingonshorttermfixes,whichcouncilapercouncil,mayorapermayorhavedoneinthepast.Wealsoneedtobuildourcityup…buildacityofthefuture.[…]
“Wehavetofindnewmodelstopayforthesebadlyneededtransit,housingandpublicspaceprojectsbeyondjustaddingthecosttothepropertytaxbill.[…]
“Thatmeansdedicatedsourcesofrevenues,diligentlyguardedandinvestedonlyinlong-terminfrastructurepriori3esliketransitandhousing.ThisistheapproachIwilltakelaterthisfall,whencitycouncildebatesnewrevenuemeasurestoaddressouropera3ngcostsandTorontocitybuildingprojects.Iwillbesuppor3ngarangeofmeasureswhicharedesignatedtospecificopera3ngpressuresorcapitalprojects.Iwillbeaskingformeasureswhicharefairandeffec3ve.AndIwillbelookingforwaysinwhichwecancapturevaluefromourexis3ngassets.”
-MayorToryremarkstotheTorontoRegionBoardofTradeon“Anewwayofdoingthings”–September21,2016
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Councilhasanswered:-Moreextensivepublicservicefootprint
Consulta3onsthisfallandwinter
Long-Term Financial Framework Goodnews: Fundamentallystableintermsoftradi3onalmunicipalservices(e.g.,directservicesto
property)
Strugglingwithdemandsof:
Density,development,andpublicinvestmentinessen3alpublicgoodsliketransit
Poverty,socialcohesion,andinter-genera3onal,geographicandracialized-basedtransmissionofrisk
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Keyques3on:-Whattypeofcitydowewant?
Relentlessexpenseconstraintaspre-condi3on• Public/private
contestability,value-for-moneyaudits,lowerwageandbenefitcosts,etc.
Needtomatch
resourcestoambi3on
Matchrevenuetoneedsandeconomicgrowth• Con3nuedsuiteofnewtaxes
orincreaseuseofexis3ngtaxes,and/or;
• Con3nuedriseinbasicpropertytax,and/or;
• Newdealwithotherordersofgovernment–shareofbroadertaxbase
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City Building Capital $29Bunfundedcapitalandgrowing(doesnotincludenewannouncements)• Gapwillberefined–but
s3llunderwater
• Needtoimprovecapitalmanagement
• Removetheneedtounderes3mateprojectcostsinordertogetapproval
• Matchcapitalprojectswithsustainablerevenuetools
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TCHC Province/Federal Share of $2.6 billion requirement 1,728
TCHC Capital Maintenance 650TCHC Revitilization Projects 356
Less Prov Grant on Energy Retro Fit -29
SOGR Backlog to 2% of Asset Value (Exc.TCHC) 1,046
TTC Board Approved Unfunded 2,679SSHA (George Street Revitalization) 480Long Term Homes Care Services 246Other City Priorities 1,318Lower Don Flood Protection 975Waterfront Land Servicing (EBF, WDL and Keating) 150
Waterfront Public Realm Initiatives 350 Less Waterfront DCS/Federal & Provincial Funding -1,125
Unfunded Projects from Environmental Assessments 2,000
Tier 2 Unmet Need PrioritiesTTC Future Capital Needs 2,323Other Programs 597
Unfunded Transit Expansion InitiativesAll Unfunded Transit Expansion Initiatives 15,300(Preliminary - Pre-Design Estimates)
Total of Unfunded Capital Projects ($Million) 29,043
Major Unmet Capital Needs ($Million)
Unmet Need Priorities (Tier 1 Projects, TCHC & Waterfront 2.0)
Poten3alrevenuemeasures
Fullcostu3litypricing
Fullcostpricingofpublicgoods
Parkinglevy
Proceedsfromassetrecycling
Dedicatedproperty
tax
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2017 and 2018 Budget Gap
• Iden3fiedopeninggrosspressure• 2017=~$607M• 2018=~$438M
• Councildirectedapproachin2017• 2.6%reduc3on
• Residualgapwillbeverychallengingtoclose
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SustainabilityGap/BudgetPressure
Expendituremanagement
Revenueop3onsBridgesolu3ons
Goal($0Pressure)
Sustainable,long-termstrategies Bridgingstrategies
How to address Science + Art: Tools Matching Need
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-2.6%strategy
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PotenGal Fall Timelines
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Inthenewyear:• Futurelong-termfinancial
framework• Renewedcapitalplanwith
financialunderpinnings
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Thank you
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