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

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)

ConGnuous improvement and progress

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Servicereinvestment

PovertyReduc3onStrategy

TransitPlan/SmartTrack

SharedServices

Alterna3veServiceDelivery

RealEstateReview

Openanddigital

governmentDirectconversa3onaboutfiscalsustainability

Businesstransforma3on

TorontoCommunityHousingTaskForce

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

Matchinglong-termpolicyvisionandexpectedservicelevelswithfiscalcapacity

Now, more clarity

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ThreekeychallengesInterrelatedandoverlap

Makingthe2017and2018budgetswork

Long-TermStructural

CityBuildingCapital

2017and2018Budget

Gap

Financingexis3ngand

newcommitments

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

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

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

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

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

PotenGal Fall Timelines

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Inthenewyear:•  Futurelong-termfinancial

framework•  Renewedcapitalplanwith

financialunderpinnings

Thank you

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