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From The Star
I've seen the future — as T.O. goes broke
Feb. 25, 2006. 01:00 AM
ROYSON JAMES
The Day Toronto Goes Broke may be closer than you think — say, four years; five at most.
That's what city officials fear — unless Queen's Park, the "banker of last resort," rescues Canada's largest city and its spiralling $7.7 billion budget.
Failing that, Toronto is on pace to clean out its reserves next year, impose double-digit tax hikes in 2007, bury itself in debt for the foreseeable future and still that won't be enough to forestall bankruptcy.
Legally, the city cannot run a deficit, but without the needed funds, it would be essentially bankrupt.
Then the province would step in and take over.
"I'm nervous after this year," says Joe Pennachetti, the city's deputy manager and chief financial officer. "Very nervous."
"If there's a recession what's going to happen? There's nothing there," adds budget chief David Soknacki, surveying this year's raid on reserve funds to balance the budget.
By 2010, as Vancouver covers itself in Olympic glory, Toronto could be on the brink of insolvency. And residents here will be wondering, "How'd we let this happen?"
In today's GTA section, Paul Moloney outlines how we got to the brink and the bitter medicine needed to avert fiscal disaster. What's clear is we're on the road to financial ruin. A look back to the future reveals a sad, cautionary tale.
On a blustery March day four years hence, a weary David Miller, in the final months of his second term as mayor, emerges from a closed-door meeting with Premier John Tory and it's obvious the news is not good. Battered from the year-long recession that has pushed the provincial deficit to near double digit levels, Tory has told the mayor there are no more bailouts. Toronto must implement the dreaded service cuts its budget chief dismissed in 2006 as "near apocalyptic."
Miller quickly signs the layoff notices for 1,000 workers, something he'd promised to avoid. Workers in nine of the city's 10 homes for the aged are out on the street. They'll have to apply to the new private-sector owners for jobs some of them have held for 20 years.
A year earlier, the city had sold Metro Hall and used the revenue to fix buses and streetcars. Now Exhibition Place is on the block; as is the Hummingbird Centre and the Guild Inn in Scarborough and the Toronto Centre for the Arts in North York. The Toronto Maple Leafs have offered $10 million for the Ricoh Coliseum and the city's interests in the new soccer stadium, both at the Ex.
Council used up its last cash cow in 2009, cashing in the last $330 million of the billion-dollar loan to Toronto Hydro. Some had warned this was akin to selling the furniture to buy groceries. The answer? "What good is furniture if you are starving?"
All garbage collection, except in the downtown, is to be privatized for a potential savings of $20 million. Bus companies are looking to purchase some lucrative TTC routes. The boulevards along those routes are weed-covered. City hall can afford to cut them only once a year. The subway to York University is a distant memory.
Against that backdrop, Miller goes on television with his final state of the city address. In hotels and hostels and watering holes around town, as in Etobicoke bungalows and Rosedale mansions, Toronto hangs on every word.
"My fellow Torontonians," the mayor says, face pale and ashen, his celebrated golden blond locks thinning and showing highlights of grey. "Our city is in a fiscal crisis.
"We arrived here today along a well-known path greased by unenlightened decisions made by a succession of federal and provincial governments. Our destination was predicted; the outcome predictable."
By now, citizens have grown tired of the same sad song. They've already punished every premier responsible — from David Peterson, who started the downloads with the dumping of provincial court costs in the early 1990s, to Bob Rae and Mike Harris, who perfected the destructive technique.
Dalton McGuinty, despite giving Toronto billions of dollars and new taxing powers, was tossed from office in 2007, losing every seat in Toronto. Residents blamed him for the 12 per cent property tax hike that year. He got the boot for his largesse.
It had become clear that even though McGuinty took back the housing and social services Mike Harris dumped on the city in 1998, ("uploaded the download") massive costs were still strangling Toronto.
"Earlier today, I signed layoff notices for some of our most devoted workers. I did it with a heavy heart, as you know. This is not the Toronto we envisioned when you elected me mayor in 2003 and in 2006 to revitalize our city," Miller says.
"Our hands are tied. Payroll must be met. All the low hanging fruits have been picked. From here on in, it'll be blood on the floor. Our options are all limited and painful. We either cut services or raise taxes and user fees, and raise them higher than the current 15 per cent target. That is unsustainable. In essence, we can't afford what we have; we can no longer have what we used to afford.
"Our credit rating is at an all-time low. Borrowing costs have skyrocketed with higher interest rates, a lower credit rating, and ballooning debt levels.
"As you know too well, we have tried to stave off the crisis in a measured, responsible way, hoping to preserve the very things that are of core value to Torontonians. Still, we've had to cut grants to our heroic community and ethnic groups by 80 per cent. Cultural grants to our world-class institutions were all but axed a year after our celebration of the year of culture.
"We have taken the first steps towards privatization of some services, leaving the most vulnerable and strategic ones in government hands. Water services, for example, will be retained for as long as we can. But the revenues from such steps are limited. Road tolls are next.
"This is not the city we once loved. Our resolve must now be to salvage what we can so we can rebuild in the future.
"I have tried with all my might to get a new deal from the province; to get Queen's Park to pay its bills and live up to its responsibilities; to challenge the premier to take back the costs that are burying his capital city; to seek 1 per cent of provincial sales tax revenues that would give us $500 million a year.
"We almost succeeded, but the recession was the final nail. What will follow is not pretty, unless we get outside help.
"I offer you nothing but tough times, higher taxes, fewer services. But with God's grace and your resolve, a stronger Toronto will survive to thrive again.
"Many of us thought this day would never come; and certainly not this soon. Well it's here and city council and I will not rest until we find every tool available to preserve essential services; and keep hope alive.
"Goodnight. Say a prayer for Toronto before you sleep tonight."
As the mayor signs off, civic workers, concerned about jobs and pensions, gather on Nathan Phillips Square for a vigil.
Police, still smarting from the freeze on new police hires since 2006, stand in solidarity.
The "near apocalyptic" cuts were nearer than even budget chief David Soknacki had imagined when he warned of them in 2006. Budget chiefs had cried wolf before. So, few residents bothered themselves about the perpetual warnings.
Now, there'd be hell to pay.
"Everywhere I go, I tell people, `You know what, you're under-taxed.' Whether or not they choose to listen ..." Soknacki's voice trailed off when he said that in 2006.
Four years later these words may also prove prophetic: "It's human nature to believe that bad things won't happen."
I've seen the future — as T.O. goes broke
Feb. 25, 2006. 01:00 AM
ROYSON JAMES
The Day Toronto Goes Broke may be closer than you think — say, four years; five at most.
That's what city officials fear — unless Queen's Park, the "banker of last resort," rescues Canada's largest city and its spiralling $7.7 billion budget.
Failing that, Toronto is on pace to clean out its reserves next year, impose double-digit tax hikes in 2007, bury itself in debt for the foreseeable future and still that won't be enough to forestall bankruptcy.
Legally, the city cannot run a deficit, but without the needed funds, it would be essentially bankrupt.
Then the province would step in and take over.
"I'm nervous after this year," says Joe Pennachetti, the city's deputy manager and chief financial officer. "Very nervous."
"If there's a recession what's going to happen? There's nothing there," adds budget chief David Soknacki, surveying this year's raid on reserve funds to balance the budget.
By 2010, as Vancouver covers itself in Olympic glory, Toronto could be on the brink of insolvency. And residents here will be wondering, "How'd we let this happen?"
In today's GTA section, Paul Moloney outlines how we got to the brink and the bitter medicine needed to avert fiscal disaster. What's clear is we're on the road to financial ruin. A look back to the future reveals a sad, cautionary tale.
On a blustery March day four years hence, a weary David Miller, in the final months of his second term as mayor, emerges from a closed-door meeting with Premier John Tory and it's obvious the news is not good. Battered from the year-long recession that has pushed the provincial deficit to near double digit levels, Tory has told the mayor there are no more bailouts. Toronto must implement the dreaded service cuts its budget chief dismissed in 2006 as "near apocalyptic."
Miller quickly signs the layoff notices for 1,000 workers, something he'd promised to avoid. Workers in nine of the city's 10 homes for the aged are out on the street. They'll have to apply to the new private-sector owners for jobs some of them have held for 20 years.
A year earlier, the city had sold Metro Hall and used the revenue to fix buses and streetcars. Now Exhibition Place is on the block; as is the Hummingbird Centre and the Guild Inn in Scarborough and the Toronto Centre for the Arts in North York. The Toronto Maple Leafs have offered $10 million for the Ricoh Coliseum and the city's interests in the new soccer stadium, both at the Ex.
Council used up its last cash cow in 2009, cashing in the last $330 million of the billion-dollar loan to Toronto Hydro. Some had warned this was akin to selling the furniture to buy groceries. The answer? "What good is furniture if you are starving?"
All garbage collection, except in the downtown, is to be privatized for a potential savings of $20 million. Bus companies are looking to purchase some lucrative TTC routes. The boulevards along those routes are weed-covered. City hall can afford to cut them only once a year. The subway to York University is a distant memory.
Against that backdrop, Miller goes on television with his final state of the city address. In hotels and hostels and watering holes around town, as in Etobicoke bungalows and Rosedale mansions, Toronto hangs on every word.
"My fellow Torontonians," the mayor says, face pale and ashen, his celebrated golden blond locks thinning and showing highlights of grey. "Our city is in a fiscal crisis.
"We arrived here today along a well-known path greased by unenlightened decisions made by a succession of federal and provincial governments. Our destination was predicted; the outcome predictable."
By now, citizens have grown tired of the same sad song. They've already punished every premier responsible — from David Peterson, who started the downloads with the dumping of provincial court costs in the early 1990s, to Bob Rae and Mike Harris, who perfected the destructive technique.
Dalton McGuinty, despite giving Toronto billions of dollars and new taxing powers, was tossed from office in 2007, losing every seat in Toronto. Residents blamed him for the 12 per cent property tax hike that year. He got the boot for his largesse.
It had become clear that even though McGuinty took back the housing and social services Mike Harris dumped on the city in 1998, ("uploaded the download") massive costs were still strangling Toronto.
"Earlier today, I signed layoff notices for some of our most devoted workers. I did it with a heavy heart, as you know. This is not the Toronto we envisioned when you elected me mayor in 2003 and in 2006 to revitalize our city," Miller says.
"Our hands are tied. Payroll must be met. All the low hanging fruits have been picked. From here on in, it'll be blood on the floor. Our options are all limited and painful. We either cut services or raise taxes and user fees, and raise them higher than the current 15 per cent target. That is unsustainable. In essence, we can't afford what we have; we can no longer have what we used to afford.
"Our credit rating is at an all-time low. Borrowing costs have skyrocketed with higher interest rates, a lower credit rating, and ballooning debt levels.
"As you know too well, we have tried to stave off the crisis in a measured, responsible way, hoping to preserve the very things that are of core value to Torontonians. Still, we've had to cut grants to our heroic community and ethnic groups by 80 per cent. Cultural grants to our world-class institutions were all but axed a year after our celebration of the year of culture.
"We have taken the first steps towards privatization of some services, leaving the most vulnerable and strategic ones in government hands. Water services, for example, will be retained for as long as we can. But the revenues from such steps are limited. Road tolls are next.
"This is not the city we once loved. Our resolve must now be to salvage what we can so we can rebuild in the future.
"I have tried with all my might to get a new deal from the province; to get Queen's Park to pay its bills and live up to its responsibilities; to challenge the premier to take back the costs that are burying his capital city; to seek 1 per cent of provincial sales tax revenues that would give us $500 million a year.
"We almost succeeded, but the recession was the final nail. What will follow is not pretty, unless we get outside help.
"I offer you nothing but tough times, higher taxes, fewer services. But with God's grace and your resolve, a stronger Toronto will survive to thrive again.
"Many of us thought this day would never come; and certainly not this soon. Well it's here and city council and I will not rest until we find every tool available to preserve essential services; and keep hope alive.
"Goodnight. Say a prayer for Toronto before you sleep tonight."
As the mayor signs off, civic workers, concerned about jobs and pensions, gather on Nathan Phillips Square for a vigil.
Police, still smarting from the freeze on new police hires since 2006, stand in solidarity.
The "near apocalyptic" cuts were nearer than even budget chief David Soknacki had imagined when he warned of them in 2006. Budget chiefs had cried wolf before. So, few residents bothered themselves about the perpetual warnings.
Now, there'd be hell to pay.
"Everywhere I go, I tell people, `You know what, you're under-taxed.' Whether or not they choose to listen ..." Soknacki's voice trailed off when he said that in 2006.
Four years later these words may also prove prophetic: "It's human nature to believe that bad things won't happen."
