City manager schools mayor, council

City manager Peter Wallace during the executive committee meeting discussing the Toronto budget Tuesday December 1, 2015. (Dave Abel/Toronto Sun)

Originally published in the Toronto Sun Dec. 1,
Toronto’s new city manager, Peter Wallace, delivered a wake-up call to Mayor John Tory and his executive committee Tuesday.

In a high-level presentation on the fiscal challenges facing the city, he schooled councillors on his role as well as theirs. In doing so, he made it clear who’s in charge at City Hall.

What did we learn?

Toronto is likely to get a lot more expensive

The presentation was the setup for a 2016 budget that’s likely to increase the cost of living in Toronto. Expect the city to borrow more, add new user fees or taxes, increase existing ones and possibly include a “one-time” property tax hike well above the rate of inflation to “reset” the fiscal framework at a “more sustainable” level.

Tory’s not running this show

Wallace made it clear he has no intention of meeting the mayor’s targets for cost reductions, efficiencies or property tax rates. Past mayors were intimately involved in shaping the budget before it was launched. But now the city’s budget is largely in the hands of an unelected civil servant not subject to the kind of public pressure politicians face. This is good if you’re happy with higher taxes. It’s bad if you want a say in how the city spends your money.

Get Council out of the weeds

By asking politicians to first consider the question, “What do you want to achieve?” Wallace flagged the biggest problems facing the city: it has no strategy and no board of directors responsible for developing one. Instead, city decisions are driven by budget considerations and councillors spend their time in the weeds, arguing about who should make hot chocolate at neighbourhood arenas or how often grass should be cut in their ward’s parks. Wallace, rightly, wants council to act like a proper board of directors and set a long-term strategy that will drive the budget process. If council tells him where it wants to go, he’ll build a budget to get there.

Debt likely to balloon

Wallace spent some time explaining how Toronto’s capital budget is financed, taking issue with past city policies and suggesting he’d like to see some significant changes. The previous city manager pursued a fiscally conservative approach, funding a growing slice of capital expenses with saved money rather than borrowed money. This allowed Toronto to maintain a strong balance sheet, low debt and high credit rating.

He pointed to $980 million in past capital projects the city paid for without borrowing money, even though council had authorized the debt. He sees this as a bad thing. Tory used his question time to pin down how much of this evil “under borrowing” was former mayor Rob Ford’s “fault” (about $300 million) and CFO Rob Rossini revealed this was being “corrected” by issuing new debt even as the committee was meeting. City Hall is truly an inside-out world.

Don’t be surprised if council changes its policy and decides to fund future capital projects entirely with debt. Tory did this on a one-time basis last year to balance the 2015 budget. Making this permanent could free up $200-$600 million annually for the operating budget going forward, but would require an increase to the city’s debt ceiling to allow for an additional $4 billion over 10 years. This means more of your tax dollars going to service higher interest expenses, leaving fewer for city services.

Either way, expect to pay more in 2016 for the privilege of living in Toronto.

— Towhey is managing director of Ballacaine Strategy & Execution and weekend host with Newstalk1010 and the former chief of staff to former mayor Rob Ford