The 2023 Budget Launch Spectacular

City Hall Watcher #210: the city's draft 2023 budget is off the launchpad — a look at what we've learned

Jan 16, 2023

Hey there! Well, it happened. The City has launched another draft budget, and we’ve only got 29 days before Council’s Valentine’s Day budget debate. Let’s not waste any time!

In this issue, I’ve looked at the nuts and bolts of the budget, with some charts — including an update to an old favourite comparing spending on rehabbing the Gardiner with spending on road safety and bike lanes. It ain’t pretty.

I’ve also got a look at the spending lines with the biggest increases and decreases in the proposed gross operating budget. You could call it the BUDGET POWER RANKINGS, but I feel like I’m overusing the “power rankings” nomenclature.

But whatever! In our main event, we’ve got a special guest post from Will Meneray looking at the problems with Toronto’s capital budget. In the Parks budget especially, the City is plowing way more into new infrastructure than they are into repairs and maintenance. It’s an imbalance that has serious implications because, really, what good are shiny new parks if the City is just going to let them badly deteriorate within a decade or two?

Let’s start there.

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— Matt Elliott

@GraphicMatt / graphicmatt@gmail.com / CityHallWatcher.com

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The Case for Capital (Budgets)

By Will Meneray

The operating side of the budget typically gets the most attention at committee, Council, and in public deputations. And why wouldn’t it? The operating budget has the greatest impact here and now…which just so happens to be the timeframe we’re living in. It is also the clearest indication of the political intents of our leaders — as the current debates around policing, TTC, and others indicate.

But for city planners, data geeks, and basically anyone planning to live in the city into — at least — the latter half of this decade, the capital budget matters nearly as much. While the operating side reflects our beliefs on how the city should be run, the capital budget — through the investments it does or does not make — reflects our vision of what we want the city to be.

So, what does the capital budget for 2023 tell us about that vision?

State of Not-So-Good-Repair

One of the key metrics in the capital budget looks at the backlog of state-of-good-repair (SOGR) needs and compares that to the total value of assets owned by the City of Toronto. When projected over time, it gives us a sense of the expected condition of our infrastructure and public spaces. Any change is a function of how much we plan to invest in maintenance, and the age of those assets.

In the 2023 budget, Toronto’s infrastructure is really showing its age. Of the seven departments that account for more than 90% of the City’s assets, only two have a SOGR backlog below 10%.

Of those, Toronto Water has the benefit of its own unique financing tools to address its spending needs. The other is the TTC, where budget analyses have seemingly assessed that zero percent of the network is in need of repair. That’s perhaps being a bit generous with its definitions of “good” repair. Councillors quizzed staff on this issue last week — to no avail.

Under the current budget, nearly all major departments will see their SOGR backlog grow over the next decade. This is despite some significant investments in repairs, with many departments committing upwards of half of their capital budgets to existing facilities instead of growth.

Parks, Forestry and Recreation (PF&R) is one of the notable exceptions, with less than a quarter of its capital spending dedicated to maintenance. In many ways, the challenges facing PF&R — the department most responsible for our public spaces — are emblematic of those facing the 2023 edition of the budget as a whole.

Unlike other departments, PF&R is highly dependent on fees levied on new development for its capital spending. This severely limits how it can use those funds as it is legally obligated to channel them to growth and service improvements, not repair.

While this may be less constraining for a department that is able to achieve both goals at once — for example, the simultaneous expansion and replacement of aging water mains — it is less practical for recreational facilities or parks.

There are other constraints working against PF&R’s use of these funds as well, such as the prohibition on using them for parkland acquisition. That’s a rather crucial portion of the City’s strategy that is expected to gobble up $280 million of the budget over the next decade on its own.

Clearly, these problems are made worse by the current uncertainty regarding development charges themselves. In the fall, the Province announced major changes to the development charges system. Though they later pledged to still make the City whole for the lost revenue, in budget meetings, staff were predictably skeptical about this outcome, instead highlighting the doomsday scenarios that would result if the Province did not replace lost municipal revenue.

Funding the Future

Even if the money continues to flow, the PF&R case study shows the cracks forming in the City’s financial model. In every budget since 2018, it has dedicated a smaller and smaller proportion of its capital budget to SOGR.

So far, however, the City has also continued to project that the backlog at the end of its ten-year plan will get smaller. But with continued emphasis on building new projects instead of funding maintenance, how much longer will this be the case?

PF&R’s funding constraints make it uniquely exposed — and perhaps the area where we will first see visible effects — but it is far from alone. Even departments with other financing tools or greater federal & provincial support, such as the TTC, are going to see their backlog grow enormously.

The City has an incredible need to fund growth: both to support its aggressive housing targets, and close the many service equity gaps across the City. But doing so without a sustainable model for managing the assets we already have only makes the eventual deficit worse.

It is a bill that will come due sooner or later.

Will Meneray is a consultant, public servant, and master’s student living in midtown. He has been an advocate on city issues for years, but is a relative newcomer to the inner workings of Toronto's budget. He welcomes comments at wmeneray@gmail.com. All errors and opinions are his alone.

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The Budget Basics

I’ll have lots more on the budget in the weeks ahead, but to start, let’s establish some of the basics.

Toronto’s proposed 2023 operating budget is $16.16 billion. But be careful when comparing that figure to past budget years. In budget years that don’t immediately follow municipal elections, the so-called “rate-supported” budgets for garbage collection, water, and parking are dealt with separately from the so-called “tax-supported” budget. An apples-to-apples comparison would use $14.15 billion for the operating spending.
That’s up 6.6% over 2022 in gross spending, including funding from user fees and other non-tax sources. The net budget increase is slightly smaller, at 5.7%. Notably, however, net spending in the budget is actually down 9% from 2022 levels. In 2022, the City was projected to make $5.4 billion in net expenditures at year-end. In 2023, they’re set to spend $4.9 billion.
At 5.5%, the proposed residential tax increase to fund the operating budget is the steepest in the history of amalgamated Toronto. (Thanks again to Neville Park for tracking down all this data for last year’s budget launch spectacular.) And that’s before you factor in the 1.5% increase to the City Building Levy — which has been extended, in this proposed budget, until 2035. The next-highest increase on record is the 5% increase passed by Mayor Mel Lastman in 2003.
Still, it’s not enough. This budget is only balanced thanks to the assumption that Prime Minister Justin Trudeau and Premier Doug Ford will contribute a combined $1.07 billion in operating budget bailout funds related to COVID pressures and supportive housing and refugee response costs.
But wait, there’s more. On the capital side, the budget assumes $2.3 billion in funding from the provincial government to offset revenue lost due to changes to development charges in Bill 23. In total, the capital and operating budgets for 2023 assume about $3.4 billion in funding that has not yet been committed.
So what does that get us? The city has provided this graphic breaking down the average property tax bill by major service area.

I really dislike how the City combines police, fire and paramedic costs into one “Emergency Services” line, however. They used to list them separately. The police budget is more than twice as large as the fire department’s and ten times larger than the paramedic budget. So here, based on their relative scale of net funding, is a version of the above chart with emergency services separated by service.

Better, right? Yeah, definitely better. In 2023, the average property tax bill will contribute $651 to Toronto Police Services — almost as much as will go toward financing capital projects. Tax bill spending on the operating budget for police is nearly three times higher than operating spending on housing.
The urbanist Brent Toderian has a saying I always think about during budget time. “The truth about a city’s aspirations isn’t found in its vision,” he says. “It’s found in its budget.” So let’s look at where spending is increasing and decreasing in the draft gross operating budget in 2023.

Interactive version (with all spending lines)

By percentage, the biggest spending increases are going toward the Office of Emergency Management (OEM) and the Mayor’s Office. For OEM, the increase is due to providing funding for ten positions to “support the management of encampments.” There are also three new positions to support the City’s plans to host five matches as part of the 2026 World Cup. Budgets reflect priorities, remember. The OEM budget isn’t huge, but it’s growing fast — they’re projecting a 29.5% increase next year, followed by a 31% increase in 2025.
The increase in Tory’s office is being justified as a necessity given the new strong mayor powers. “The mayor has much larger role to play in the budget process and in the hiring and changing of senior city officials,” a Tory spokesperson told the Star’s Alyshah Hasham.
Because this is looking at gross spending, it’s important to consider some spending increases are due to actions taken by other levels of government. The $237.5 million increase for Children’s Services, for example, appears to be mainly because of changes made by the federal government as part of their $10-a-day- program. The City’s net budgeted spending on Children’s Services is actually set to decline in 2023, by 2%.
Speaking of declines, here are all the decreases in gross spending.

Don’t despair, fans of Clerks — the City Hall kind, not the Kevin Smith movie, though there’s probably some overlap — the sharp cut to the Clerk’s office is due to not needing to budget $17 million to deliver a municipal election this year.
The 15.7% drop in budgeted spending on the Chief Information Security Officer’s Office is less explicable, and more concerning, given how common ransomware and other cyberattacks are getting. The budget is a bit mysterious. In 2022, the office budgeted $40 million for 80 positions but spent just $24.3 million, according to projections. The new budget is $35 million for 82 positions.

Let’s close with an update to an old favourite: a chart comparing capital plan spending on the Gardiner versus other transportation priorities. This highway remains very expensive.

I’ve collected more of my coverage from the budget launch here.

If you’ve got questions about the budget or areas you’d like me to focus on, don’t hesitate to reach out.

You can contact me by replying to this message in your email program of choice.

More from Matt: on John Tory’s budget gamble, and failing service standards

📰 For the Toronto Star last week, I wrote about Mayor John Tory’s big budget bet, and the risk that comes from assuming there will be tons of provincial and federal money coming to fund services. I hadn’t yet seen the budget when I wrote it, but the gist of it all proved true.

🗞 For the Star this week, a special look at the transportation budget, which shows a whole bunch of failing service standards — and not enough capital investment.

Look for it in your favourite newspaper.

The week at Toronto City Hall

MONDAY: 🩺 The Board of Health met this morning, naming Councillor Chris Moise as their new chair. They got an update on Toronto’s Respiratory Viruses Season, which is one of my least favourite seasons. As you’d probably expect — and may have experienced — the flu hit faster and peaked earlier last fall than in past years.

The Committee also considered and approved a walk-on motion brought by Councillor Ausma Malik, Councillor Alejandra Bravo, and Councillor Gord Perks that, among other things, recommends “that City Council declare a public health crisis in the City of Toronto based on systemic failure of all three levels of government to provide adequate 24-hour, drop-in and respite indoor spaces.”

TUESDAY: 💸 The Budget Committee begins hearing public deputations on the 2023 budget. They’ll be hearing from people at City Hall and North York Civic Centre today.

WEDNESDAY: Budget deputations continue, with sessions at Etobicoke Civic Centre and Scarborough Civic Centre.

Spare two thoughts for East York Civic Centre and York Civic Centre. Always forgotten.

🏆 Bid Award Panel contract award of the week: Up to $5.8 million for Adobe Product Software Licenses. (That’s a lot of Photoshop!)

THURSDAY: 🏘️ The Planning & Housing Committee meets. Councillor Brad Bradford, the newly-minted Chair of the committee, has a motion requesting a report due in April on the potential to use the provincial government’s Community Infrastructure and Housing Accelerator tool to speed along work on Housing Now sites.

“On December 19, 2022,” Bradford notes, “the Town of Bowmanville used the CHIA to expedite approval of an 84-unit affordable housing project.” And seriously, if even Bowmanville can do it, why can’t we?

🚝 The TTC Board gathers. CEO Rick Leary’s monthly report reveals yet another drop in customer satisfaction and the percentage of TTC riders who would say they’re proud of the transit system. At 59%, the “Pride in TTC” score looks like it could be setting records. Maybe raising fares and cutting service will help.

FRIDAY: 🗄️The General Government Committee wraps up the week. The City was supposed to update prescribed wage rates under the Fair Wage Policy three years ago for the 2019-2021 period, but COVID and staff shortage means they’re just getting around to it now. Whoops.

NEXT WEEK: The Budget Committee wraps up their work on the finances on Tuesday.

City Hall Watcher #210

Thanks for reading yet another budget spectacular! For fun, you can go back and read our budget launch coverage for 2019, 2020, 2021 and 2022. Time flies.

Thanks to Will for his contribution! City Hall Watcher is looking for more paid freelance contributions. If you’ve got an angle on the budget or another pressing municipal issue, please reach out to me.

I’ll be back next Monday with more charts and things. See you then.

City Hall Watcher