Tax hikes or service cuts? New Toronto council has to close a 'scary' budget gap of $857M

The annual struggle to balance the City of Toronto's budget looks particularly tough this year. 

Instead of the usual tens of millions of dollars the city needs to raise, or cut, to balance the $15-billion spending package, the candidates elected to the next city council will need to figure out how to make up an $857-million gap.

Most of that deficit is related to the cost of addressing the COVID-19 pandemic. But experts say that's just the start of the serious financial pressures councillors will have to contend with as they work to fulfil the legal requirement to table a balanced city budget.

Those experts also warn that there are limited pathways to balance, compounded by sky-high inflation, a flat-lining of new home sales that has slashed city tax revenue, and an electorate accustomed to low property taxes. 

All of those factors will make dealing with this year's budget a thorny task, said Myer Siemiatycki, professor emeritus with the Department of Politics and Public Administration at Toronto Metropolitan University.

"That is a scary gap to have to make up," he said.

"And I think it signals, to me, that we are looking at deep cuts to a range of municipal services and programs."

Siemiatycki said the city has come through years where it intentionally limited tax increases to the rate of inflation. That has meant the impact of funding COVID-19 programs has been more profound on the budget, he said.

The recent cuts to recreation programs and a deferral of $300 million worth of infrastructure work are symptoms of the stress caused by the fiscal gap, he added.

"There have been consequences to the city not having sufficient revenue to meet the expenditures it needs to make to keep the city livable, viable, sustainable even," he said.

The director of the University of Toronto's Institute on Municipal Finance and Governance, Enid Slack, said prior to the pandemic, the city was in decent fiscal health, but some long-term signs of wear had started to emerge.

"We likened Toronto's fiscal health to an aging Toronto Maple Leafs defenceman," she told CBC News. 

"He's playing pretty well, the training staff are looking after him, but he's getting increasingly expensive," she said. "And he's going to need knee surgery very soon."

The proverbial surgical tools will have to come out in the months ahead, as revenues the city has counted on have dropped and the need for pandemic services have jumped. It remains unclear if the federal and provincial governments will come to the rescue as they have in previous years to help sort out the city's deficit.