How does a $774-million deficit become a $90-million surplus?

How did a $774-million hole in the city’s operating budget become a $90-million surplus?

Toronto is expected to finish the year with $90-million to spare. Just a year ago, Mayor Rob Ford’s administration was issuing dire warnings about the need to cut costs in order to plug a $774-million funding shortfall in the city’s 2012 budget.

Councillor Doug Ford says the extra money shows his brother the mayor’s austerity efforts worked.

“Through efficiencies we found savings, through labour contracts and throughout the whole system,” he said. “Anyone when we first got elected who said where’s the gravy? We’ve proved in 18 months where the gravy is and there’s barrels of gravy still down here.”

Councillor Gord Perks, a critic of the mayor, says the massive budget swing shows the Ford administration inflated the budget shortfall in order to justify shrinking government. “The budget chief was exaggerating the size of the hole so he could scare Torontonians into accepting cuts,’ he said.

Toronto chief financial officer Cam Weldon, says the city is close to balancing its budget – something he defines as when it no longer needs to dip into reserves to cover operating expenses. The city’s debt for capital projects continues to increase.

Council took $100-million from reserves to use for the 2012 budget, but now that same budget is expected to have a $90-million surplus – just $10-million shy of balancing. “We are working on getting that gap closed for 2013,” Mr. Weldon said.

Mr. Weldon’s back-of-the-envelope summary of Toronto’s 2012 budget shows the $774-million gap was reduced through a combination of savings and new revenue. Service cuts and cost reductions added up to $329-million. Increasing fees, TTC fares and other revenue sources as well as taxes brought in another $345-million. The rest – $100-million – came from reserves.

FOLLOW THE MONEY

The challenge: $774-million budget gap

How they got to zero:

Expenditure reductions: $271 m

Service adjustments: $58 m

Revenue increases: $258 m

Tax increases: $57 m

TTC fare increase: $30 m

Money from reserves: $100 m

How they got a surplus:

Expenditure savings $19 m

Labour savings $26 m

Other: $1 m

Higher-than-expected land transfer tax: $44 m

End result: $90-million surplus

Original Article
Source: the globe and mail
Author: ELIZABETH CHURCH