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E-BLAST: We Got A New Deal, But Challenges Remain

Last week, Premier Ford and Mayor Chow stood together and announced a New Deal for Toronto. This was the biggest announcement for our city in quite some time. Everywhere I went for the rest of the week, people would stop me and say, "Well, you must be relieved! Problem solved, eh?" These well-meaning friends knew that chairing the City Budget process for 2024 is the biggest challenge of my career.

Premier Ford and Mayor Chow shake hands at the New Deal announcement last Monday, November 27, 2023.

The Province did come forward with solutions to some of our financial challenges. Our City Manager and Chief Financial Officer (CFO), both of whom were part of the New Deal Working Group, reported that these table discussions were some of the most productive intergovernmental talks they've been a part of, and that the City's concerns were heard more than ever before. They achieved a lot for Toronto. Let me give you a sneak peak of what they will report at Council next week:

  1. Across three years: $330 million in operating support for new integrated provincial transit projects, starting in 2024.These funds will be used to bring the Finch West LRT and Eglinton Crosstown LRT online. This is very good news, because hiring staff and training starts in 2024. 

  2. One-time funding: $300 million for subway and transit safety, recovery, and sustainable operations.Conditional upon: Toronto establishing a new transit rider safety committee.This money would need to go towards increasing the presence of police or safety officers at stations and on transit vehicles. Additional safety officers are already requested in the 2024 draft budget, so this is also welcome news. 

  3. Across three years: $600 million in shelter and homelessness support for non-refugees.Conditional upon: The Federal government providing operating funding support for refugees and asylum seekers.This funding would build upon the Province's existing homelessness prevention program and support services, which are already relying far too much on the property tax base. 

  4. Procurement funding of $758 million to modernize subway trains on Line 2.Conditional upon: Matching funds from the Federal government. (The City has already committed to our share).This money would go towards the purchase of 55 new subway trains to replace those near the end of their life on the Bloor-Danforth line. Good news, because Line 2 needs to be modernized before the Scarborough subway expansion can be integrated with it. 

  5. Across three years: Up to $342 million through the Building Faster Fund.Conditional upon: Toronto achieving 125% of its annual housing targets in 2024, 2025, and 2026.Council has committed to exceeding the provincial target every year and is taking aggressive steps right now to get that underway, so I trust that we will be able to access these funds every year.

After reading that list, you might be thinking that there are an awful lot of strings attached. You're right. I don't mind, because the strings align with the Mayor and Council's needs and goals. Where funding is conditional upon Federal support, these are urgent asks that have already been made to Ottawa. These committed funds from the Province only make our case to the Government of Canada even stronger.

There is one other major piece of the New Deal that I haven't touched on yet. It really represents the biggest change and it is something the City has been struggling with for decades. The oversight of two major Toronto highways—the Gardiner and the Don Valley Parkway—is being uploaded to the Provincial government.

Mayor Chow put it well at the press conference last Monday: "By uploading the Gardiner and DVP, the City will be able to spend billions more on affordable housing, fixing transit, and building communities. Over the next few years, we will continue to examine the City's finances and work together on Toronto's long-term financial sustainability. It's a beginning of a journey, it's a wonderful first step."

As part of the New Deal, the City is also allowing the Province to take over responsibility for the entirety of Ontario Place (the City owns a small sliver of the land). This paves the way for the Province's controversial redevelopment of the site. While I know some aren't happy about this part of the agreement, it is the price we pay for the billions of dollars in operating and capital support the City now has for years to come.

You might be wondering what happened to the new revenue streams that were contemplated last summer in our Long-Term Financial Plan, and written about extensively in this E-Blast. There was a potential sales tax, commercial parking levy, and other smaller tools. These are very much still open for discussion. The financial teams at both the Province and here at the City have committed to continue exploring these tools and what they would mean for our city. Ultimately, the New Deal was only achieved as quickly as it was because all parties agreed to set aside new taxes and fees given the state of the economy, but those discussions continue.

So what did I have to say to all of those kind people who patted me on the back and said that the City's financial problems are solved? I'm afraid I had to say, "Not so fast.' 

You've heard me say many times that the City is staring down a $1.5 billion operating shortfall for 2024. The New Deal only covers about $400 million of that hole. That is not chump change, and the same amount will be available for the next three years. However, it still means that we have a $1.1 billion shortfall to contend with. Our Chief Financial Officer (CFO) and I are hard at work to dig for the rest of the shortfall in our municipal sofa cushions. That's only fair. Hunting for efficiencies must never stop. 

What I'm most looking forward to when the City Manager and CFO present their New Deal report to Council is the financial room created by the upload of the Gardiner and DVP. This represents billions in capital expenditures over the next several years, but also saves us significant operating dollars that are usually spent on emergency repairs. We will now be able to use the Budget process to reprioritize those capital resources towards many other important projects in the city, perhaps including the creation of affordable housing.

One last thought: Don't forget about those all-important conditions attached to some of the New Deal funding. You may be in a position to help us with that. We need the Federal government to step up and provide the funding our city desperately needs, particularly to support the over 4000 refugee claimants and asylum seekers in our shelter system. If you have the time, reach out to your local MP and tell them that your property taxes are the entirely wrong funding source for immigration shelter supports. Politely ask them to consider that Premier Ford has put $600 million on the table for homelessness, but it all goes away if the Federal government won't pay their fair share. 

My sincere thanks go out to our Mayor and Premier for reaching this historic deal for our city. The 2024 Budget will still be a challenging process, but this deal puts Toronto on much more solid footing for the years ahead. Of course, the question of the City's long-term financial sustainability is still very much unanswered, but most of the players are at the table to start that essential conversation. Rest assured I will keep you fully updated on all things budget in 2024 and onwards.



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