Mayor Rob Ford’s administration continues to raise the spectre of a $774 million budget hole in the 2012 budget even though new revenues have dramatically changed the outlook.

For example, the city has already revealed it has an extra $88 million in surplus funds from 2010 that can be used to reduce the gap, and other extra revenues can cut it further.

Those monies whittle the shortfall down to about $443 million, still a huge sum but $330 million less than the Ford administration is saying publicly.

Key Ford officials mention the $774 million number on a regular basis, in the context of the city’s need to tame the budget.

The web page for the city’s service review now underway says prominently that the review is needed “to address Toronto’s 2012 budget gap of $774 million.”

The strategy of sticking with the opening deficit was defended by Councillor Peter Milczyn, a member of the budget committee.

Milczyn noted that the city’s practice has always been to wait until budget deliberations begin before finance staff publicly release their recommendations to close the gap.

“It is the opening number,” Milczyn said. “Yes, we’re already finding various ways of reducing that number and there are different options to get that number down to zero. We have to do that, and we will, but $774 million is the real number.”

Critics accuse the Ford administration of exaggerating the city’s money woes to cow citizens into going along with serious cuts.

“I think the mayor is trying to create a political climate that suggests that the City of Toronto government is broken,” said Councillor Gord Perks, a key budget figure in the old David Miller administration.

“The kind of damage that Rob Ford wants to do to services Torontonians rely on can only be achieved if he terrorizes the public into believing we need to do it,” Perks said.

Milczyn said moves such as raising property taxes and transit fares may be recommended by staff as options, but it’s premature to count those revenues until council makes a decision.

“It’s no different from what has happened every single year.”

Perks said he agrees with taking a close look at city spending each year and cutting services that aren’t doing the job any more.

“But we don’t have a disaster or a crisis on the scale that the mayor and the budget chief are describing,” he said. “They’re exaggerating the amount of work we have to do to balance our budget to create a culture of fear.”

Milczyn said the real difference is the Miller administration maintained services were being provided efficiently and the Ford administration doesn’t agree.

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He said Ford is willing to act to put the city on a sound financial footing.

“We’ve had a structural deficit since amalgamation occurred (in 1998) and it’s never really been addressed. The goal of this administration during this term of council is to try to finally address the structural deficit.”