Toronto residents will be asked to pay 2.5-per-cent more in property taxes at a time of cuts to city spending as Mayor Rob Ford continues his austerity crusade with the proposed budget for next year.

The mayor is attempting to reverse a steady increase in spending – an especially tall task in municipal government, where Mr. Ford requires buy-in from a majority of council. Toronto residents get their first glance at how Mr. Ford plans to do that when the wraps come off the 2012 budget starting Monday.

Proposed cuts would shave close to $50-million off the city's total spending, sources familiar with the budget say. At the same time, the city is counting on taxes to cover a greater share of its planned $9.35-billion budget, which also includes revenue from transfer payments, user fees and other sources. A growing assessment base and the proposed tax hike are expected to add close to $100-million to the city's coffers, sources say.

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Mr. Ford has been clear about his desire to shrink the size of Toronto's government and reduce costs across the board. For too long, he argues, the city has lived beyond its means, relying on one-time revenue and bailouts from the province to balance its books.

But curbing spending is proving to be a greater task than the mayor envisioned when he promised voters he could cut costs and preserve services by finding the "gravy" at city hall – proof his critics say that there is no gravy after all.

The proposed cut to next year's budget represents about half a per cent of total expenditures. Balancing the city's books will depend on one-time windfalls, such as the sale of real estate and the city's interest in Enwave, Toronto's downtown district heating and cooling system, The Globe and Mail has learned.

Gaining council's approval for this budget is a key test for the mayor. The prospect of cuts to libraries and transit service has prompted strong push-back from the public. A review of core services this summer came up with $27.7-million in cost savings to which councillors could agree and the mayor's closest allies outvoted him earlier this month on a money-saving measure to stop the collection of extra recycling placed beside blue bins.

Labour costs also will be a factor. Staff cuts are a certainty, with pink slips already being delivered in some departments. In addition, management are being trained to drive Zambonis and deliver front-line services in anticipation of a possible lengthy labour disruption next year.

In selling his budget, Mr. Ford is expected to emphasize the need to hold the line on spending, stressing that a dollar directed to save one service must be balanced by a dollar cut elsewhere.

"This is where the city needs to go," said a source close to the administration. "This is all about resetting the foundation."

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A city-wide directive asked for 10-per-cent savings in all areas. But some, such as police services, failed to reach that number, meaning others will face even more reductions. "Not all departments are essential," said the source, characterizing the 10-per-cent request as a "management tool," used to push staff to find savings.

Using the cost-cutting efforts of other governments as a guide, economist Eric Lascelles predicts lowering Toronto's spending will be tough. Inflation and a growing population naturally drive up expenditures by about 3-per-cent annually, he said, even without new programs, so holding the line or reducing the money going out generally means fewer services.

"It's difficult to avoid," said Mr. Lascelles, chief economist for RBC Global Asset Management, pointing to the federal budgets of Paul Martin as an example. "You have to be out there actively cutting and that's the challenge. It's very unpopular and politicians don't like to be unpopular. That's what makes it so difficult," he said.

Critics of Mr. Ford, among them former budget chair Shelley Carroll, argue there is no need to cut spending in a city with a growing population and tax base like Toronto. "We are not that broke," Councillor Carroll said. "You should be efficient, but rein in spending? There is nothing to rein in here."