The final tally of the city’s books shows there’s an extra $88 million available to reduce next year’s budget gap.

The year-end report for 2010 shows higher revenues and lower costs than had been projected in September.

City finance staff are recommending that the $88 million be used to reduce the $774 million hole in the 2012 operating budget rather than put the money into capital repairs.

If the budget committee and city council agree with that strategy, the amount of money the city needs to find to balance next year’s operating budget would drop to $686 million.

A big chunk of the windfall came from higher-than-expected revenues.

There was $14 million more from the land transfer tax that Mayor Rob Ford has vowed to kill; $19 million more from investments; city-owned Toronto Hydro chipped in an extra $15 million and court fines produced $12 million extra.

Costs were also lower in some categories, says the report, to be presented to the budget committee’s meeting Tuesday:

The city saved $6 million on welfare costs because the monthly caseload averaged 95,000 cases in 2010 versus an expected 105,000 cases.

There was $4 million in payroll savings due to a hiring slowdown in which certain vacant positions are left unfilled.

As of Dec. 31, the city’s workforce totalled 47,870 full-time positions and 4,025 part time positions. The report said that represents an overall drop of 1,333 positions.