Mayor John Tory’s low-tax, big-spend city budget is in serious trouble after he spurned the Wynne government’s interest-bearing, heavily secured loan, sending the city scrambling to fill an $86-million budget hole.

On Thursday, Tory offered a complicated alternative that would see Canada’s biggest city go to a bank for a loan to help balance its $9.973-billion operating budget, and still delay or cancel some capital spending.

News of the major miscalculation came one day after the TTC’s chief executive cast doubt on the practicality of Tory’s budget pledge to let kids under 12 ride free, because few children carry proof of age.

Together they cast a pall over the future of Tory’s popular debut spending plan, which limited the residential property hike to 2.75 per cent while offering $170 million in new spending on transit, social services and more.

With a stay-the-course demeanour, Tory told reporters at city hall that the $200 million line of credit proffered by Premier Kathleen Wynne was “cumbersome” — secured by city land plus future gas-tax revenues.

“We have concluded that the city can do better on its own,” Tory said. “We thank the province for its offer, but in the end, we will take care of our own house.”

Wynne’s office was notified of the snub about one hour before Tory made it public. City officials earlier felt blindsided by provincial wavering over how much relief to give Toronto from a three-year phase-out of a provincial grant for long-ago downloaded social housing.

“I don’t think so,” Tory said when asked if there was a chill in the warm relationship with Wynne that he had repeatedly touted as an asset during last year’s mayoral campaign.

But his deputy mayor, Councillor Denzil Minnan-Wong, said, “The City of Toronto needed some help and the arrangements (the province) gave us were, quite frankly, no help at all. Thanks for nothing.”

Nick Kouvalis, a key figure in Tory’s campaign and transition teams who no longer works for the mayor, said city officials were misled by assurances of provincial help.

“They made a commitment and they’ve broken their commitment,” Kouvalis said. “The province has dirt on its hands.”

Ontario Finance Minister Charles Sousa said provincial officials worked “diligently” with city counterparts on help for Toronto that would not have a financial impact on the deficit-plagued province.

Noting other provincial aid to Toronto and that the city has run surpluses, Sousa added in a statement: “While we recognize the unique challenges of Ontario’s largest city, any support must be consistent with Ontario’s fiscal plan.”

Legally, the city cannot borrow money to balance its operating budget. Acknowledging Toronto’s aging infrastructure, council has for years transferred a portion of operating revenues to fund capital costs.

City manager Joe Pennachetti proposed Thursday to reduce that transfer for several years and to help fill the gap with a bank loan to be repaid over six years, with an aim to eventually get the transfer back up to current levels.

The loan would effectively lessen the impact of the grant phase-out by stretching it over more years, but would not erase what will turn into a permanent $121.9-million shortfall in city funding.

Tory said some capital projects might have to be delayed or cancelled. Next month Pennachetti will give councillors, who are to finalize the budget in March, a list of possible targets.

Councillor Shelley Carroll, budget chief under former mayor David Miller, said Tory was not misguided, but assumed the province would come onside after a frequently toxic relationship with predecessor Rob Ford.

“In fact, this argument dates back to the beginning of amalgamation,” Carroll said of the downloaded housing costs. “Today we’ve learned that this 12-year conversation is coming to an end.”

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Residents, she said, must accept that the huge costs of social housing have become a city “burden” funded through property taxes.

With files from Robert Benzie

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