politics Campaign Fact-Check: Rob Ford on Toronto’s Fiscal Health and Future

Responding to a U of T report on the City's finances, the mayor played fast and loose with the truth.

In contrast to the conclusion repeatedly drawn by Rob Ford, Toronto does not have a spending problem, nor are we awash in gravy and waste. According to a new report issued by the Institute on Municipal Finance and Governance, a research hub and think-tank at the University of Toronto, the City instead has a revenue problem: specifically, a multibillion-dollar infrastructure funding shortfall. Our mayor’s rhetoric notwithstanding, the problem is that we don’t have enough money coming in, not that there is too much going out the door.

IMFG’s study—the first in a series to be released in advance of the 2014 municipal election—provides an overview of Toronto’s financial situation, as well as a look at the fiscal challenges facing the City. Their four main findings amount to a confutation of nearly everything Ford has claimed about the City’s finances over the past four-plus years: city council does not spend money like a drunken poet on payday, Toronto’s property tax rates are low compared to those of other Ontario cities, the City needs new sources of revenue to fund infrastructure maintenance and investment, and Toronto’s debt is both modest and manageable.

Responding to the report in a press release, Ford took credit for the good parts, ignored the bad parts, and made up the rest. Here’s a breakdown of his response, with half-truths rendered in orange and outright lies in red :

The report released today by the Institute on Municipal Finance and Governance highlights a number of interesting points. They note that under my watch Toronto’s finances are strong and sound.1

1 The authors make no such vague, uniformly positive assessment of Toronto’s finances, nor do they credit Ford (or any other politician) with the financial well-being of the city. They write that “the City’s fiscal health is sound by most measures, but it faces cost pressures and its aging infrastructure and investment needs present a huge financial challenge.” (The report does note in an aside that politicians often claim to have much more influence on a city’s economy than they actually do—but adds, “elected officials in general, and at the City level in particular, have little direct control over broad economic trends such as GDP growth, housing booms, or unemployment rates.”)

They found that the City of Toronto is managing its spending levels2 , we are keeping our debt in check3 and most importantly, under my administration, the City of Toronto is not over taxing its residents.4

The first two parts of this statement are mostly true, but not in the way Ford would like them to be.

2 The study’s authors, Enid Slack and André Côté, write that “Toronto’s operating expenditures per household are about what they were in 2000, when adjusted for inflation.” The mayor has simply maintained the status quo, and proclamations notwithstanding, he hasn’t reduced the size of government or the “burden” on “taxpayers.”

3 While Toronto’s debt burden is indeed manageable, it’s worth noting that the City has, in fact, gone deeper into debt under Ford.

4 It’s true also that the City is not overtaxing its residents (although the report notes that businesses and tenants are overtaxed relative to residential property taxpayers). Indeed, when it comes to the property tax—one of Ford’s many fiscal bugbears—Toronto may actually be undertaxing. Slack and Côté point out that “property tax revenues have grown by less than the rate of inflation since 2000. The average property tax burden per household has actually been falling“—which would be great, were it not for the aforementioned shortfall in infrastructure funds. As a share of average household income, residential property taxes are lower in Toronto than in Hamilton, Markham, Ottawa, Kitchener, Mississauga, and Windsor.

The reality is, my administration brought the City of Toronto back from the edge of a fiscal cliff.5 When I took office, the City’s operating spending was rising by around $400 million each year, our debt was climbing and taxes were increasing at an average of 3.5% a year.

5 The IMFG report makes it clear that Toronto has not been profligate with taxpayer money, nor has it retained unreasonable levels of debt. As for the mayor’s purse-on-a-precipice narrative, the City’s top civil servant, Joe Pennachetti, dismissed the suggestion: “We’ve had a double-A credit rating for the last 10 years. We have never been on a fiscal cliff.”

Today, we have reduced the annual spending growth in our budget by over 98%6 , we have reduced our planned debt by over $500 million7 and brought the annual tax increase down to just 1.5% per year.8

6 It’s difficult to verify Ford’s claim to have reduced spending growth by 98 per cent (the only place we could find that statistic was on the highly dubious list of accomplishments that appears on the mayor’s campaign website), but Pennachetti was skeptical: “Quite frankly, I find that statement a very difficult statement to understand and I think it’s a little misleading.”

7 Planned debt has decreased under Ford (although a few months ago he had the decrease pegged at $808 million). According to Matt Elliott of Metro, “some of that is because of offsets from a financing strategy introduced in 2012 that banks on operating surpluses and the sale of city assets”—but IMFG’s report suggests that council’s unwillingness to take on more debt is imprudent: “At a time when infrastructure investment is a critical priority, debt levels are manageable, and borrowing costs are low, the City’s decision to maintain the 15 percent debt-ceiling will limit its financial flexibility in the years ahead.”

8 One of the reasons Toronto has been able to keep tax increases modest is the success of the Land Transfer Tax, which Ford hates but which, according to the IMFG report, “has actually exceeded its revenue projections in each year since its inception, and helped create the City’s year-end surpluses.” Ford wants to cut that tax. And no matter how low Ford keeps annual property tax increases, there’s still the matter of the Scarborough subway extension levy, which will increase to 1.6 per cent in 2016 and stay at that level for about 30 years—1.6 per cent over and above any other baseline property tax increase.

While we have slowed down the out of control spending to keep taxes low and keep our City affordable, I still firmly believe that there are millions of dollars in further waste and efficiencies that we can find.9

9 Nope. From the IMFG report: “Toronto’s service levels, efficiency, and costs appear to be relatively healthy. Yet there appears to be little scope for further ‘efficiencies’ without reducing service levels.”

The report also notes that Toronto is facing major infrastructure challenges. This is something I’ve tackled head on. We have invested over $10 billion10 to maintain our aging infrastructure in a state of good repair. These investments will keep our city competitive today, and in the future.

10 Toronto is indeed facing infrastructure challenges. It will cost about $2.5 billion just to keep the City’s existing assets, such as transit and public housing, in a state of good repair. The IMFG report says the City must find new and sustainable sources of revenue to deal with these issues, but notes that in Toronto’s 2014 capital budget, “the largest projected source of funding for infrastructure is the most uncertain: provincial and federal transfers.” (The report projects that Ford’s vanity subway, incidentally, will cost $3.5 billion over the next 10 years. That amounts to one-fifth of all planned capital spending.) At any rate, the mayor can hardly claim to have invested $10 billion to infrastructure maintenance: in 2010, under then-mayor David Miller, the City was already planning to spend $9.8 billion on SOGR. In 2014, that figure has risen to $11.4 billion—an increase, to be sure, but not a new multibillion-dollar investment.

To learn more, read the full text of the IMFG report below.