Councillor Mary-Margaret McMahon believed there was a Gravy Train.

As a fiscal conservative, she arrived at city hall fired up to end the wasteful spending that voters heard so much about during the election.

But after a little more than two months in office — two months of listening during in-camera meetings, reading staff reports and looking over confidential documents — this rookie councillor sees things a little differently.

“The gravy’s not flowing through city hall like originally expected,” McMahon said.

McMahon is the political newcomer who, with the backing of prominent Conservatives such as John Tory, ousted an entrenched left-wing incumbent. She is not a part of the mayor’s inner circle. She’s just one of a dozen new councillors who promised change and rode a wave of anger and mistrust in local government to victory. They’re now getting a dose of reality about the city’s financial situation.

That’s not to say there isn’t waste, she added. Hundreds of thousands in savings could be found by turning off lights on weekends and powering down computers at night.

But when the city is $774 million short, a hundred thousand here and a million there don’t go very far to fill that hole.

It’s a lesson that Rob Ford’s team is also learning.

Insiders — ranging from members of the budget and executive committees to city financial staff — say that bubbling pot of gravy still hasn’t been found. The financial renaissance Ford campaigned on is still a few years away, they say.

“Honestly, it’s going to be a challenge,” said Councillor Doug Ford, vice-chair of the budget committee and the mayor’s brother. “This administration did not put the city in the position we’re in. You can’t change the world in 100 days. We’ve already done so much and we’ll continue to do more.”

In his short time in office, Mayor Ford has scored a number of symbolic victories. Office budget caps for councillors and the mayor took a $1.46 million whack. Ford won his longtime battle against free food at council and committee meetings. That cut is worth $48,000 to taxpayers. And by coaxing councillors into a pay freeze, he drained another $110,000 worth of gravy.

Important? Absolutely. But it’s still small potatoes.

Worse, with every cut, the mayor seems to add more pressure. Since taking office, Ford has added more than $100 million to the bottom line by killing the vehicle registration tax and promising a property tax freeze in 2011.

To balance his first $9.4 billion operating budget this year, the mayor relied on $230 million in revenue windfalls and then depleted the city’s surplus and reserve funds — a combined $370 million — to avoid major service cuts.

Ford only needed to find $57 million in efficiencies to make the numbers work. But next year, he will need to come up with $774 million to balance his books. And with all of the city’s emergency savings spent, the mayor has no safety net.

“I have no idea what they can do. All I know is they have taken a problem we were starting to manage and made it much, much worse,” said Councillor Gord Perks, a key player in former mayor David Miller’s administration. “Rob Ford sold Torontonians on a fantasy. He argued that money comes down to city hall and vanishes, and it’s simply not true.”

Deputy mayor Doug Holyday begs to differ.

Closing the entire funding gap by the spring — when the Ford administration says it will release a draft 2012 budget — is going to be difficult, Holyday concedes. But unlike the Miller regime, the current administration is going to try to bring it closer through savings, rather than provincial bailouts or surprise cash reserves. (For the record, since it looks unlikely Ford will be able to close the gap, the mayor may still be forced to go cap in hand to other levels of government for at least another year.)

Exactly how Ford plans to do that is still unknown. But hundreds of documents obtained by the Star through freedom-of-information requests — including emails to high-level city managers, confidential staff documents, presentations and reports — show where the mayor and his team are searching.

The day after Ford’s election, Doug Ford contacted Case Ootes, the former deputy mayor and outgoing councillor, to head up the transition team.

In an interview earlier this week, Ootes said he wouldn’t comment on how Ford could find the savings, but added: “You can probably draw your own conclusions (based on the documents) as to what we looked at . . . I gave my advice as part of the transition team as to where they might want to look.”

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By that logic, all kinds of environmental and cultural programs are on the chopping block. These include the urban forest renewal plan and the water rebate program. It also includes Caribana’s management, the Toronto International Film Festival and the Toronto Zoo. The team also reviewed wage and expense policies regarding citizen appointees to city boards, police funding and the city’s community grants program.

But combined, cuts to all of those initiatives — not to mention the political fight associated with cutting TIFF funding, for example — would still realistically generate only tens of millions in savings.

Early on in the campaign, Ford suggested that contracting out city services such as garbage collection would save the city millions. But as former budget chief Shelley Carroll points out, any savings from the solid waste department doesn’t go to the operating budget. It goes to the utility rate budget.

The real benefit of contracting out garbage is that it removes the union’s trump card in a strike situation. But again, that’s a long-term solution that won’t help in 2012.

The Ford administration can probably expect about $150 million in surplus next year (in part from increased property assessments and new condo developments), several million in increased dividends from Enwave and some additional provincial uploading funds. But the math is still against the mayor.

The easiest way to make a big impact on the budget is to pay down Toronto’s $2.1 billion debt, which costs about $450 million to carry each year.

The goal is to be Mississauga, Doug Ford said. (The Toronto suburb has zero debt and $489 million in a reserve fund, thanks to years of development.)

But for that to happen, Toronto would need to sell big-ticket assets, a scenario the transition team looked at closely, the documents reveal. It’s also a strategy Miller’s blue-ribbon fiscal review panel recommended in 2008. Staff reports on the benefits associated with selling off, in full or in part, Toronto’s three corporate entities — Toronto Hydro, Enwave Energy Corporation and the Toronto Parking Authority — made up a significant chunk of the transition team’s review material.

Red tape and political hurdles aside, if the city sold all three it could net perhaps $2 billion — not quite enough to clear the debt. It would mean losing out on about $200 million in annual dividends.

Toronto Hydro is no longer on the table, according to Doug Ford. But even if the city moved forward on the others, it would take at least a year of study and consultation.

The mayor’s brother has said he wants to sell off city property to pay off the debt. Toronto currently owns about $18 billion in real estate, he said. Even that will take time.

“That would be a multi-year strategy. Nobody would be capable of selling off all of our surplus property in one shot,” said Councillor Peter Milczyn, who sits on both the executive and budget committees. “We’d end up flooding the market and lowering prices.”

Milczyn said that for the first time since amalgamation, the budget committee is about to undertake a “comprehensive and systemic” review of what the city does, how it does it and how effective it is at administering those services.

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