Red hot real estate market helped with city budget surplus

Toronto's red hot real estate market, city staff attrition and high-performing investments have all added up to a budget surplus that's almost double what Toronto City Council was led to expect when it set the city's 2012 operating and capital budget.

In total, Toronto's surplus sits at $292 million, according to a report to the city's budget committee next week. In January, council approved a budget that had just $154 million anticipated surpluses.

At the time, councillors opposing Mayor Rob Ford's budget said they suspected the surplus would be larger given the city's booming real estate market.

As it turned out, heavy trading in real estate had a lot to do with the surplus. The Land Transfer Tax, which Ford has pledged to cut, raised an additional $98 million. The city saved $80 million from a hiring slowdown. The TTC's ridership grew higher than expected, bringing in another $19.481 million from the fare box.

And the city's investment strategies meant a drop in debt servicing costs to the tune of $21.304 million and an increase in investment earnings of $22.108 million.

The money should, according to staff, mostly go towards paying for Toronto's new streetcar order and other TTC capital costs, with a quarter of it going toward operating budget issues.

Mayor Ford, who as a councillor was highly critical of surpluses run by his predecessor David Miller, said that this one was a result of sound fiscal management.

"That's how we found the $140 million," said Ford. "It's straightening the ship. This tax-and-spend mentality of the previous administration is over. People know I mean business; I was elected to find efficiencies and that's what I've done."

The late-in-the-year revelation of a higher-than-expected surplus has become an annual affair. In the last year of his mandate, Mayor David Miller boasted about a $367 million surplus (resulting from many of the same factors: fiscal restraint, strong investments and a robust real estate market).

In the face of this surplus, Ford has suggested in a memo to senior staff that the city should only be raising property taxes as a last resort and should be aiming for tax freezes in the last two years of his mandate.

Councillors who have opposed Ford in the past say that he would have little chance of getting such an agenda through.

"We saw what happened in the year that the mayor insisted on and pushed through a tax freeze," said Beaches-East York Councillor Janet Davis. "We fell behind. The city needs a long term tax plan that includes finding efficiencies but we have to ensure we have the revenues that we need."

Don Valley East Councillor Shelley Carroll said that the city needs to pay attention to the consistency with which budgets have shown a surplus.

"A city should have a surplus when they finish their financial statement, however we're now in the magnitude of $300 million on a regular basis, because we're not accurately projecting land transfer tax revenues, which means we're not letting council and the community weigh in on all the funds available to fund a working city," she said.

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Sherif Nathoo

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