I guess when I think "shabby" I think crumbling buildings, abandoned warehouses, houses with garbage in their yard, and gutted cars on the streets.
But all of those are in the private realm. What we're talking about here is the public realm. Private buildings in Toronto are, on the whole, as well-maintained or better than anywhere else in the world. The difference lies in the public realm, where it seems like virtually no care is taken to keep up some kind of aesthetic standard.
I'm actually inclined to believe that a little bit of shabbiness in the private realm isn't a bad thing at all. I agree that it's a sign of vitality, and it's pretty unavoidable. Obviously it would be ideal for every business to keep its premises pristine, but I think the market can sort that out. It'd be a shame if all we had was a monoculture of chains and high-end stores, however well-kept they might be.
On the other hand, the public realm should be maintained to as high a standard as possible, especially in the heavily-frequented commercial areas. There shouldn't be hazardous cracked sidewalks, ugly poles and rat's nests of elevated hydro wires, dead trees, broken planters, and all the other serious issues that are common in Toronto. Unfortunately, these problems have become so widespread that people are accustomed to them. They assume there's no better way, and they even resent spending on a little beautification. The Mayor's Clean and Beautiful City project is small and had few accomplishments, but travelling up University Avenue in the summer and seeing the truly beautiful flowers actually brightened my day. Those plantings were amazing, and they show what the city can do if it puts its mind to it. If only we could expand the program a hundredfold and spread it all around the city.
As for New York, the NYPD has been shrinking for years, and so have crime rates. The police played an important role in wrestling the city back from its downhill spiral during the crack epidemic, but I think it's a bit exaggerated and there are a lot of other factors making New York the safe city it is today.