What do you cats make of this? Is James right about Miller's strategy? And if so, is this a wise play?
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"Miller fiddles, money burns"
April 23, 2007
Royson James
http://www.thestar.com/article/206059
Toronto residents are sure to face tax shock by the end of the decade – a drastic hike in user fees and taxes to catch up on decades of underfunding. The surprise is that most are sleepwalking toward the abyss.
The quiet descent into near-bankruptcy is a deliberate strategy by Mayor David Miller and the ruling New Democrats at city hall. The bankruptcy isn't deliberate, of course. But the strategy of underplaying its dangers – of governing as if there is a viable plan to right the ship – is a carefully studied one.
If it succeeds, it will go down as one of the boldest and shrewdest political moves in Canadian history. If it fails, well, we all pay.
It started when Miller ran for mayor in 2003. His fiscal plan was laughable. He planned to balance the budget by getting money from Queen's Park. We bought it, or ignored it because we liked his other attributes.
Miller won and governed as if his wish list of provincial bailouts would be filled.
Even though Premier Dalton McGuinty sent buckets of cash and loads of praise and heaps of sympathy Toronto's way, the wish list remains unfilled. Why? Because the list is so long and so unrealistic.
Take this year's budget, for example. Even before it started, Miller had a post-dated cheque for $165 million. He got it in 2006 with a note from the province that this is budgetary aid for 2007. Subsequent to that, the province amended the amount to more than $200 million.
Still, Toronto entered this budget cycle stating a claim to a further $71 million. And when that didn't materialize, the Miller party masterminded a legal court challenge that threatens to damage a fairly good relationship between the McGuinty Liberals and the Millerites.
What exactly is the beef and why the strategy?
The three main reasons cited for the city's fiscal mess are:
# The provincial government doesn't pay its bills. Signed agreements, legislated by the province, call for Toronto and the province to share costs of certain programs like emergency shelters. But the province starts out paying, then cuts back or caps its share, even as the costs rise. The net impact for 2007 is $71 million. And it is this issue the city hopes to win in court.
It would appear the city is on good legal and moral ground.
# Queen's Park downloaded service costs on the city.
This is not the 1998 Mike Harris download. That has been fixed. But Download 2 has seen municipalities forced to pick up some of the costs for Ontario Disability Benefits, an entirely provincial program.
There may be a moral argument, but Ontario has been doing this type of financing for a long time. This grievance has been stated for a long time.
This is a request, not a demand. Toronto and other cities have no legal ground on which to demand a fix.
# Big-city Toronto needs funding sources that grow with the economy, such as income or sales tax. But again, this is an ask, not a demand. By itself, the campaign can be considered reasonable as opposed to wishful thinking; something that can muster public support.
Miller, of course, knows this. Why has he chosen not to curtail budget spending and opt instead to advocate for assistance from the province and Ottawa? Why limit the solutions?
If Miller were to entertain the idea that help is not on the way, and soon, he would be expected to take corrective action. And that would surely lead to a combination of layoffs, service cuts and hikes to taxes and user fees.
So, instead, he waits and waits. And while he does, he empties the reserves to the point where senior bureaucrats are worried.
Since 2001, Toronto has taken $1.3 billion from reserve funds to balance the budget. Of that, Miller has drawn $1.1 billion.
Miller's strategy is campaign to get the province to solve the problem. Chip away at the city reserves while we wait. And delay the tough medicine until we are absolutely forced to take it.
The strategy has some attractiveness. If you believe, as the Millerites do, that property taxes buy good government, a great city, generate economic activity and create a city that is prosperous and liable for all, then the last thing you want to do is embark on an austerity program. Do the cuts only when you absolutely have to – not a day before.
But the strategy also serves to trap the mayor. If you say your city's fiscal future is bordering on bankruptcy, as staff have made clear, then voters will want you to implement solutions that are in your power to deliver. And if you downplay the danger, then citizens are not agitated enough to pressure the senior governments to come to Toronto's rescue. So, Miller tries to straddle the fence.
As such, we arrive at the 2007 budget to find reserve funds are depleted, the city debt has doubled to nearly $3 billion, and the city's annual inflationary costs amount to $250 million, an amount that would require double-digit tax hikes to tame.
Councillor Norm Kelly nailed the issue during the executive committee debate on the budget. Even if Queen's Park and city hall "straightened out" their differences over how much is owed the city, "there's still not enough money to run the city the way the people expect."
To accomplish that, Toronto is going to have to tax more.
Miller certainly knows that. His failure to outline the medicine and the cure is damning. One can understand the strategy, in political terms. But it is not transparent, not totally honest. And risky.
Taxpayers know where the buck stops. The sooner they get the entire story, the earlier they can prepare to weather the bad times.
