Straight Talk
EDITORIAL - Toronto's Ford & Co. are smart shoppers

Toronto Mayor Rob Ford

Credits: REUTERS/Mark Blinch


Smart Boxing Day shoppers will be looking for bargains on Wednesday, but they won't buy stuff they can't afford.

Because of that, they won't have to spend money they've set aside for fixing their roof, to pay off their credit card debt instead.

By contrast, Toronto city council, until recently, was acting like a dumb Boxing Day shopper.

It bought stuff it couldn't afford and then paid for it by using money it should have set aside to maintain roads and transit.

Put another way, it's been balancing its annual operating budget by raiding the previous year's surplus, instead of putting it into capital reserves, to help keep roads and public transit in a state of good repair.

As City Manager Joe Pennachetti told the Toronto Sun's Don Peat, that means council has been ignoring its own six-year-old policy and creating huge financial problems for itself.

"You can't rely on it. It just simply becomes a vicious circle," Pennachetti said. "It also sends a message out to our partner levels of government. When I go to the province and say ‘Please help,' well, they say ‘Look what you're doing. It makes no sense.'"

The reason it makes no sense is that using the previous year's surplus to balance the annual operating budget creates a structural deficit in the budget.

Indeed, once a city starts relying on annual surpluses to help pay for next year's operating budget, it's playing Russian Roulette with its finances.

What it really means is that there's an unfunded hole in the budget at the start of every year.

The good news is that under Mayor Rob Ford, council has started to address this issue by getting its operating budget under control.

That was the whole point of asking city departments to reduce their budgets by 10%, starting last year.

As a result, the amount the city has to raid from its annual surplus to balance the books has dropped from $380 million in 2011, to $102 million this year. And in 2013, says Pennachetti, it will drop to zero.

In other words, the Ford administration will have cleaned up yet another fiscal mess it inherited from previous councils.

Which is exactly what Ford promised to do.

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