Province to cover one-third of Toronto’s $700 million budget shortfall

Premier Doug Ford’s government said Wednesday it would provide funding to help Toronto fill one-third of its pandemic-related budget shortfall this year, and opened the door to reimbursing the city for the financial impacts of Ontario’s controversial new housing bill.

Mayor John Tory welcomed the news, but pledged to fight the province if it doesn’t do enough to ensure the long-term financial stability of the city.

The province’s commitment “does mark some progress,” Tory said at a city hall press conference on Wednesday, but “there is much, much, much left to be done.”

In an letter to the mayor on Wednesday, Ontario Municipal Affairs and Housing Minister Steve Clark said the province would provide funding to address one-third of the pandemic-driven shortfall in Toronto’s 2022 operating budget, which the latest estimates put at $703 million.

Clark wrote that he was making the commitment in “the spirit of strengthening” the province’s “long-standing partnership” with Toronto.

Tory said he was calling on Deputy Prime Minister and Finance Minister Chrystia Freeland to “join us at the table now” and help fill the remaining budget gap.

The announcement came on the day by which Tory had said the city needed clearer commitments from the federal and provincial governments in order to balance its books this year.

The mayor had also set Wednesday as the deadline for the other governments to commit to helping with Toronto’s 2023 operating budget, which city staff say will have an opening pressure of almost $1.5 billion as a result of the ongoing impacts of COVID-19.

Clark’s letter made no commitment to fund next year’s shortfall, and said it was “critical” that the mayor use the support the province is providing this year “to take action to address Toronto’s forward looking operating pressures.”

The minister also wrote that the province was “committing to ensuring the City of Toronto is made whole” in the event “there is any impact to the city’s ability to fund housing-related infrastructure and services” as a result of Bill 23, the sweeping new housing legislation the province passed on Monday.

The bill would reduce or eliminate development charges on some new developments, which the province says will spur construction and help ease the housing crisis. But the city says the reduction in development fees will cost it more than $200 million annually, and starve the municipality of revenue required to build roads, sewers, transit and other infrastructure required for new homes.

The province plans to launch a third-party audit of the city’s finances, including its use of development charges, which it says will help determine the impact of the bill.

Tory has been sounding the alarm about what he says would be the devastating effect on the city’s budget of losing development charge revenue, and characterized Bill 23 as taking money from cities and giving it to developers. On Wednesday he also criticized the housing legislation for watering down building green standards and protection of rental stock.

The mayor said that keeping the city whole after any changes to development charges is vital, but the province’s commitment to reimburse the city for the effects of Bill 23 is “not as clear and explicit” as he would like.

He said he would continue discussions with the province about the legislation, but if they “cease to be productive” he is prepared to go on the offensive.

“I have put the weapons down, I have not put them away,” he said.

“If we’re forced to absorb the cost of this provincially invented deal with developers and/or cancel desperately needed investment, we will make our voices heard in this matter in a way that is consistent with the size of this threat to the well-being of this city and frankly other cities across the province.”

Ben Spurr is a Toronto-based reporter covering city hall and municipal politics for the Star. Reach him by email at bspurr@thestar.ca or follow him on Twitter: @BenSpurr

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