Creative Accounting and the Toronto Budget

Previously, I mentioned the abysmal track record of David Miller who left Toronto's debt and annual budget 50 percent higher only seven years after he arrived. As such, it isn't very difficult to understand how every year he would have posted larger and larger budget shortfalls.

The budget before David Miller took office had a projected shortfall of $128.9 million. David Miller's first budget in 2004 had a project shortfall of $344 million. In 2005, it rose to $400 million. In 2006, $532 million. In 2007, $575 million. In 2008, $415 million. And in 2009, $679 million.

Notice how most of the time the shortfall got higher and higher and never once got into the arena of a surplus? Even after the introduction of the Vehicle Registration and Land Transfer Taxes as well as a 3% property tax hike, the 2009 budget deficit continued to bloom.

And yet in 2010, shortly before his departure, David Miller was able to pull off a magic trick of going from continuous and at times record deficits into a $250 million surplus. He even found an extra $100 million in a sock drawer in City Hall just before he left office.

It's a miracle!

Present Mayor Rob Ford, having already toasted the Vehicle Registration and Land Transfer taxes, is projecting a $774 million budget shortfall for 2011. Of course, Ford opponents are up in arms suggesting he has been lying about the "gravy train" spending down at City Hall and that he somehow has created a $1 billion turnaround in Toronto's financial situation.

Now, I don't believe government budgets. I'm of the mindset that budgets are one part accounting and three parts political theatre and always assume that whoever is in power is going to be playing creative accounting to make their opponents look bad and themselves look good. But looking at the numbers, one very interesting thing popped into my mind...

It's really hard to believe that with no major spending cuts Miller could push Toronto's financials $1 billion upwards over the course of one year during the worst recession since the Great Depression. It's equally hard to believe that having actually decreased spending Rob Ford could push Toronto's financials $1 billion downwards even with ridding Toronto of two of David Miller's tax grabs.

However, if the shortfall in 2009 was $680 million and let's say hypothetically that nothing actually did change going into 2010's budget and the surplus was creative accounting. And let's also say hypothetically that Miller honestly did find $100 million.

Using 2009's numbers that would put the budget shortfall at $580 million. That's roughly $200 million less than this year's projected shortfall. Coincidentally, $200 million is precisely what was taken out of city revenues with Rob Ford's cancellation of the vehicle registration and land transfer taxes.

It's almost like David Miller's last budget shortfall never did turn into a surplus and this year's increased shortfall was entirely because of the Vehicle Registration and Land Transfer Tax elimination.

But I'm sure that's just a coincidence.

David Miller's Legacy: A Bankrupt City

I was speaking with a friend of mine last night and we were discussing different aspects of the city. With me being kind of centre-right and her being more to the left, we of course have different perspectives. She dreaded the arrival of Rob Ford while I am relieved that we have somebody with a unique and very ambitious plan for Toronto.

However, she took me totally by surprise in suggesting that David Miller had a positive, long term vision of the city and that Toronto is one of the better fiscally managed cities in Canada. She also indicated that Toronto's debt has been managed very well compared to other cities in Canada.

Needless to say, I was dumbfounded. While I didn't want to take her to task over this -- being well aware of the ballooning budget -- I decided to not say anything about the debt level until I could present to her the actual numbers. So, this is what I pulled up.

Toronto - 2003

• Debt: $2.1 Billion
• Annual Budget: $6 Billion

Toronto - 2010

• Debt: $3.1 Billion
• Annual Budget: $9 Billion

In case it doesn't jump out at you right away, these numbers indicate that both the debt level of the city and the annual budget post-Miller is 150% of what it was pre-Miller. And let's not forget that Toronto is now pulling in approximately $750 Million more each year with the new Land Transfer Tax and Vehicle Registration Tax.

And when we compare Toronto to other cities, the picture isn't pretty either. Toronto has the third largest debt per capita of any Canadian city:

1. Montreal = $8,274
2. Calgary = $3,843
3. Toronto = $2,671

This kind of lays to rest any discussion on whether or not Toronto has been well-managed. It's not like David Miller was mayor for 30 years; he was in power for 7. To increase the debt and budget size of the city that significantly in that short of a time... it's almost imperceptible.

David Miller may go down as the most destructive mayor the city of Toronto ever had. One need only look at his spineless approach to unions in capitulating to their each and every wage demand...

...his ridiculous approach to poverty and community housing by giving away property...

...his mindless approach to the homeless in not even trying to figure out who they are, how many there are and coming up with a concise plan based on real numbers...

...his approach to roads in the city that have left businesses in ruins...

...and his complete disregard of the taxpayers' money.

Toronto is in sore shape right now. Thankfully we have somebody who is ready to give the city the shock therapy it so sorely needs. Let's hope that Rob Ford is able to enact the changes he plans. Toronto is on the brink. If Ford can do for Toronto what Rudy Giuliani did for New York, we may enter a new Golden Age for the city. And if anybody has the cojones to do it, it's Rob Ford.

UPDATE * * *

As pointed out in the comments section, my debt figures in the trillions of dollars is incorrect. As it is, I was using figures from the City of Toronto's website in which they quote their figures as being in millions.

The gross outstanding debt in 2010 is 3,063,064 (millions). Clearly, if the base value is in millions, that number becomes $3,063,064,000,000 or roughly $3.063 Trillion. However, Toronto's gross debt is actually $3.063 Billion. That would mean their base value is in the thousands: 3,063,064 (thousands) = $3,063,640,000

I've correct the debt figures back to being in the billions. Surprise, surprise that the City of Toronto's finances are so screwed up that they can't even quote financial figures on their website correctly.

Mayor Rob Ford... yes, it's official!

All I can say is, thank the maker... we have a real fiscal conservative in control in Canada. And in Toronto of all places!

The city needed shock treatment and that's what it got. I certainly am hopeful that Rob Ford surprises everybody and is able to implement his seemingly mountainous platform.

More subways? Yes!

Less streetcars? Double yes!

Respect for drivers? Triple yes!

Councillors being held accountable for both their voting and spending? You better believe it!

And, uh... Mr Miller? Don't let the door hit you on the way out. Your legacy has arrived. And his name is Rob Ford.

Tomorrow is the End... Hallelujah!

Regardless of who becomes Mayor of Toronto tomorrow -- George Smitherman or Rob Ford -- I think the overwhelming majority of Torontonians can breathe a sigh of relief that the David Miller regime will be gone.

It is disturbing to look at Toronto today in comparison to where we were before David Miller took office. The city has become a dump. The roads have become a disaster. The unions have turned the city into their own fiefdom.

And the cost? The yearly city budget is now 50% larger than when Miller took office.

With nothing to show for it.

Not a single monument to the success of David Miller.

Why? Because David Miller is the ultimate failure. The only thing people will think of when David Miller's name is spoke will be the smell of garbage piling up in the streets.

Regardless of whether my favored candidate -- Rob Ford -- wins tomorrow or not, I will be able to smile on Tuesday knowing that David Miller is gone. Hallelujah.

Is Toronto regaining its sanity?

It was with significant surprise that I read yesterday how Rob Ford has slipped into a comfortable lead over all of his opponents in the Toronto mayoralty race. It is surprising considering how comfortable Torontonians were in electing the spendthrift David Miller over the fiscally responsible and always full of unique ideas John Tory.

Perhaps this is a sign of resignation of the citizens of Toronto after endless disruptions by the spoiled brat leaders of the TTC and the Toronto Civic Employees union that has resulted in transit strikes and garbage strikes and saw David Miller fold like a deck of cards every time. To put simply, Torontonians are fed up.

Now, I don't see Rob Ford as a knight in shining armor. I tend to find some of his views to be a little too far to the right for me. But as long as his more socially conservative views are not going to cause a ruckus or lead to ill treatment of minority groups, I don't see this as a problem.

Toronto's problems are fiscal in nature. Under David Miller's seven-year leadership, the annual operating budget has risen from $6.4 Billion $9.2 Billion almost a full 50%. This is as clear a sign of the utter ridiculousness of the Miller team.

And what has it gotten us? Ask any Torontonian what David Miller's legacy will be and most will have no clue. Ask any Torontonian what major changes happened in Toronto since David Miller came to power and they are likely to give you windfall of negativity and no positive angles at all. From new tax after new spending after new tax, Miller has achieved the most epic of epic fails.

Make no mistake, Toronto is a left-wing city. The fact that the federal Conservatives can't make a single headway into the Metro core is a clear sign. As such, it is more likely that people aren't being drawn towards Rob Ford so much as David Miller's policies are driving them in that direction. They know that they were sold a bill of goods by Miller and his cronies who have achieved nothing substantial for the incredible increase in costs Toronto has seen.

As Kelly McParland so eloquently put it, David Miller's legacy could very well be Rob Ford.

Unlike certain places that refuse to accept that there is no such place as a utopia where you can pay anybody anything they want without taking in more tax money to cover the costs, everyday Torontonians have obviously recognized that you can't spend money that isn't there. And while it's a nice fantasy that unions should be able to pay uneducated trash collectors the same wage as some of the most trained professionals out there, fantasy does not bode well in reality and can usually kill it.

Here's hoping that a Rob Ford victory will find him actually able to implement the kind of policies that would save this city from its fiscal destruction.