As promised, Mayor Rob Ford and his brother Coun. Doug Ford returned to the airwaves this past Sunday with more detail to back up their claim of saving Toronto taxpayers an estimated $1 billion. The Fords have been making their billion-dollar budget boast for several months now. It's never made a whole lot of sense.
Since Ford took office in 2010, Toronto's net operating budget — the part paid by property taxes — has increased at levels similar to the previous administration, while the gross operating budget has grown by about $200 million. Neither of those figures lend themselves to boasts that a billion dollars has been saved. But I appreciate that the Fords are trying to make the claim work.
The accounting of their claimed savings — also posted to Twitter by mayoral staffer Amin Massoudi — is divided into six line items. There's the repeal of the vehicle registration tax, which they say saved about $200 million. Then there's cuts to office budgets, contracting out garbage, labour deals, and the user fee review, which kicked in amounts between $6.4 million and $89 million. Last, there's blanket “efficiency savings” totalling $606 million.
Here's how their savings claim looks in chart form:
To start, we'll give the Fords a couple of these. No one ever accused them of achieving nothing. Ford's immediate move to slash office budgets is teensy tiny in the grand scheme of things, but he's got a valid claim to some savings from the move.
Similarly, the savings based on labour deals appear to be high-end estimates and include things like the elimination of long-term liabilities, which is hard to translate into immediate savings. I suspect the Ford number of $79 million saved via labour deals signed in 2012 is overstated, but it's solid enough for a political claim.
User Fee Review – $24 million
The Background: As part of the city's long-term fiscal plan approved in 2005, council adopted a policy that indicated user fees the city charges for various services should, with some exceptions, be high enough to recover the cost of delivering the service. As part of the 2012 budget, city staff conducted a review of existing user fees and recommended the city adjust rates.
The Ford Math: Those service fee adjustments were projected to bring in an extra $17 million per year courtesy of increases to existing fees, plus another $3 million per year via new ones. That adds up to $20 million. I'm not sure where the Fords are getting the extra $4 million, but let's call it inflation.
Why this is misleading: Because increases to user fees don't immediately translate into savings. And because revenue is different than expenses. And because, in this very same summary, the Fords claim reducing a user fee targeting car owners (by eliminating it) counts as a savings, whereas here they're saying that increasing user fees for various things also counts as a savings. It really can't be both.
Contracting Out Garbage – $78.4 million
The Background: Once, in the days before Rob Ford, the city had a labour dispute that caused garbage to pile up in city parks. When Ford was elected, he contracted out garbage collection in one part of the city, meaning that half of Torontonians now get their garbage picked up by city trucks while the other half is served by a private company.
The Ford Math: Straight from the staff report on the contracting out of garbage collection. It reads, “The savings over the main seven-year term of the contract is anticipated to be approximately $78.4 million excluding inflation.”
Why this is misleading: The Fords have cited a seven-year savings figure when this whole billion-dollar claim is supposed to be about money they saved over four years. The correct four-year amount should be about $45.2 million, which is just 57 per cent of the amount they've claimed. Oops.
Repeal of Vehicle Registration Tax – $200 million
The Background: Years ago, Toronto City Council adopted a strategy that would maintain Toronto's low property tax rates while diversifying their revenue streams through a couple of new taxes. One of those new taxes amounted to a $5-per-month charge for every personal vehicle registered in the city. People got mad about this. Every candidate in the 2010 election pledged to repeal it. Ford won, and did.
The Ford Math: The Vehicle Registration Tax brought in annual revenues of about $50 million. By repealing it, it stands to reason, taxpayers saved $200 million over four years!
Why this is misleading: Because it really doesn't make any sense to conflate a revenue cut to immediate budget savings. The Fords are counting the same savings twice — once here, and once in the $606 million they list as efficiency savings.
By way of example, imagine my boss came to me and said, “Hey, we're cutting your pay by $1,000 per month.” I would not shake my boss' hand and say, “Awesome, thanks, you just saved me $1,000 per month off my household budget.” Instead, I'd silently swear at my boss and then go home and try to figure out how to cut $1,000 out of my monthly expenses.
A revenue cut tends to force savings, but by itself, it's not representative of savings.
Efficiency Savings, 2011, 2012, 2013 – $606 million
The Background: The City of Toronto is not allowed to carry a budget deficit. So each year, the city government faces a so-called “opening pressure” when they start planning for next year's budget — a projected gap between expenses and revenues they need to fill in order to avoid an illegal deficit situation. That gap is always filled with some combination of increased revenues and budget reductions — which can take the form of outright budget cuts or so-called “efficiencies.”
The Ford Math: Ford's 2011 budget, which was balanced mostly with a massive surplus left to him by the previous administration, included some $57 million in efficiencies. The 2012 budget saw a reported $327 million of the same, where 2013 saw another $222 million. Add those all together and you get $606 million.
Why that's misleading: First off, because they're not all merely “efficiencies.” The $57 million in 2011, for example, includes a significant rollback in TTC service and the closure of a library. The 2012 figure breaks down into $267 million of “efficiencies” and the rest in what finance staff call “service adjustments” but which we can reasonably call service cuts. The 2013 figure also seems a little dodgy as it includes $44 million attributed to “reduced capital financing costs” which could have as much to do with low interest rates as it does any kind of fiscal wizardry.
But most importantly, this kind of budget balancing through continuous cost efficiencies is not a new thing. In the previous administration's final four-year term, their budget balancing strategies reveal efficiencies totalling about $431 million. So under this kind of creative accounting, the supposedly fiscally disastrous administration of Mayor David Miller can also lay claim to having saved taxpayers a bundle.
But set that aside and we're left with this: the Fords have claimed they saved taxpayers a billion dollars over four years. Their phrasing is important — this isn't a boast about saving the city a billion dollars, which would necessarily translate into budget reductions. Instead, this is about indirect savings to the “taxpayer” — and, in this case, a very specific group of taxpayers who apparently own cars, don't use any city services affected by user fee rate increases, and so on. It's a hedge.
But even legitimizing that hedge and taking a charitable stance toward some of their claims I can, at best, come up with savings to the taxpayer totalling just over half the claim made by the mayor and his brother.
The Fords are still falling well short of a billion dollars.
This post was originally published at http://www.metronews.ca/views/toronto/ford-for-toronto-matt-elliott/2013/06/12/back-to-busting-mayor-rob-fords-billion-dollar-budget-boast.html on 2013-06-12T00:00:00.000Z