Councillor Shelley Carroll

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Friday, April 22, 2005

April 22/05 Surplus Fuss

A few of you have emailed or called about the ‘Surplus Story’ on the CBC on Thursday. Here is the way it works:

Staff develop for each department a budget of how they should spend their share of the City’s cash. This cash is a combination of property taxes, revenue generated from user fees development charges, etc. and last but not least Provincial Funding. Councillors set priorities, Budget Committee checks the work of Finance staff, fine tunes the Budget to direct funds to best use and delivers the final document to Council.

At the end of every year, departments indicate whether they have spent the whole amount designated in the Budget. There is ALWAYS a variance, plus or minus. The total variance should be a surplus if you are doing things right. By private sector standards you hope it will be at least 1% which would be $72 million in the case of the Toronto budget. Then, as a corporation you deposit your surplus in a reserve account to be used to retire debt, replenish reserve accounts that you have drawn from in emergencies or use it to cover any shortfall in the following year’s budget.

This is a very simplistic explanation to be sure. There are many complexities in an Operating Budget of $7.2 billion. The key thing to understand about this little tempest in a teapot on the City of Toronto’s surplus is as follows:

Out of all of the plus and minus variances for 2004, $30 million was left. All departments, including the TTC are required to report their variance to the Budget Committee. They may not go over budget and treat the variance as a windfall. Last year’s $30 million was deposited in a reserve account. In order to balance the budget for 2005, $86 million was then drawn out of reserves.
This may seem like a budgeting plan that is not viable in the long run, $30 million in, $86 million out. It most certainly is not. It is the best explanation I can think of for why we need to sit down and draw up the New Deal for Cities. If a Federal election is on its way, I will be listening every day for some indication of real commitment to Sustainable Major Cities.