Is Toronto Fiscally Healthy, a report from University of Toronto’s Institute for Municipal Finance and Governance, suggests that Toronto is in good financial condition.
This report encourages the city to borrow and spend more. It ignores the greater benefits that can be achieved through better planning and advance funding without the costs and obligations of financing.
What if the City were to operate as a condominium corporation?
In condo corporations, borrowing is a last resort resulting from a failure to plan. The City would create a City Fund Study to identify necessary and desired expenditures over some period of time – perhaps 20 or 30 years.
There would be a City Fund that is required to meet the obligations identified in the City Fund Study. Annual revenues – property taxes paid by residents and all other fees collected by the city – would have to be sufficient to meet operational expenses plus fully fund the City Fund.
The need to borrow money would be eliminated.
Borrowing would be considered a failure that should result in termination of those responsible.
While there would be some short term hardships, the long term result would be that the City could internally fund what it requires and desires. Politicians would not be allowed to make promises which require money without presenting a solid and realistic plan for raising the money or reducing expenditures elsewhere.
If the City operated as a condo corporation, perhaps we would all be better off.
Condo corporations should and usually do make every conceivable effort to avoid borrowing money. They understand that it costs more to repay borrowed money than it does to save money to pay for necessary expenditures.
Despite this same truth for municipalities, it is easier for elected leaders to borrow money today by rationalizing borrowing levels and leave future repayment to others.