$100M in found money?

Should we really be all that shocked that Mayor David Miller surprised us with $100m in found money?

I'm writing this blog post while on a business trip to Shanghai, so I apologize if I don't have some real numbers at hand, but by memory, Toronto has revenues north of $3 billion. That means Miller's "surprise" amounts to around 3% of revenues. In that context, it doesn't sound so outrageous. But it also represents a 40% increase ($250m to $350m) above their earlier projections, and I'm sure this is what gets people's spider-senses tingling. I mean, they didn't have this information one month ago when they announced the $93/head property tax increase?

Hard to believe, isn't it?

As usual, the devil is in the details. To be frank, it is not at all uncommon to under-promise and over-deliver when it comes to municipal revenue projections. I just looked at the 2008 numbers quickly and note that the City came in around $235 million above budget. One can even argue this is good policy in politics.

It's the timing here - and the vague explanation - that irks me. Higher than expected returns on investments that we're led to believe surprisingly materialized in the last month are the source of the funds. Hopefully Mayor Miller will give us some further detail here because I don't buy it.

My guess, and by the sounds of it a lot of people agree, is that Miller has been holding this card for a while. Perhaps he was going to use it to fend off his foes in his own run for another mayoral campaign at one time. Who knows? Now, at the very least, he has done his left-leaning friend Joe Pantalone a big favour. The belt-tightening rhetoric from Smitherman and his compatriots in the middle-right sounds a bit odd when the City can find $100 million at the drop of a hat.

Or am I just being cynical?

$100M surplus puts you in a woman's debt

I can understand the excitement behind today's announcement. After all, finding an extra $5 can change my entire day- and yours. I can only imagine how Shelley Carroll felt when she “found” $100M surplus in the city budget.

Today the city has been buzzing about the announcement since the "secret memo" went out and TV, radio and the blogging sphere first caught wind of it last night. The news leaves some of us happy, while others are suspicious, wondering what it all means. I was on the fence for a short while (i.e. the duration of my lunch break). Then I started thinking about this in terms of long-term impact. And then it hit me. This announcement actually means two things:

1) it’s a woman’s world and;

2) Shelley Carroll will be running for mayor.

It could be this election, it could be next. But “finding” a $100M surplus wasn’t just for Mayor David Miller’s legacy, it was a BOGO (buy one, get one) deal. While Miller bows out with a city-wide standing ovation, Councillor Shelley Carroll will take the stage while the crowd is still on its feet. And it will all be for the same performance.

It’s a brilliant move, strategically speaking. First, it silences the right-leaning critics like David Shiner, who once called Carroll’s management of the city’s finances “ridiculous.” Take that.

Secondly, Carroll can test the political waters for this mayoral race from the sidelines, without actually entering. Instead, she throws a morsel of “opportunity” (i.e. the surplus announcement) and the vainglorious spectacle begins. And like survival of the fittest, the candidate with the best answer wins.

This leads to my third and final reason, the winning candidate will be in Carroll’s debt, whether they make the right decision or not, which for her is a powerful place to be in the realm of politics.

Why? Because the right decision means that Carroll gets credit for finding the funding that allowed the mayor to carry out their work. However if mayor screws up, she can lead the repo depot, charging them for poor fiscal management, declare her bid to run in 2014 and turn to us and say, “Remember when I found that $100M surplus last term? I can do it again. Vote Shelley Carroll for mayor.”

Brilliant, no?

What's behind Miller's sudden budget surplus?

 I just came out of the Mayor's "important" announcement about this year's budget.

Besides the fact that he played coy with the media and the public by sending out a vague and cryptic media advisory, the Mayor's announcement of a $100 million surplus was surprising, but not shocking. With the increase in revenue from the Vehicle Registration Tax, the Land Transfer Tax, water rate increase, garbage tax, and other user fee increases, it is easy to see how the "surplus" could take place. I still find it surprising that the Mayor uses the word "surplus" to describe a budget that includes a tax increase. A true surplus means no tax increase in my books.

The Mayor will definitely have some explaining to do as to how the budget process created this surplus "out of the blue," when just a couple of months ago the budget hole was more than $500 million. Critics will definitely claim that the Mayor hid the surplus until it was politically opportunistic to use it.

Okay, enough of my cynicism, while the surplus was a surprise, the proposed allocation of that surplus was miraculous!

Instead of using the surplus to go on a spending spree, the Mayor has suggested using 25% of the money to reduce the residential property tax rate to 2.9% and the rest of the money to create a reserve fund to be used to offset the pressure for next year's budget process.

Wow! Where did this Mayor come from??

I think I have the answer...

One word: Legacy!

With this announcement, Miller has attempted to selflessly prepare the City and the new Mayor for the budget challenges that lie ahead. He has also created an opportunity for the left on Council to shift to the centre in order to be re-elected this year. With this new budget direction, the councillors and mayoral candidates on the left will be able to knock on doors during the campaign and show that they do have a prudent approach to governance and they aren't the spendaholics that the right has been successful at framing them as.

You have to hand it to the left on Council. When the chips are down, they do what ever it takes to remain in control, including becoming Conservatives.

This sudden epiphany will definitely cause tension on the left. The special interests groups will be raving mad about this announcement over the coming days and weeks. Who knows, Council may reverse this decision and spend away the 2011 reserve fund.

For the sake of the future of the City, I certainly hope that they maintain this direction, but as we all know, anything is possible at City Hall.

About Dan Bordonali