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Financial Accountability Officer Peter Weltman, seen here in Toronto on Dec. 10, 2018, said that budget shortfalls at municipalities resonate because most Ontarians live in them.Frank Gunn/The Canadian Press

Ontario municipalities are facing another year of massive budget shortfalls because of the pandemic, the province’s financial watchdog is projecting, and existing promises of aid from higher levels of government will not cover the gap.

Toronto Mayor John Tory, whose city is described in the new report by the Financial Accountability Office (FAO) as facing the worst budget hit in the province, called Thursday for Queen’s Park and Ottawa to begin talks aimed at a new round of assistance.

“As we look ahead to 2021, it is clear that both our revenue shortfalls and additional expenditures to support vulnerable communities are likely to continue, for at least part of the year,” Mr. Tory wrote to Prime Minister Justin Trudeau and Premier Doug Ford, in a letter released by his office.

“In Toronto we are currently forecasting an approximately $1.5-billion budget deficit by the end of next year, and that is after substantial savings in the hundreds of millions of dollars have been identified.”

By law, Ontario municipalities cannot pass a deficit budget. However, there have been cases in which civil servants have assumed that desired funding from higher levels of government will come through – even if it has not formally been promised – and included that money in a budget to put it into balance.

The new FAO projections, released Thursday, peg the two-year municipal shortfalls related to COVID-19 at $6.8-billion, across the province. The bulk of that was sustained this year and has been covered by municipal cost-cutting and federal and provincial support. But $2.7-billion of that shortfall is projected to come in 2021, according to the watchdog.

Financial Accountability Officer Peter Weltman, who heads the FAO, said that budget shortfalls at municipalities resonate because most Ontarians live in them.

“You know, it hits home,” he told reporters. “And hopefully [our report] will provide fodder for discussion and questions.”

Association of Ontario Municipalities president Graydon Smith called the FAO figures “consistent with what municipalities are feeling on the ground” and said his organization would continue to advocate for funding from other levels of government.

“Municipalities continue to be on the front line of the COVID-19 pandemic, protecting Ontario’s communities and maintaining key services,” he said.

In a statement, Steve Clark, Ontario’s Minister of Municipal Affairs and Housing, pledged to “leave no community behind as we head into 2021.”

Although the shortfall identified by the FAO is spread across many of the province’s 444 municipalities, bigger cities face the worst gaps and the watchdog’s report puts Toronto in a category of its own.

“The City of Toronto is projected to experience the largest relative financial loss from the COVID-19 pandemic, equivalent to 10.7 per cent of revenue over 2020 and 2021,” the report notes.

Bigger cities’ financial vulnerability to the pandemic has been laid bare this year. These municipalities have the largest transit agencies, which faced massive losses as ridership plummeted, and are more likely to sustain higher costs for housing and social assistance.

The single largest cause of revenue decreases identified by the FAO was the drop in transit usage. Ridership was down 60 per cent overall this year, resulting in $1.2-billion in losses. Next year, based on an assumption of ridership being 42-per-cent below prepandemic norms, losses would be $900-million.

Canadian cities have historically had few ways to raise money, other than boosting property tax. Unique among Ontario municipalities, though, Toronto levies a tax on the sale of most homes. Revenues from that tax were down $44-million this year and are projected, according to the FAO, to be down $50-million next year.

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