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Toronto deputy mayor Jennifer McKelvie sits in the council chamber ahead of the city's budget meeting on February 15. On Wednesday, McKelvie blamed the federal government for not coming through with a bailout for the city in its budget this week.Chris Young/The Canadian Press

Toronto will dip into its reserves and pause capital projects to cover a $454-million shortfall in 2022, the city’s deputy mayor said Wednesday, as she blamed the federal government for not coming through with a bailout in its budget this week.

Speaking with reporters Wednesday, Jennifer McKelvie said she was disappointed the federal government didn’t meet the city’s request for funding to cover what it says are pandemic-related costs and lost revenue. Ms. McKelvie had urged Ottawa to cover $235-million, one-third of a 2022 shortfall related to increased transit and shelter costs, as well as $423-million for this year.

Both Ms. McKelvie and former mayor John Tory have warned that the city is in a precarious financial situation because of lingering effects of the COVID-19 pandemic, and they called for Ottawa and the Ontario government to come through with support.

While the Ontario government announced $235-million last November to cover a third of the 2022 shortfall, the provincial budget last week did not include any additional money for this year. This week’s federal budget did not include funding for either year.

Toronto council now intends to make up last year’s shortfall by redirecting $300-million from paused capital projects and taking $154-million from its reserve fund of about $1-billion.

The city is also projecting a $933-million shortfall for the current fiscal year. The city’s 2023 budget, approved in February, earmarks reserve funds to again be used if support isn’t received by either orders of government, but this will run essentially run them dry.

Ms. McKelvie warned that without support, there will be a significant crunch on the city’s finances in 2024 that could lead to increased property taxes and rapid cuts to services as the city grapples with minimal revenue tools and continued increased costs from the COVID-19 pandemic.

“Toronto deserves better,” Ms. McKelvie said. “We are able to use the reserves we’ve squirrelled away to pay for this year, but it’s not a good strategy going forward. It’s like taking out your RRSPs to pay your mortgage or pay your groceries. It’s not sustainable.”

When asked to respond to Toronto’s concerns, Finance Minister Chrystia Freeland’s office sent a transcribed segment of the minister’s interview on CBC Radio’s Metro Morning on Wednesday.

In the interview, Ms. Freeland defended her government’s support for Toronto, pointing to about $1-billion in previous funding through the Safe Restart Program to help the city address COVID-19 challenges, and suggested it was up to the province, not Ottawa, to step in with help for the city.

Enid Slack, director of the Institute on Municipal Finance and Governance at the University of Toronto, said using up reserve funds is a major concern if another big need arises, such as an extreme weather event.

“If those reserves are gone, that’s a real problem,” she said.

The provincial government already provided Toronto with a one-third share of the 2022 budget hole, but it didn’t earmark any of the requested $510-million for this year. The budget did include $48-million to provide health and social services at the city’s supportive housing sites.

On top of the bailouts to balance the current budget, Toronto council is calling on senior levels of government to find a longer-term solution to prevent these yearly requests from reoccurring. A long-term fiscal outlook report presented to councillors Wednesday outlined a dire financial picture for the city, projecting $46.5-billion in capital and operating pressures over the next 10 years, mostly affecting the state of good repair budget and transit service improvements

Council passed several motions to advocate to the other governments for additional revenue tools, including meeting with their local MPs. A city report reviewing all of its revenue capabilities, including the potential to implement parking levies, is being accelerated and will be presented in July.

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