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The 2023 gap will be filled through a dedicated billion-dollar reserve fund the city has been building for several years – unless Mr. Tory secures COVID-19-related financial assistance from the provincial and federal governments.Aaron Vincent Elkaim/The Globe and Mail

Toronto’s projected pandemic-related shortfall is now around $1.4-billion, money that Mayor John Tory says should come from higher levels of government.

The figure was released Tuesday as part of the city’s 2023 budget process. It combines $933-million for this year with the $484-million still being sought from Ottawa for 2022. The total is equivalent to nearly 10 per cent of the size of the city’s entire operating budget this year.

However, Mr. Tory said that Toronto should not try to fill this hole through money that would otherwise go to day-to-day city services. Instead, the city provisionally covered the 2022 hole by deferring capital projects. And the 2023 gap will be filled through a dedicated billion-dollar reserve fund the city has been building for several years – unless Mr. Tory secures COVID-19-related financial assistance from the provincial and federal governments.

“Those discussions are challenging, but I am very hopeful that the strength of our partnership with these governments, and the strength of our case that an economically healthy Toronto is important … will help us get through,” the mayor told reporters at a briefing shortly before the 2023 operating and capital budgets were unveiled.

“It’s not lost on me that those two governments are both running a surplus at the moment. We’re not.”

In e-mailed statements, communications staff for federal Finance Minister Chrystia Freeland and Ontario’s Minister of Municipal Affairs and Housing, Steve Clark, pointed to past support to Toronto without making any promises for 2023.

In recent years, the higher levels of government have contributed COVID-19 relief money to Toronto on an equal basis, with Ottawa, Queen’s Park and the city each putting up one-third. If that model fails, the city could cover the full $933-million with its reserve fund, though this would essentially deplete it.

Under Ontario’s new strong-mayor legislation, Mr. Tory is responsible for crafting the budget with the assistance of city staff. It goes next to the public for consultation and will be voted on by city council in February. Any changes approved by council could be vetoed by the mayor, who can be overridden only with a two-thirds majority.

The draft $16.2-billion operating budget for this year includes a 5.5-per-cent property tax rise. Combined with the city-building fund, a recurring levy, that creates a 7-per-cent increase for homeowners. As well, the cost of water, sewer and garbage services will each go up by 3 per cent.

As announced last week, the budget includes more money to hire police. There is also an increased subsidy to the Toronto Transit Commission, though the service will remain below pre-pandemic levels and crowding standards for vehicles have been loosened to allow them to fill more tightly. The library service will get a lower-than-inflation budget increase.

Based on assumptions about other levels of government providing funding, the operating budget is deemed to be balanced, as required by law.

The biggest part of the COVID-related shortfall projected for 2023 is due to a prolonged slump in transit ridership that has slashed fare revenues. Several years of work from home policies have kept many people off the TTC and raised questions about its long-term funding model.

Owing to the pandemic, the agency is projected to be out $366-million this year, and somewhere between $350-million and $420-million next year.

Mr. Tory said it was too soon to accept that the situation had permanently changed because of COVID-19, creating a structural deficit in city finances. But he acknowledged that the continuing shift in work habits risks costing Toronto hundreds of millions of dollars.

And he said he would use what he insists is his third and final term in office to push for an arrangement to replace “a completely outdated, Confederation-era” approach to funding cities.

“I just think that is an unsatisfactory state of affairs and I’m going to have a lot more to say about that once we get the budget through because I think we just can’t go on this way. Others have said that before me but I’m going to take it up as a project that’s very important to me.”