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Patrons at two establishments along College Street in Toronto sit at outdoor patios on July 20, 2020. The most recent figure put the city's 2020 budget shortfall at $1.9-billion, which was whittled down to $1.35-billion through cost-saving measures.

Tijana Martin/The Globe and Mail

Toronto city staff say this year’s budget crisis can be warded off with recently promised federal and provincial funding, but warn that the city is facing another massive shortfall next year and that a second wave of COVID-19 would send Toronto’s finances into a new tailspin.

Many of the details of the federal and provincial funding remain unclear as the city grapples with a budget shortfall from the pandemic, which has caused a plunge in ridership at the local transit agency, the Toronto Transit Commission. Early projections had the city’s 2020 budget shortfall as high as $2.76-billion. The most recent figure was $1.9-billion, which was then whittled down to $1.35-billion through cost-saving measures that included reducing transit service and trimming city programs.

Council voted Wednesday to forgo their 2020 cost-of-living salary adjustment and freeze compensation.

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Like other Canadian cities, Toronto can run a short-term deficit during the fiscal year, but cannot pass a deficit budget. Mayor John Tory has spoken strongly against the city being given the right to do so, saying it would simply kick the financial problem down the road. Given the city’s limited powers of taxation, the mayor argued that relief had to come from higher levels of government.

That relief came in this month, first with a promise of $19-billion in federal money to the provinces, a portion of which will flow to cities and towns. This week, Ontario pledged $2-billion for municipalities and transit to be matched by the federal government, some part of which would go to Toronto.

“We don’t know the precise amount that we’re going to get as yet, but I’m confident … that what we’re going to get is going to go a long way to helping us out with our problem,” Mr. Tory told council. “Does it solve every problem? No. But it’s a helpful deal.”

Though the details of this funding remain under wraps, making it unclear just how it will affect Toronto’s budget situation, senior city staff say this year’s budget crisis can be averted.

“We feel optimistic that the pressure for 2020 will be addressed,” Toronto chief financial officer Heather Taylor told city council Wednesday.

However, she warned that staff have projected a $1.5-billion shortfall next year. And if the city is hit by a second wave of COVID-19 infections, forcing new lockdowns, the city’s burn rate – the gap between its revenue and spending – would surge to at least $55-million per week.

The city’s burn rate had been projected to average $60-million a week at the height of the first-wave lockdowns. More recent figures, as the city begins to reopen, TTC ridership creeps up and economic activity starts to resume, were not available Wednesday.

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After seeing its number of passengers slump to as little as 20 per cent of the prepandemic levels, the TTC is now carrying about one-third its regular ridership. Revenues, which had been down more than $20-million a week, are now down about $15-million.

Toronto will go to the next stage of reopening Friday, allowing activities such as indoor dining and gym workouts, but the city manager warned that true recovery remains some time off. Asked by Councillor Anthony Perruzza how the current recession compares to the one in the early 1990s, city manager Chris Murray suggested that he prepare for a slower return to normal.

“The recovery of the recession you just talked about was relatively quick, and its impact wasn’t as deep as what we’re experiencing right now,” Mr. Murray said. “I expect that we’re going to see a recovery but it’s not going to be as fast as I think people have previously experienced.”

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