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Joe Pennachetti, Toronto city manager and head of the country’s sixth largest government, will announce his retirement next week during the final council meeting of the term.Chris Young/The Globe and Mail

Toronto's senior bureaucrat, Joe Pennachetti, the man whose job included telling Mayor Rob Ford "No," is retiring in December, leaving the city to search for his replacement just as a new council and potentially a new mayor is taking office.

Mr. Pennachetti, city manager and head of the country's sixth largest government, will announce his retirement next week during the final council meeting of the term, along with plans to appoint Deputy City Manager John Livey as his interim replacement, sources say.

Mr. Pennachetti, 64, has long hinted that he would retire soon, but many assumed he would stay on for several months following this October's municipal election. His departure comes at a critical time for the city as it faces mounting financial challenges to make badly needed investments in transit and social housing. It comes at the same time the city is searching for a new police chief to replace Bill Blair and at the end of an unprecedented period of political turmoil for Toronto under the mayoralty of Mr. Ford.

Reached earlier this week, Mr. Pennachetti would not discuss his plans or the timing of his retirement. "My response is no comment," he said.

While he is leaving two months after the election, he will still oversee staff's preparation of the city's 2015 budget and briefings for the person elected mayor on Oct. 27, sources said.

Mr. Pennachetti, a soft-spoken bureaucrat with a distinctive shock of white hair, prefers to stay out of the news. He has not spoken publicly about Mr. Ford's personal problems, but on more than one occasion over the past year, he has been called upon to read the rule book to Mr. Ford when his behaviour or requests crossed a line.

Earlier this year, when the mayor made threatening remarks about a City Hall security guard who reported the after-hour shenanigans in his office on a past St. Patrick's Day, it was the city manager who met with Mr. Ford to tell him his remarks were not acceptable, according to documents obtained by The Globe and Mail through a freedom of information request.

And when the Rainbow Flag went up at City Hall in a show of solidarity for gay athletes during the Winter Olympics, it was left to the city manager to tell the mayor he could not order it to come down.

Mr. Pennachetti also has stepped forward recently to defend the city's fiscal record in the face of biting criticism from Mr. Ford. Mr. Pennachetti took the unusual step earlier this month of calling a news conference after the mayor's office issued an official press release claiming Mr. Ford's administration "brought the City of Toronto back from the edge of a fiscal cliff."

"That terminology I do not support," Mr. Pennachetti told reporters in a rare visit to the City Hall press gallery.

"We have never been on a fiscal cliff," he said, using the city's decade-long double-A credit rating to make his case.

An accountant, Mr. Pennachetti came to the city as its chief financial officer in 2002 after holding similar roles in the Toronto region. He is a familiar figure walking across Nathan Phillips Square every morning and evening on his way to and from his GO train to Aurora.

He often preaches the need for "fiscal sustainability" for the city, and has cautioned that Toronto needs new sources of revenue to address its mounting capital needs. During his tenure with the city he has worked to implement a fiscal plan that reduces the city's reliance on one-time funds, something he has largely accomplished.

While he has stressed the need for cost savings – a passion of Mr. Ford's – Mr. Pennachetti found himself on the opposite side from the mayor during this year's budget debate, defending staff's recommended tax increase, while Mr. Ford boasted to reporters that he could find an additional $50-million in savings, "easy."

During this term of council, Mr. Pennachetti also did not always see eye-to-eye with Mr. Ford's opponents, facing criticism for the role he played in the city's budget-cutting core service review and for what some saw as his support for Councillor Doug Ford's attempt to have the city take control of development on the Port Lands from Waterfront Toronto. His openness to the possibility of a casino in downtown Toronto because of the revenue it would bring the city also upset some councillors.

In the past nine months – since Mr. Ford admitted he smoked crack cocaine and council gave most of the mayor's authority to Deputy Mayor Norm Kelly – Mr. Pennachetti also has played the role of diplomat, managing a municipal government like no other, answering to "two mayors." Since the November council vote, the city manager and his staff have shuttled between the offices of the mayor and Mr. Kelly on the second floor of City Hall, providing separate briefings to both on key topics and before all council meetings.

In 2008, when Mr. Pennachetti took his post, then mayor David Miller named him as his preferred candidate the same day he announced the departure of his predecessor in the job, Shirley Hoy.

His appointment was later approved by council, although some councillors were critical that no effort was made to attract external candidates.

With an election just two months away, sources say this time it will be up to the person elected as mayor and the new council to pick the next city manager.