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Toronto's Mayor Elect John Tory (centre left) and Joe Pennachetti (centre right) make their way towards the waiting media as they announce that the City Manager will delay retirement and stay on his position during a newser at Toronto's City Hall on Thursday November 6 2014.

Chris Young/Chris Young for The Globe and Ma

Mayor-elect John Tory, now fully briefed on Toronto's financial outlook and its challenges, has asked the city's top manager to delay his retirement, an early indication of the tough budget talks that lie ahead.

City manager Joe Pennachetti was scheduled to retire at the end of the month, but has agreed to stay on at Mr. Tory's request until the end of April.

The announcement Thursday is the first major move by the mayor-elect who takes office in December.

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Mr. Tory made it flanked by councillors – visual evidence of the collaboration he is promising to bring to city hall. During a news conference he was careful to stress that the decision must be approved by council at its first full meeting on Dec. 3.

Mr. Pennachetti warned council earlier in the year that the city is facing a budget challenge. He said Thursday he agreed to stay an extra five months because of issues such as housing and transit that require negotiations with other levels of government and because of his love of Toronto.

During his campaign Mr. Tory pledged to hold tax increases to the rate of inflation and not reduce services.

Asked whether that was possible, Mr. Pennachetti hinted there could be some wiggle room in delivering on that election pledge.

"I believe it is possible, yes," he said. "I'll just say the definition of inflation is also another issue. I'll leave it at that."

Mr. Pennachetti said there will be "challenges" to maintain service levels with the targets discussed during the election. "So we were candid with the mayor-elect," he said.

Councillor Denzil Minnan-Wong, who is expected to hold a major role in Mr. Tory's administration, possibly as deputy mayor, predicted the coming budget debate will be difficult.

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"There is no question that this budget cycle will be a challenge," he said. "I suspect you are going to see a lot of financial pressures and a lot of councillors wanting to come in with service improvements."

Mr. Tory did not discuss particulars of the 2015 budget, which will be one of the first issues for his administration.

"We are in the midst of sorting out what has to be sorted out every year," he said, adding that the public and council will be involved in the discussions early in the new term of council.

City councillors on hand for Thursday's announcement praised Mr. Tory for his efforts to reach out to them as he settles into his new role and decides on whom to appoint to his executive and as chairs of committees.

Councillor Shelley Carroll, whose name has been floated as a possible budget committee chair, said she hopes the final appointments by Mr. Tory will reflect the new administration's promise of inclusiveness.

"It's an utter and complete 180. It's so refreshing," she said when asked to compare the atmosphere with that four years ago when Rob Ford took office.

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Councillor Josh Colle described the four years under Rob Ford as "tumultuous and exhausting."

Mr. Tory's ability to persuade Mr. Pennachetti to stay on shows the mayor-elect's ability to reach out to experts and work collaboratively, he said.

But not everyone was in a mood to compromise Thursday. Shortly after Mr. Tory's announcement, Rob Ford, who is still the mayor until next month when he will take his seat as a councillor, issued a press release critical of councillors' expense claims in the runup to the election.

"I will fight against any plans to raise expense accounts for City Councillors next term," said a statement issued by Mr. Ford, who is in hospital receiving chemotherapy treatment for cancer.

"I urge the rest of City Council to do the same."

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