Opinion: Municipal budgeting practices stoke needless annual panic

Canadians concerned about their city’s finances should not let their attention wander during the summer lull. The time for budget panics are over, write Nicholas Dahir and William Robson, we are about to see the results. Photo by Ernest Doroszuk/Toronto Sun/Postmedia files

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By William Robson and Nicholas Dahir

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An annual Canadian ritual starting just after New Year’s is the panic over municipal budgets. Concerns about deficits and consequent spending cuts and tax increases dominate the headlines — “Torontonians face property tax hike!” “Vancouver overspending on policing!” “Montreal to limit hiring!” “Calgary faced with tough choices!”

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Then everything goes quiet. But ratepayers, users of services and elected councillors should stay alert. Over the summer and into the fall, municipalities release their financial statements. And the bottom line those statements invariably reveal — substantial surpluses — will surprise anyone who bought into the budget panic.

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The audited financial statements that municipalities release after their year-ends get far less attention than the budgets themselves. That is too bad because they reveal much more — including how the results differed from projections, how much healthier the bottom line was than the budget debate suggested, and very often that property taxes could have been lower than they were.

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Toronto’s 2023 financial statements — the most recent available — would amaze anyone who followed Toronto’s budget debates in the spring of that year. They showed a $1.2-billion surplus, a weirdly robust result in a city that had been consumed by talk of a budget disaster. Even weirder, the financial statements included numbers from the 2023 budget that had not previously been published — numbers using the same accounting as the financial statements — that revealed that the budget prefigured a surplus of more than $600 million, which was something nobody knew at the time.

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Vancouver’s financial statements for 2024 released earlier this spring also showed an unexpectedly large surplus. But Vancouver’s budget at least hadn’t forecast a deficit. The eyebrow-raising development was a dramatic overshoot in revenues: collections of $3.2 billion compared with $2.6 billion budgeted. That would have been a useful fact for councillors and voters to know before raising alarms about the city’s condition this year.

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Montreal’s 2023 financial statements showed a surplus of $870 million. That was actually lower than the $1.3-billion surplus the 2023 budget had projected. But who in Montreal knew, in the usual fiscal crisis talk in 2023 or 2024 or this year, that Montreal runs such large surpluses?

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Calgary’s most recent financial statements, for 2024, also showed a substantial surplus: $1.1 billion. Its 2024 budget forecast no such thing. Only once the financial statements were out could Calgarians learn that the city’s 2024 budget anticipated an even bigger surplus: $1.3 billion — a projection it missed mainly because of spending overruns.