Public Commons

• Apparently overall city costs, employee pay, and user charges have all gone up in the 40% range in real costs (inflation adjusted dollars) from 2001 - 2011, after amalgamation.

Part of City Finance Analysis Understanding the Commons

please note that this research should be considered preliminary - HB

Much higher costs since amalgamation

In 1998 the six municipalities making up Metropolitan Toronto amalgamated into the new City of Toronto. This was done primarily to achieve savings in public administration.

Through the disruption, it is hard to find financial records that are consistent and comparable (to some extent still true today) but records beginning around 2001 are fairly robust. As of this writing the most recent audited financial statements are for the fiscal year 2011.

In this investigation, I looked at mostly audited financial records to discern any trends that may have emerged. I discovered several, as shown in the following chart.

To examine the spreadsheet behind the chart, see the google spreadsheet.

The chart normalizes all the data presented in the columns to an index value of 100 for 2001, and presents the change against this index to 2011. (The exception is that I could not find approved positions for 2001, so I used 2002. Approved positions, unlike the other figures, was taken from budget documents, not financial statements.) Thus the chart visually compares changes in the factors behind the columns. All currency information was adjusted for inflation, to constant 2011 dollars, so any changes in dollar valuations are real.

The first two columns show changes in Toronto's population, and Ontario's GDP (gross domestic product), to provide a sense of scale of expected changes with all other factors equal. Clearly only approved positions and property taxes fall within the range of expected changes from normal growth alone.

Total revenue (a close proxy for costs, since by law the budget must be balanced every year); employee pay (salary, wages, and benefits); and user charges all increased in the order of 40% during that time. Government transfers in increased by almost 85%, to reflect mostly large increases of transfer payments to individuals through the City.

Quite clearly amalgamation did not result in a reduction in costs. To the contrary, overall costs, including particularly an increase in employee pay, and massive user charge increases to help pay for these increased costs, resulted instead. One can only assume that property taxes were spared a large increase for political reasons. Unfortunately, user fees can be viewed as regressive, as they are not geared to income.

Here are the numbers behind the chart:

To find sources, see the google spreadsheet, as above.

Rise in employee salaries, wages and benefits is particularly notable

Of particular note is the 44% rise of employee costs over the 11 year period (again real costs, inflation adjusted to 2011 $) from $3.5B to $5.1B, in spite of approved positions from the budget up by only about 7%. The reader should realize, though, that the employee cost figures are from "expenses by object" section of the financial statements, which are consolidated operating and capital numbers, while the approved positions are from the operating budgets (and only from 2002-2011). However, assuming (reasonably) that the comparison generally holds, then it suggests not only that costs are up, but that employees are much more expensive on average. Clearly more research is required to find out what's going on here.

See the chart below.

Source numbers and documents can be found in the google spreadsheet.

Net Government Transfers After Transfers to Persons

Here's a possible refinement: the chart below shows that net government transfers (transfers in, less transfers to persons), has been roughly stable around $1.5B in constant 2011 $. So the index chart would show little or no increase in net transfers. That would leave the increase in employee costs, and the increase user charges as the big changes, both above 40%. So roughly speaking, employee costs have gone up around $1.5B, while user charge increases have paid for something over half of that.

The question then becomes: is that good social policy?