The head of Toronto's unionized inside workers has announced her retirement ahead of expectedly tense contract talks between the city and its employees.

"For me personally, the time has come to pass the torch and progress into a new chapter of my life," Ann Dembinski wrote in a farewell letter to CUPE Local 79 released Monday.

As head of CUPE 79, Dembinski represents more than 18,000 city workers.

Her announcement comes at a turbulent time for Toronto's unionized workforce which includes CUPE 79 and CUPE 416, a group that represents the city's outside workers.

The city's contract with its unionized workforce expires on December 31. The current deal was reached after a 39-day strike in the summer of 2009.

While the city prepares to renegotiate the deal in early October, it is also wrestling with a $774-million budget shortfall.

In light of the budget hole, Mayor Rob Ford's administration has started looking for savings. Last week, he announced that those savings may include layoffs to the city's labour force.

The city offered a voluntary buyout program to workers in management in mid-July. Up to 17,000 city employees are eligible for the package. Employees have until Sept. 9 to apply for the buyout package.

But with the application deadline looming, the city has found that few workers are buying in to the buyout.

The unfavourable buyout response prompted Ford to announce that layoffs are possible, despite promising that they wouldn't happen during his election campaign.

"Layoffs are on the table and that's a reality that we have to look at," York-West Coun. Giorgio Mammoliti confirmed to CTV Toronto last week.

In the past, Dembinsky has accused Ford of being "on a witch hunt looking for gravy that just isn't there."

Dembinsky will end her 36-year career with CUPE 79 on the same day contracts for the city's unionized workers expire.