OTTAWA - This fall's municipal elections could create one more empty seat at the Ontario government cabinet table as early as Tuesday when Municipal Affairs and Housing Minister Jim Watson makes a scheduled announcement about his political future.

A source close to Watson confirmed that he will quit provincial politics Tuesday to run for mayor of Ottawa, a job he has held before.

Watson, who was not available for comment Monday, has spoken to Premier Dalton McGuinty about his resignation, which will take effect Tuesday, the source said.

Watson was "definitely not" unhappy in cabinet and has a "very good relationship" with McGuinty, said the source, who spoke on condition of anonymity.

But Watson is unhappy with the way Ottawa has been run and wanted to help the city get back on its feet, the source said.

"Personally, I know it was a tough decision to make, because he loves his job and loves the work he does and the people he works with," said the source.

"It's a big step for him, but something he felt that he should do."

McGuinty already has to replace former deputy premier George Smitherman, who officially resigned as a member of provincial parliament last week to run for mayor of Toronto.

Government sources said Monday that McGuinty won't be shuffling his cabinet before next week, but that he does plan some major changes to the Liberal lineup as he puts in place a team that will take the government into the 2011 Ontario election.

"There's a ton of talent in caucus, and that's great for the premier to have to draw from," said one Liberal source.

"He's looking to make changes to help him further the government's agenda for the next two years."

The sources said McGuinty still hasn't decided if he will prorogue the legislature before its scheduled resumption Feb. 16 and return in March with a throne speech and a budget. Some observers say there's little time for new cabinet ministers to get up to speed on their portfolios if McGuinty doesn't end the current session of the legislature and start another in the spring.

Ironically, it would help the Opposition if McGuinty does prorogue the house because two Progressive Conservative members were banned for the remainder of the session for staging a two-day sit-in in the legislature in December. If the premier doesn't prorogue, Tories Randy Hillier and Bill Murdoch would be barred from the legislature until after the 2011 election.

Many Liberals who have been on the backbenches since they were first elected in 2003 are considered possible cabinet material, but the sources say McGuinty hasn't made any final decisions yet.

There's been a lot of speculation about promoting some relatively new Liberals like Rick Johnson, who defeated former Progressive Conservative leader John Tory in a Lindsay-area byelection last February. But there's concern that could upset those who've been patiently waiting for a promotion to the front benches.

At least one cabinet veteran is known to want a lighter workload. Gerry Phillips took over temporarily as energy and infrastructure minister when Smitherman quit cabinet last fall, and he's widely expected to be dropped in the shuffle or return to his old post of minister without portfolio.

One published report had two northern cabinet ministers about to be dropped from cabinet because they're not running again in 2011, but staffers for both Community Safety Minister Rick Bartolucci and Northern Development and Mines Minister Michael Gravelle say both men intend to seek re-election and hope to stay in cabinet.