The first look at Toronto's 2008 capital budget numbers painted a grim picture on Monday, as $1.2 billion in new debt is being projected over the next five years.

Members of council's executive committee had their first meeting to discuss the capital budget -- the fiscal blueprint of what the city spends improving assets such as roads, parks and buildings.

Toronto's chief financial officer, Joe Pennachetti, said one-third of the recommended five-year capital budget plan will be funded from debt.

"That is not going to go away," he said. "If you look at any large government like the city of Toronto, debt-servicing is a significant portion."

Pennachetti projects $1.2 billion in new debt over the next five years -- $300 million less than what was predicted last year.

But he admits the debt-servicing figure is troubling, as it is the second-highest cost to the city at $541 million. The Toronto Police Service costs $785 million.

The budget committee lays nearly all the blame on the Toronto Transit Commission, whose aging vehicles are coming to the end of their road.

Projections show Toronto is $434.2 million over its spending target. The projected TTC spending is $420.5 million.

Officials say Toronto is not receiving enough public transit dollars from the senior levels of government.

"We're moving 80 per cent of the transit rides in the entire province in this one system -- that requires long-term, sustainable funding and the ability to know our fate from other orders of government, and that's what missing," said Budget Chief Shelley Carroll.

Some councillors, however, lay the blame on spending decisions made at city hall. Councillor Doug Holyday said some officials continue to rely on "the tooth fairy" for handouts.

"(That's) not a good way to finance. I want to know if there's a Plan B," Holyday said.

The current financial state could mean property tax hikes for residents. Pennachetti is recommending a 0.5-0.75 per cent increase every year for the next five years.

There will be at least five more hearings and meetings on the budget over the next 1 1/2 months.

Council as a whole is expected to cast a vote on the issue on Dec. 6.

With a report from CTV's Janice Golding