Toronto continues call for provincial, federal funding to address COVID-19 'hangover'

Toronto City Hall is pictured downtown. (Joshua Freeman /CP24)

In advance of their upcoming budgets, Toronto is calling on the provincial and federal governments to ensure the fiscal needs of Canada’s largest city are taken care of.

Deputy Mayor Jennifer McKelvie sent separate letters Monday to federal Minister of Finance Chrystia Freeland and provincial Minister of Finance Peter Bethlenfalvy, urging them to stick to their promise to help Toronto recover from its COVID-19 “hangover.”

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The city’s 2023 budget, which was passed on Feb. 15, has a nearly $1 billion deficit.

This year, Toronto is seeking $423 million from the federal government to help with its pandemic-related shortfall as well as more money to support newcomers and refugees, an area of federal responsibility.

“This week we received confirmation from Minister Fraser that $40 million will be provided to cover housing costs for newcomers and refugees. While we are grateful for this support, more is needed as the City of Toronto has incurred $74 million in 2022 costs and $97 million in anticipated 2023 costs for the temporary accommodation for refugee claimants,” McKelvie said.

She also said Toronto needs “increased and reliable, long-term funding to deliver on our shared housing priories” from the feds in order to “urgently address the housing and homelessness crises.”

This can be done by expanding the Rapid Housing Initiative and by “working with the Province of Ontario to provide ongoing operating funding for wraparound health and social supports crucial for long-term pathways out of homelessness,” she said.

She added that the federal government needs to also do its part by supporting the city’s Housing Now Initiative through the improvement of the Rental Construction Financing Initiative and the Co-Investment Fund, entering into a memorandum of understanding with the city to “secure funding and financing for sites and increasing grant funding to the programs to deepen affordability and respond to the high cost of construction in Toronto,” and working towards a stable, multi-year plan to help end chronic homelessness in Toronto and meet HousingTO’s 2020-2030 targets.

Freeland’s Press Secretary Adrienne Vaupshas told CP24.com that cities, like Toronto, have had a “reliable partner in the federal government since the start of the pandemic.”

“In fact, the federal government has provided over $5 billion in emergency funding to municipalities since March of 2020 – over and above regular transfers that go to municipalities, she said.

“The provinces have a particular responsibility to support and work with municipalities, too.”

Deputy Prime Minister and Finance Minister Chrystia Freeland rises during Question Period in the House of Commons on Parliament Hill in Ottawa on Monday, February 13, 2023. THE CANADIAN PRESS/ Patrick Doyle

The city is asking the province for $510 million: $423 million for COVID-related costs and $87 million for Toronto Public Health.

McKelvie said the city hopes that the provincial government will be open to discussing a “new framework for funding the operating costs of new transit lines as they come online, especially in light of transit ridership levels given post pandemic commuting patterns.”

When it comes to supportive housing, the city is seeking an additional $48 million in provincial funding for wrap-around services for 2,000 vulnerable residents.

Further, it is calling on the province to come through with its $8.6 billion share of Toronto’s $33.2 billion HousingTO Plan, which aims to approve 40,000 affordable rental homes, including 18,000 supportive homes, by 2030. So far, the province has only committed roughly $695 million to this file.

“A substantial portion of funds already committed by the City (approximately $1.3 billion over 10 years) was budgeted to come from development charges which have now been eliminated through provisions of Bill 23, underscoring the need for your government to honour its commitment that Toronto will be "kept whole" with respect to Bill 23's financial impacts,” the letter read.

McKelvie said several of the province’s priorities could be jeopardized if Toronto doesn’t receive enough money.

“Substantial reductions to the City's capital spending will undermine our ability to build more housing – especially in transit-oriented communities – which will be absolutely essential to helping the Province achieve its goal of building 1.5 million new homes across Ontario within 10 years,” she said.

“Among Ontario's municipalities, you will not find a greater supporter for meeting the Province's housing objectives than Toronto, and I firmly believe that increasing the supply of housing and promoting housing abundance is necessary to drive housing affordability,” she said pointing to former mayor John Tory’s “ground-breaking Housing Action Plan for getting more homes built or made available in Toronto as quickly as possible while also making housing more affordable.”

She said without financial support from the province the work Toronto is doing to meet and even exceed the province’s housing targets will be “threatened.”

The city’s “lack of sufficient revenue streams” will also impact its ability to build new infrastructure and contribute to our necessary State of Good Repair work, McKelvie noted.

“These are urgent matters which affect not only Toronto, but all of Ontario, and they are of central importance to addressing the housing crisis,” she said in her letter to Bethanfalvy.

Peter Bethlenfalvy, Minister of Finance of Ontario speaks with the media during the Finance Ministers' Meeting in Toronto, on Friday, February 3, 2023. THE CANADIAN PRESS/Nathan Dene

In a statement provided to CP24.com, Bethlenfalvy said the Ontario government has received the City of Toronto’s budget submission and is “committed to supporting municipalities in a way that is sustain able and responsible.”

“Our province has already taken bold steps on building infrastructure, including the Ontario Line and LRT lines to connect Toronto, Markham, Richmond Hill, and Mississauga, and are building new highways – Highway 413 and the Bradford Bypass. We remain committed to attracting investments and creating good jobs to build a strong economy,” he said, noting Toronto has received more than $3.24B in COVID-related financial assistance for social services, transit, and public health funding among other things.

“This is in addition to the additional $1.3B in additional support above the Safe Restart Agreement of 2020,” he said, adding the Ford government would “continue to work closely with municipalities, including the city of Toronto to protect the long-term stability of our province.”

This afternoon, Bethlenfalvy told reporters at Queen’s Park that the province has worked closely with Toronto during the pandemic and delivered, adding they would “continue to have dialogue with the city.”

He also said that he recently met with the Big City mayors, who outlined their priorities, namely mental health support, supportive housing, infrastructure and Bill 23 supports “for building more houses.”

Bethlenfalvy also said that the needs of rural communities are important, like broadband service and infrastructure, and need to be taken into consideration.

“We’re listening to all the cities in Ontario,” he said, adding Toronto hasn’t formally asked him to implement a new revenue financing structure.

Bethlenfalvy said as the province’s Minister of Finance his “hallmark” is “listening to all stakeholders and trying to solve problems together and getting things done.”

And while these asks may not be small, McKelvie said Toronto has “taken steps to immediately and significantly increase revenues” by instituting the largest property tax increase in the history of post amalgamation Toronto, implementing a 10-year extension of its City-Building Levy to fund transit expansion and housing, introducing the Vacant Homes Tax, and investigating other revenue sources.

“Despite these efforts, the revenues the City can generate are not enough to meet the needs of our city’s increased shelter costs and decreased TTC farebox revenue, while effectively delivering services for millions of residents in the country’s economic engine,” she wrote.

Last year, the province agreed to provide Toronto with $235 million to help cover the city’s roughly $700 million budget shortfall due to the so-called COVID-19 “hangover.”

The federal government, however, never committed to providing its equal share of that money as it had done in previous years resulting in the delay hundreds of millions of dollars in capital work.

In January, Tory called for a more consistent funding model for municipalities from the provincial and federal governments.

He said the current “ad-hoc” one is broken and needs an overhaul as it leave cities without concrete solutions to their fiscal challenges.

McKelvie reiterated that call for a new framework in her latest letter to Bethanfalvy and Freeland, noting the Toronto “cannot solve a structural problem with quick fixes and one-time funding; (it) cannot get to a solution by itself without new legal or fiscal levers; we urgently need a new arrangement on municipal finance and responsibilities.”

“I believe that our residents expect our two governments to build on strong partnerships through the pandemic, and deliver on our shared commitments to grow Toronto and Ontario's economies, expand transit, and build more housing,” she said, adding the funding would allow Toronto to “avoid dramatic cuts to frontline services and historic tax hikes for residents who are already managing the economic challenges of the inflation crisis and rising interest rates.”

With files from CP24.com’s Chris Fox