Published in the Toronto Sun on September 14, 2011
By Benjamin Dachis
After circus-like public hearings intended to identify what residents think are core city services, Toronto is fast approaching decision day on what to cut, contract out or maintain.
On Sept. 19, the city’s executive committee will make recommendations on measures that could save the city money.
Many of the savings needed to fill the $774-million operating budget gap for 2012 can be found without cutting services.
Through competitive contracting, the city could maintain most services at a lower cost or improve them at existing costs.
Is it doable? Last spring, the city surveyed 13,000 residents to see what types of services they cared about and whether they cared if the city or a private or non-profit contractor provided it.
The survey suggests which services the city might contract out without significant public resistance.
For many services, the majority of respondents were in favour of contracting out, or did not care who provided them.
These include: Supporting business improvement areas, operating skating rinks, the High Park Zoo, the Toronto Island ferries, owning and operating venues for sporting events, conferences, theatres, concerts, and providing on-street or garage parking.
There are many ways for the city to get out of these service areas and let more efficient, private operators take on the costs.
First, there are services now making money for the city, but which a private operator could do more profitably, where the city would be ahead if it sold the assets to get the money up-front. An alternative would be to lease the assets to private operators and have them returned at the end.
Of the services residents were most supportive of the city divesting, Toronto’s Parking Authority has the largest total budget and potential savings through contracting — more than 20% of present costs, according to the city’s consultants. Concern over future increases in parking rates could be met, at the cost of a lower selling price, by imposing a contractual cap on rate increases.
If potential private operators bid competitively to provide the service, the bid amounts will compensate the city for lost profits. If private bidders believe they can operate parking lots more efficiently than the city, they will be willing to bid more than the city’s foregone future profits from parking.
Similarly, sports and recreation assets have no obvious public policy reason for being in public hands.
With ice time in short supply, existing skating rinks could be sold, potentially turning a handsome profit. If the city wished to provide low-cost skating time, it could arrange to subsidize ice time by buying it from a private provider.
The city could retain services that may not make money on their own – theatres or the Island ferry during winter – but allow private operators to bid competitively to provide them, while collecting the lowest subsidy from the city.
Beyond this, the next big item would be contracting some TTC services. According to the city’s consultants, savings could reach 20 percent of existing costs.
The lessons from the city’s core service review show there is a politically palatable path to reduced costs.
They come not necessarily by cutting, but by finding what the city can let others do, at a lower cost to taxpayers.
— Dachis is a policy analyst at the C.D. Howe Institute
