At council earlier this week, while the mayor was busy meeting the Premier about the tragic Danforth shooting, Interim CFO Joe Farag was put on the hot seat about revenues collected to date from the Municipal Land Transfer Tax (MLTT.)
Up for consideration was the 111-page operating variance report to the end of May, in which buried on page 15 was a very quick reference to the fact that the MLTT revenue is “lower compared to the same period in 2017.”
In fact, if one were to glance at the cover report one would think all was rosy, considering that it says the MLTT revenue is “higher than anticipated” due an unanticipated $18.4-million from the non-residential (commercial real estate) category.
Oh my how bureaucrats spin things.
We wouldn’t want to actually present the fiscal situation as it truly is — namely that the city’s cash cow is a little low on milk.
Gord Perks, however, came through — a rare moment in which we actually agreed.
He asked interim CFO Joe Farag how the MLTT was performing in the residential sector.
Farag waffled for a few minutes before admitting the tax was not “achieving the revenues expected” to date this year and is being bolstered by the non-residential sector.
Problem is, as he finally conceded with some prodding, two-thirds of the estimated MLTT budget of $803-million is supposed to come from residential sales and one-third from commercial real estate.
Farag also admitted, when asked, that the residential sector is “underperforming by 10-12%” so far.
If that carries through to the end of the year, the city could be short by about $64-million — interestingly enough the exact amount extra the mayor recently contended will be spent on the huge influx of refugees to year’s end.
“All things considered we should achieve budget,” Farag said, trying to tap dance around the problems. “But this is a variable tax completely dependent on market activity.”
No kidding. I predicted it a year when city officials — faced with the escalating spending on feel-good social programs and housing the influx of refugees — decided to stick with a $803-million MLTT budget for 2018.
That was despite concerns from former city CFO Rob Rossini and budget committee member John Campbell that the city had far too heavy a reliance on this cash cow to balance the books — particularly risky with projections about the potential softening of the Toronto real estate market.
According to the Farag, department heads are being asked “to take remedial action” but don’t worry, be happy. he told council, he’ll just move the shells around if the cash cow targets don’t come through at year’s end.
He said they’ll defer some capital expenditures or raise more debt or take the difference from the tax stabilization fund, the latter being his first line of defence.
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