Quick Summary: Six Changes to Normalize the City of Toronto 2023 Operating Budget

The City of Toronto operating budgets are quite distorted. Fortunately there’s an easy fix. Here’s a summary.

Figure 1. Six changes to normalize the City of Toronto 2023 budget. Source: Henrik Bechmann.

First, isolate internal transfers.

#1. Re-assign transfers to and from reserves to a new section: Internal Transfers. The transfers are neither Revenue nor Expenses. They’re just shifts in responsibility for cash the City already has.

#2. Re-assign Contribution To Capital from Expenses to Internal Transfers. It’s cash that the City already earned. Now it’s just being moved to cash accounts.

#3. Re-assign Cash Allocation for Debt Principal to Internal Transfers, from Expenses. This amount is broken out from the City Debt Service Charges which combines principal and interest payments. Principal payments are not an expense. They’re capital transactions that (later) trade cash for reductions in liabilities.

Next, recognize offsets when appropriate, to be accurate.

#4. Re-assign Offsets from Inter-Divisional Recoveries (renamed from Inter-Divisional Recoveries) from Revenues to Expenses. It’s a book-keeping entry, not a revenue! Also, without that change, the balancing Inter-Divisional Charges end up being double counted.

#5. Re-assign Offsets from Capital Budgets (renamed from Transfers from Capital) from Revenue to Expenses. It’s a shift in responsibility of some costs to the capital budget, not a revenue. So it reduces operating costs.

#6. Re-assign Waste Rebates and Tax Write-offs from Expenses to Revenue as offsets. They reduce revenue, not increase expenses.

Here’s what the resulting normalized budget summary looks like.

Figure 2. City of Toronto normalized 2023 operating budget by category. Source: Henrik Bechmann

This has a lot of advantages. One of them is that it’s now easy to see where money comes from, and where it goes.

Figure 3. City of Toronto 2023 budgeted cash flow. Source: Henrik Bechmann

In the first column, the various City of Toronto Divisions and Agencies show an operating surplus or deficit, from Revenues less Expenses.

The second column shows some support from existing cash reserves for operations that are tax supported. That column also shows cash that’s stashed for future purposes.

Finally in the third column, the cash flow shortages are covered by the cash surpluses, mostly from local taxes.

For details, see Six Easy Steps to Normalize Toronto’s Operating Budgets.

Henrik Bechmann is a retired software developer with an interest in all things related to the Toronto budget. From 2015 to 2018 he was the lead of the budgetpedia.ca project. Twitter: ‘@HenrikBechmann’