LORINC: A math lesson for Rob Ford

“One key ingredient in any solution to Toronto’s financial challenges will be a new relationship with our employees.  Together with our Agencies, Boards and Commissions, the City of Toronto employs over 53,000 people.  The vast majority of these are hard-working men and women who take pride in what they do for Toronto.  But, the fact remains that it takes 37 homeowners to pay for each city worker.

“The math is simple.  The average city employee costs taxpayers just under $90,000 – that’s salary and benefits.  The average homeowner pays the city $2,400 in tax each year.  So, it takes about 37 average homes to pay for each and every city employee. That’s 37 taxpayers.  That’s 37 private sector jobs to pay for one public sector job.”

— Mayor Rob Ford, Empire Club, October 14th

The math may seem “simple,” as the mayor assured a business audience last Friday at the Empire Club. The problem is, his math, as usual, is wrong. Let’s see if we can unravel the strands of his calculations.

CLAIM: “The average city employee costs taxpayers just under $90,000.”

According to recent pronouncements from the mayor and city manager Joe Pennachetti, labour costs account for about half of the City’s gross budget of $9.4 billion (2011). If you divide $9.4 billion in half, you have $4.7 billion. If we then divide that figure by 53,000 employees, we get a number just south of $90,000.

So far so good. Tentative tick mark here. But here’s where the mayor’s arithmetic starts to get a little dodgy.

CLAIM: “The average homeowner pays the city $2,400 in tax each year.”

Okay, this is indeed the case, as countless city presentations have affirmed. But let’s not forget that the average homeowner isn’t the only source of the City’s revenues; far from it. In fact, residential homeowners account for only 44% of all property taxes collected by the City. The balance comes from multi-unit residential (16%), industrial (4%) and commercial (36%).

If you do the math, homeowners contribute just $1.55 billion to the city’s gross budget — which looks like a whole lot less than $4.7 billion, doesn’t it?

Why so low? Because revenue from property taxes totals $3.5 billion, as the City of Toronto’s 2010 annual report stateS [PDF] on page 41 (note to mayor’s staff: check 2010 annual report). The balance, as various budget presentations all explaiN [PDF] with the clarity only a pie chart can deliver (see page 24), comes from user fees, federal and provincial grants, the land transfer tax, surpluses and licensing revenue.

As it transpires, those 37 hardworking, private sector homeowners only do a fraction of the heavy fiscal lifting when it comes to public sector workers’ wages.

The mayor conveniently neglects to mention the 50% of Torontonians who live in apartments, and whose tax rate is not only higher, proportionally, than homeowners’, but who can not see how much they contribute to the public weal because landlords are not obliged to break out the tax portion of their leases.

We also don’t know which segment of Toronto society bears the brunt of paying the $1.5 billion in user fee revenues. And our business friendly mayor forgot to acknowledge the role the private sector plays in supporting those public servants.

So does it actually take 37 homeowners to pay for each City employee?

Nope. Based on residential property taxes, each civil servant costs homeowners just $29,000, and certainly not $90,000.

Sorry, Mr. Mayor. I’m not even sure I’d give you part marks for this one.

The fact is, a far more accurate reading of the fiscal burden of the public service is expenditure per capita. For the City of Toronto, that number works out to be $3,760 — i.e., what every resident of the city pays for municipal services.

So what are the comparable ratios for the Government of Ontario? With a $115 billion operating budget for 2010 and a population of 13.4 million, provincial spending per capita in Ontario is just a shade under $8,600.

And the federal government of Canada? Prime Minister Stephen Harper’s Conservatives authorized a budget of $236.5 billion in 2009, which works out to about $6,980 per person.

Indeed, $2.1 billion — or 22% — of Toronto’s gross revenues came from the Feds and Queen’s Park, so the per capita tax burden facing Toronto’s long-suffering homeowners is quite a bit less than $3,760. (Homework assignment: calculate how much less. Please round your answer to the nearest hundred.)

Let’s emerge from the numerical weeds at this point: however you do the computations, the reality is that Torontonians get a very good deal on their local government. But we’d only know that truth if the mayor and his numerically challenged advisors did their math correctly, instead of disingenuously.

43 comments

  1. Excellent post. I think it would be interesting to do similar math for other municipalities, both in Canada and in other countries. How does Toronto compare?

  2. “Indeed, $2.1 billion — or 22% — of Toronto’s gross revenues came from the Feds and Queen’s Park, so the per capita tax burden facing Toronto’s long-suffering homeowners is quite a bit less than $3,760.”

    While it’s great that other levels of government are pitching in, since the municipal collection methods are archaically constrained, this shouldn’t be waived off as magic money that doesn’t come out of taxpayer’s pockets. We are sending more to them, than they are sending back to us.

  3. And why is it only hardworking homeowners in the private sector that pay for city workers. I and many of my neighbours work in the public sector and pay those same residential property taxes.
    Also, would love to hear someone start the public conversation on the merits (or not) of employing people who actually live in this city. If layoff notices are to be handed out, should they be given first to people who don’t live within the city limits? Can employees who don’t reside here make good decision for the residents? For example, I don’t think it’s an accident that the blue/grey/green bins don’t work very well in the core of the city given that the Manager of Solid Waste Management for the city resides in Oakville and, to my knowledge, has never lived in Toronto? If Mr. Rathbone had lived in the core of the city, would the program look different? I have heard that some cities do have a policy where they only (or give preference to) candidates that live within the city boundaries. I believe Detroit is one of them. I would love to see an intelligent argument of the pros and cons of implementing such a policy in Toronto and I think Spacing is one of the few media sources up for that challenge. Please give it consideration. Thanks.

  4. “We also don’t know which segment of Toronto society bears the brunt of paying the $1.5 billion in user fee revenues.”

    I believe TTC fares account for about $1 billion of the user fee revenues.

  5. I could live with fiscal conservatism, but the dishonesty is intolerable. And in the end, it makes it impossible to trust City Hall.

    For example, the goals of the TCHC sell-off might be justifiable (reallocate resources to where they might get the best bang for the buck), but who actually believes Rob Ford or any of his supporters give a crap about low-income housing? If Ford was willing to give the pinkos a role on the executive committee, or simply have the discussions in the open instead of in back rooms, or simply treat their public input with respect, or simply not blindside political opponents with fuck-you motions at the last minute, then I might believe that City Hall was capable of dealing with complicated issues like this. But right now, people must be wondering what blindside or Trojan horse lies in wait, or what falsehoods is the mayor telling now?

    The really stupid thing is, from the conservatives’ perspective, they have already wasted their ammo on small-change things like the Jarvis bike lanes and the Fort York bridge. Now Toronto has become so radicalized, there are thousands of people who will flood City Hall to fight a measly $25 million or so in cuts. How are they going to rein in union demands, decentralize service delivery, and cut red tape – policies that had broad electoral support – when no one trusts the mayor anymore?

    The mayor needs to do a major reset, now.

  6. Well, the obvious point of saying that is to give the impression that city employees make 37 times as much as the average Torontonian. Of course what it really means is that the average person pays 1/37th (2.7%) of a city employee’s compensation in municipal taxes.

  7. As usual, Ford also forgets to mention that the city workers pay taxes themselves, pay user fees and support businesses that pay taxes. When these jobs were secure (once upon a time)they also had a generally stabiliziing effect on the local economy. The net impact of a civic salary on municipal finances is nothing close to what is being claimed. These simplistic analyses of public service costs rarely provide any real insight into the issue. But they do make for good soundbites.

  8. I think you missed the subtle point that property tax is paid on a per-property basis, which doesn’t actually map neatly to a single person. A lot of those property taxes, even the indirect amounts paid by renters, are actually paid by two or three or four people. Calculating this figure accurately is basically impossible. But trying to do so is also missing the point, and playing into the mayor’s narrative.

    The real question is what does “37 taxpayers to support one city worker” even mean? Would we be better if it was one taxpayer supporting each city worker, even if that meant dramatically higher taxes for each? Would we be better if it was 100 taxpayers to support one city worker, with each citizen paying less in property taxes? The latter sounds to me like the efficiencies of scale Council’s right-wing espouses and claims should have been the result of amalgamation.

  9. A few things worth noting here:

    The lion’s share of the “user fees”, about $1-billion, are TTC fares.

    The proportion of costs that are due to labour vary immensely from one part of the city’s operation to another. For example, at the TTC, it’s around 80%, although this is just on the operating side of the ledger. On the capital side, the number is much lower, but the capital accounts are not part of the city budget Ford claims to be talking about.

    You also need to break out other major agencies like the Police, Waste Management and Toronto Water. Throwing them all together means that the comparatively high paying police jobs, and the not quite so high paying TTC jobs, skew the average for the city as a whole.

    Of course it suits Ford’s thesis (if we can give it so grand a name) to misrepresent what is actually going on and demand big cuts from the little people.

  10. Oh yes, one more thing. If Ford claims that 1,000 City employees taking voluntary severance will save $60-million per year, that means an average cost of $60k per employee, not $90k, at least for those who chose to go.

    If the $90k figure is actually correct (which I doubt), then we have just pushed the average even higher by getting rid of the less expensive of the city’s staff.

  11. On the other hand… let’s use Fords logic, and untwist it a little.

    With the Mayor’s reasoning; a single city worker, working for you and everyone in your home, for less than an hour a day (1/37th of a day to be precise) delivers clean water, electricity, fire, police and ambulance protection, picks up your garbage and recycling and takes it to the depot or dump, runs a ttc vehicle to pick you up and deliver to anywhere in the city, That worker then shovels the snow, cleans your sewage, builds runs and maintains your local park while providing daycare and recreation programmes for your kids, creates long-term care at home or in an institution for your parents, builds new roads, repairs sidewalks and fixes bridges that help you get to work or school or to the corner store, They do all that while lighting the streets at night, funding the arts, operating a library… and while they are doing this for you they also clean the Mayor’s office (and water his plants), while providing Ford with a press agent and a staff to keep him on message… A single worker does all of the above for about half the pay of the mayor!

    But wait there is more; that same, single worker (in the time left over has finds the minutes needed to plan your city, approve building permits and inspect construction sites, while protecting heritage. The worker provides housing for the poor, and cleans graffiti while inspecting restaurants, while handing out parking tickets and painting bike lanes, As they go about the city on errands they also find time to provide transit for folks with disabilities, emergency shelter for the homeless, and run low cost parking for all while juggling tree maintenance, filling potholes, hosting Pride Day and making sure illegal billboards are not erected.

    Ps they also operate and staff swimming pools, maintain and build dog runs and if needed find lost cats… Again a single worker does all this for you in less than an hour. Quite the bargain, especially when you consider they do it 24hrs a day 7 days a wk year round…. Of course they do get a pension

  12. This is a helpful corrective.

    A point that may be lost, however, is this: of what significance is it that it takes 37 properties to pay for 1 city worker?  What *should* the number be?  

    If it were higher – say 100 properties to pay for 1 employee – well, 100 sounds like an awful lot, but wouldn’t that mean that each ratepayer isn’t paying much towards the employee?  And if were a lot lower – say 5 properties/employee, that wouldn’t be much value per property, would it?

  13. Sorry for the follow-up, but I’m not sure I was clear.

    Rob Ford cites 37 properties/employee as if it were a lot, as in “wow, can you believe it takes 37 ratepayers to pay for just one employee!?”.

    But if we cut costs (ie. employees), the number would be even *higher*.

  14. Pushing Adam’s take another step. How many personal employees would you have to hire to deliver the suite of services the City delivers? It would be a lot less than 1/37th of a person. Dear me: the government of Toronto sure is efficient.

    Gord

  15. McKingford, your point was clear to me — that was going to be my comment, too! “37 homes per public servant” is a completely meaningless statistic, and it’s ridiculous that it would be used as part of any presentation. 

  16. Oooops. A lot MORE than 1/37th of a person.

  17. Who is this “average” city employee? And what does this “average” employee do? Ford-like narrative about “average city employee” glosses over the fact that there are various levels of salaries and also that these employees actually do something that contributes to the functioning of the city and that there are many departments where these employees are employed delivering different kinds of services. If, for example, that average city employee ensures that I can drink water out of the tap without fear of dying, I’m cool with $90,000 salary.

  18. No kidding! I’m a city employee and I make less than $10,000 per year, with no benefits for a job that requires a Masters degree. I’d love to know where Ford got his economics degree.

  19. Other useful nonsensical ratios for future Rob Ford speeches:

    – 3.6 renters for every streetlight

    – 353 city households per km of Yonge St in Ontario

    – 920 social housing units to support each wedding license

    – 2.14 island airport flights for every union dental plan

    – 117 private sector jobs lost for each parade permit

    – 2 apples for every orange

    – 0.33 mayors per zoo hippo

    I’m sure you guys can do better. Let’s have a “Rob Ratio” contest on Spacing. Rules: ratios must relate to Toronto figures, and ratios must be true.

  20. I’m not sure if my comment is being lost or moderated out so I’ll try again. $90,000 average salary for public servants compares to a median income of $28,000 for Toronto men and $22,000 for Toronto women. I can think of no good reason for the average public servant to make between three to four and a half times the wage of ordinary citizens. This is the silent majority that the mayor speaks of. To Councillors Perks and Vaughn I can confirm that my condo can and does procure services much more cost effectively than this. I would suggest that you are blind to this simple fact because substantial portions of your base are derived from these “public servants”.

  21. @Joe — beware of averages! If you have a homeless person with no income and a doctor who makes $200,000, you have an average income of $100,000 but then number reveals nothing about that group of individuals, does it? The city has a fair number of employees who make a lot of money — especially the police, and another set that make less. That “average” of $90,000 offers little information about the compensation rates for various work categories. 

  22. @Joe – $90,000 represents the mean (average) of City employees NOT the median. Thus, your comparison is meaningless.

  23. Let’s try putting public service wages in another light. I think we can all agree that most of what the City of Toronto’s employees provide are the things we need to have – drinking water, basic shelter, public transit – and as such, as a society we want to have the best people working on that job. So consider this scenario. Each year, less than 100 water resources engineers graduate from universities in Ontario. These are the people that design your drinking water plants, waste water, sewers, stormwater management devices, etc. The vast majority go work in private consulting firms or land developers. They make starting salaries between 45-75k at these firms, plus a number of job perks (RRSP matching, health plans, fitness memberships, transit passes, stocks are all standard job perks in this field). The City of Toronto offers a starting salary in the same range, but a pension plan that is constantly under threat, the maximum potential salary after years of work is far lower (250k as a manager in private industry vs 120k as a public servant), constant public pressure and criticism and very few resources available to do their job. Knowing all this, if you are at the top of your class and have job opportunities at either the City of Toronto or in a private firm, where do you go? (Answer: Not the City).

  24. @Joe $90,000 isn’t the salary, it’s the average cost per employee per year. That number likely (I don’t know the details of how they account for this stuff) includes insurance, EI contributions, pensions, workplace maintenance, supplies, IT support contracts, software licenses, cell phone plans, employee support programs, and various other costs that you don’t see reflected in your paycheque but I assure you your employer is spending on you.

    When Ford and his supporters throw around that number, they know that many people will compare it to their salaries without realizing that they’re comparing apples and oranges.

  25. @Adam Vaughan: I highly recommend that you write that post on to a clay tablet or a metal plate, so that future generations or lifeforms can discover it, and not repeat the same mistakes we make today.

  26. @John – correct about the misleading use of averages in general, but more importantly, Joe’s post is deliberately misleading because it compares _average_ of one data set to _median_ of another.

    Another thing he’s done wrong is to compare the *cost* of an employee to the *wage* of the employee.

    It was cited during the strike of 2009 that the average (striking) worker salary was sub-$40k. That’s essentially all the non-TTC, non-police staff. The front lines for the City are not staffed by $90k employees.

  27. @Joe — note too that $90k includes benefits.

  28. Someone mentioned that if the number of staff were reduced, the number of homes it takes to pay for each staff member would go up.

    And even if the number of staff stayed the same, the only way to decrease the number of homes per city worker would be to *increase* property taxes.

    Using Ford’s own math, an increase in taxes from $2,400/yr to $4,000/yr per household would reduce the number of households per city worker from 37 to 22.5.

    I find it so hilarious that the argument Ford is making is actually promoting raising property taxes (or hiring *more* city workers) lol.

  29. “In probability theory and statistics, a median is described as the numerical value separating the higher half of a sample, a population, or a probability distribution, from the lower half.”

    Therefore barring a very abnormal distribution we can say with confidence that a majority of citizens in Toronto have wages in the twenty odd thousand range. Having worked a few jobs that fit that category I can assure the commentators here that ancillory benefits do not bring the total compensation anywhere close to $90,000.

    As far as the average cost of public servants we know from even a glance at the sunshine list that there isn’t a multimillionaire or billionaire outlier artificially skewing the average for these individuals up.

    Which is all to say that yes you can compare these numbers and yes most citizens in Toronto are not making anywhere close to the total compensation packages of public servants and public sector compensation is egregious (or gravy as it were).

    It never ceases to amaze me that progressives can amend millenia old social institutions on a dime and woe to anyone who dosent immediately jump on board (read marriage) but ask a liberal to amend the delivery of public services (libraries, transit, policing) and all of a sudden a progressive becomes the staunchest conservative…

  30. For comparison: during the debate over killing the vehicle registration fee, a motion was made to create two administrative positions at a cost (not salary) of $96k, or $48k each, to administer refunds (the motion failed). Without knowing off-hand how the city accounts for hiring & employment costs, that would correspond to a salary of about $30k-35k/yr. Not exorbitant for a clerk.

    The point is that the city is not staffed by front line workers making $90k/yr as the mayor suggests. It’s a few managers making the big bucks while thousands more make wages comparable with market rates, just like any private sector business. Ford’s math is right, but it’s the wrong math. And you’re a fool if you don’t think it’s intentionally and deliberately misleading.

  31. @Jane – I don’t know which city you live in, but your confident suggestion that a majority of citizens of Toronto have incomes in the $20,000-range is preposterous. As this CoT income breakdown shows (http://www.toronto.ca/wards2000/pdf/2006/ward40_income_page.pdf), about 10% of the population is in the $20k decile. You can read the rest for yourself. My broader point: we’ve gotten into the habit of throwing numbers around recklessly, with little regard to accuracy or computational rigor. 

  32. @ Jane — There are city-wide statistics on the same slide. The relevant number is household income, is it not? I don’t dispute the fact that there are a lot of households in the city that have to make do with relatively little. I don’t agree that the solution is to throw more people out of work, using a torqued back-of-the-bar-napkin calculation about public sector wages. 

  33. There is no point in arguing some about city salaries. There is little understanding about the breadth of positions, professions or work. They will continue to perpetuate lies about everyone from the 17 year old camp counsellor to lawyers making 90k. I would think that advocating for livable salaries for all would be a more prudent argument, but alas, let’s just advocate everyone live below the poverty line.

  34. @ Jane: The document you linked to doesn’t support your claims at all! It clearly states that while the *median* personal income is $28,800 for men and $21,153 for women (p. 1), the *average* personal income is $49,387 for men and $32,125 for women (p. 2). In other words, there is a huge difference between the median and the average, as everyone keeps trying to explain.
    Second, those numbers are misleading in this context because they’re the median and the average of all income earners in the city. So they include students who only work ten hours a week, stay-at-home parents who do a little bit of freelance work, semi-retired people, people who were unemployed for half the year, etc. If you can find more precise data for people who are actually comparable to City employees — i.e., working-age adults who work full-year and mostly full-time — I can assure you the numbers will be quite a bit higher.

  35. Vaughan, you might want to check you calculations. Your 1/37th of a day analogy is based per person while it should have been on a per household basis. In Toronto there are an average o 2.54 persons per households. So your 1/37th should be recalculated to something less than half. Regardless, it is a useless metric. IMO, you would be excluded in any budget deliberations. It is a apparent that you believe that the city has more than enough money. After All you spearheaded they creation of BY-LAW No. 980-2010, which has the city paying hundreds of thousands of dollars to refund property taxes on behalf of the the owners of retail space on Queen St. West. The city not only refunded the municipal portion of those taxes, but now pays for a portion of the business education tax. BTW, since your enlightenment on the issue of the impact of CVA taxes on street retail space, what have you done?
    Did you effort and concern end with the adoption of BY-Law 980-2010? The city’s planning department noted that “it is clear that the owners would not need grants to offset higher taxes if the fire had not occurred. In other situations, however, it may be difficult to determine if the redevelopment would not have occurred ‘but for’ the grants offered by the CIP program.”.

    You helped to get tax rebates for businesses that did not need them, have you helped get any for businesses that do?

  36. Luckily, Glen is not on council to exclude Vaughan’s rather thoughtful and innovative ways to help local businesses. Maybe they didn’t need the breaks (though Duke’s certainly did) but since the tax raise was foisted onto them by the fire it is only fair that they are not punished for something they were not legally responsible for.

    Or maybe Glen is just jealous that his floundering fur retail business — Glen and Paul Magder Furs on Spadina south of Dundas — didn’t get the break. Maybe Glen should make sure to preface his comments whenever he is talking about retail in Vaughan’s ward since he has a vested interest in this topic.

    But he already has chosen to work in an industry that is sick and rotten. He seems to have no qualms about attacking innocent animals, and in on this blog he way too often attacks innocent commenters with fabrications.

  37. Morris, take a look at the conditions for the the CIP in the bylaw. You will find that they are so narrow that they would not be applicable elsewhere. Do you agree that the properties that burned down on Spadina a year before the Queen St. fire are less deserving? It appears that councillor Vaughan does. After his epithany on the burden of commerial taxes on street level retail has he done anything other than secure funds for these properties? Keep in mind that staff had pointed out that these propeties did not need the rebates and others would. Yet they got them and others do not. Also that the reconstruction of these properties started before the passing of the bylaw. CIP’s are to encouage development that would not otherwise occur , not reward that which is already occuring.

    One has to wonder why these select few got such lavish attention.

  38. BTW, it was not a tax raise foisted on them, it was an end of their paying a fraction of what many others already were. Over the years those properties saved plenty of money by paying only a fraction of full CVA taxes. Since the introduction of CVA the amount is over $600,000. Add in the savings from decades of frozen assessment values and the amount goes into the millions. My hat comes off to Adam for protraying them as victims of tax policy and finding a gullible audience such as yourself and council.

  39. Ford, pretending to care about the home owners of Toronto, or to care about anything about Toronto or the people in Toronto, LOL, to justify his once again and again…of hitting Toronto below the belt. Since becoming the Mayor this is starting to almost be like normal procedure. Let’s face it the people’s comments above sound more intelligent and factual then the Mayor’s justification to city hall. The worse is apparently nobody can do anything about it. That is why Ford’s Fu@% you attitude to everyone is happening. John your comment about the Trojan Horse…Perfect…loved it, nobody could have hit the nail on the head better!

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