The City of Toronto has accrued a surplus of $275 million in the current fiscal year, a sum that cuts the anticipated budget shortfall by more than half, outgoing Mayor David Miller says.

The announcement on Thursday provides some leeway for mayor-elect Rob Ford to work with as he vows to revamp the city's finances — Toronto had estimated a budget shortfall of $503 million shortfall for the 2011 operating budget.

Ford, has said repeatedly that the he will enact dramatic measures to fix what he calls the city's "spending problem." He has vowed to cut city staff through attrition, contract out services and eliminate the vehicle registration tax and, eventually, the land transfer tax.

But Coun. Joe Mihevc, a member of Miller's budget committee, hopes the shrinking shortfall — now around $225 million — will mean less drastic changes to programs and services .

"$200 million with some cutting here and there and some nipping and ticking — it is a very achievable goal," said Mihevc.

When asked how the city found the additional dollars, Mihevc replied: "I think having a hiring freeze imposed on all city departments, really is probably the biggest contributor to that."

He said factors like reduced gas costs and an improving economy contributed to the surplus.

This is the second straight year the city has posted an unexpectedly fat surplus.

In February the city estimated it would have an estimated $250 million surplus for the 2009 budget. In March, Miller said the numbers had changed due to "prudent fiscal management" and that the actual surplus was more than $350 million.