Toronto Mayor Olivia Chow expects a deficit ranging between $600 and $700 million in her municipality's budget for the upcoming fiscal year, even with the new financial agreement announced by the Ontario government on Monday.

On Monday, Ontario Progressive Conservative Party Premier Doug Ford revealed in a joint press conference with Chow a $1.2 billion agreement with the City of Toronto, which he described as "historic."

This amount is distributed over three years and aims to address the chronic issues in the budget of Ontario's capital and Canada's largest city, especially in supporting transportation infrastructure and providing more funds for the homeless, as municipal shelters are no longer sufficient to accommodate them.

Chow also described the agreement as a "good first step," pointing out that it includes, among other things, Ontario's government's agreement to take responsibility for the two highways "Gardiner" and "Don Valley."

In an interview with the "CBC" news network on Tuesday morning, Chow noted that the agreement only covers about 60% of the expected $1.5 billion gap in the next fiscal year's budget.

"We are doing the calculations," Chow said without giving details on what her administration will do to balance the municipality's budget for the next year.

This year, the City of Toronto had to withdraw hundreds of millions of dollars from its financial reserve to cover expenses.

For his part, city manager Paul Johnson sees the agreement with the provincial government as a "big leap" forward for his municipality's finances.

Johnson said discussions with the Ontario government will continue until 2025 aimed at obtaining more funding, expressing his hope that the federal government will also provide more financial support to Toronto.