If you hold a party in your basement, you should pay for it yourself. 

If an organization holds a party that brings in hundreds of millions of dollars to the city in increased spending and tourism, then I don't think that it's crazy for the city to contribute some funding. Toronto gives over a million dollars a year to TIFF, for example (over four times as much as they give to Pride), and I don't see people arguing that this is a waste of money. The $1.6 million that they gave to the Canadian Opera Company in 2016, however...

That all being said, I completely agree with Marcus that if Pride is going to turn its back on a key part of the city of Toronto (i.e. the police), then Toronto should most definitely take that into account when deciding whether and how much to give to Pride in annual funding. Sometimes people have to learn that their actions have consequences.