Northern municipalities are worried about economic crunch time

COVID-19 has brought massive and unexpected costs — and communities in the north are trying to brace for them
By Nick Dunne - Published on Apr 24, 2020
Lost revenues for the City of Greater Sudbury from March 17 through April are projected to hit $2 million. (facebook.com/GreaterSudbury)

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SUDBURY — Deferred property-tax and water-bill payments, waived public-transit fares — these are some of the steps that the City of Greater Sudbury has taken to ease financial hardship for its denizens during the COVID-19 pandemic. But they’ve come at a cost for the northeastern Ontario municipality. From March 17 — when the province declared a state of emergency — through April, lost revenues are projected to hit $2 million. And, factoring in additional COVID-19-related expenses, such as paying staff leave, purchasing cleaning supplies, and increasing garbage collection after shutting down the landfill, the city anticipates total losses of $4 million by the month’s end.  

“There is a possibility of deferring capital projects if worse came to worst, but that's not a long-term solution for anybody,” says Sudbury mayor Brian Bigger. While he says the city isn’t “sending off alarm bells” — relative to Sudbury’s $600 million 2020 operating budget, losses are small so far — Bigger and other leaders suggest that northern Ontario municipalities will soon have cause for serious concern. 

Enid Slack, director of the Institute of Municipal Finance and Governance at the University of Toronto's Munk School of Global Affairs, suggests that northern municipalities will face a crucial question: “Do they have the ability to operate in the face of declining revenues [and] in some cases the higher cost of delivering services like roads?” Slack points to the fact that municipalities have few revenue-raising tools; around half of their money is generated through property taxes. And they provide a wide range of services, including many that the province has downloaded over the past few decades. “We're talking about transit and roads, water and sewer, fire and police, libraries, recreation, social services, public-health planning. There are lots of different kinds of expenditures and a very limited source of revenues,” Slack says. “The issue for the northern municipalities is simply one of fiscal capacity.” 

North Bay councillor Tanya Vrebosch notes that smaller Ontario cities “may have more of a delayed negative impact,” adding that there is only so much a city can predict just one month into the shutdown of non-essential businesses. The city, she says, projects that, by June, it will have lost $1.2 million in revenue as a result of slashed transit revenues, parking rentals, and waived penalties or interest on late bills. “But again, those numbers could change on a monthly basis, on a weekly, daily basis,” says Vrebosch, whose city has a $94 million operating budget this year. That may appear to be a drop in the bucket, but there are many unknown expenses that cities are just beginning to catch up on. She notes, for example, that council motioned on April 21 to provide $200,000 per month to North Bay’s Jack Garland Airport from September to the end of 2020 if federal funding doesn't come through.

There are other unknowns. Whether people will be able to pay their bills, even with the Canada Emergency Response Benefit, is unclear. And municipalities could face other, unpredictable expenses. Vrebosch says the total cost of COVID-19 measures in North Bay remains a question mark: “When we find out what happens, we may get levied from our health unit, our social services, the agencies and boards that are having to deal with COVID on their own.” 

Slack says that rethinking which levels of government pay for certain services could ease pressure on cities — and that the province may move to bail out municipalities once it shifts its focus from health care to the economy. But Slack wonders whether the province is in any position to help. “Can the province, any of the provinces, assist municipalities? Maybe it's the federal government that has to come in.”

On April 23, the Federation of Canadian Municipalities, an organization representing the interests of more than 2,000 municipalities across the country, urged the federal government to provide at least $10 billion in emergency funding. “From turning arenas into safe shelters to deferring property taxes, municipal leaders are working flat-out to support Canadians through this pandemic,” says FCM President Bill Karsten in a news release. “But with new expenses, staggering drops in revenue and no freedom to run deficits, municipalities need emergency funding to keep essential services going strong.” Unlike the provincial or federal governments, Ontario’s municipalities are forbidden from running deficits to fund their day-to-day operations. They can incur debt only in order to fund long-term construction projects.

Premier Doug Ford said during his daily press conference on April 17 that Finance Minister Rod Phillips “has been working on a plan” to help municipalities deal with shortfalls. “All levels of government are struggling financially based on COVID-19,” Ford added. “I’ve said from day one I won’t spare a penny to make sure that we support the people of Ontario.” In an emailed statement, a spokesperson for the Ministry of Municipal Affairs and Housing tells TVO.org, “We understand that municipal revenues are impacted by the current situation. In addition to tracking response costs related to healthcare, we are encouraging municipalities to track other incremental costs related to COVID-19.”

Assessing lost revenues, reserve funds, and delayed and deferred capital projects — along with potential support from higher levels of government — will shape how cities approach budgets in 2021. Looking ahead, Vrebosch is concerned about the fact that people will have to pay income tax on the CERB in addition to any tax deferrals. “That's when I think the effect will really hit people,” she says.

In Sudbury, Bigger says, that when council considers the 2021 budget, “We absolutely need to be looking very closely at the services that we’ll will continue to maintain and other services that may fit more into the nonessential part of our services.” 

This is one in a series of stories about issues affecting northeastern Ontario. It's brought to you with the assistance of Laurentian University.

Ontario Hubs are made possible by the Barry and Laurie Green Family Charitable Trust & Goldie Feldman.

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