Who will save Ontario’s municipalities?

Federal and provincial governments have helped bail out employees, employers, seniors, tenants, businesses, post-secondary students, and lower-income people. What about our cities?
By Steve Paikin - Published on May 25, 2020
Mississauga mayor Bonnie Crombie estimates that the city is losing $20 million each month. (iStock/benedek)

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The COVID-19 pandemic has put governments across this country to the test as never before. And, for the most part, the machinery of government has responded admirably to the crisis.

Millions of jobs lost? Let’s get a Canada Emergency Response Benefit out the door in record time. Employers laying people off? No problem: here’s a wage-backstop program to encourage employers to hire back their workers. Seniors and parents need a bump in income? We’ve got that covered, too. Here’s an income supplement. Businesses need some loans with very favourable conditions to get through the next few months? Okay, sign up here.

But there’s one group of needy recipients that’s been quite conspicuous by its absence at both the prime minister’s and Ontario premier’s daily briefings: our cities and towns.

The Large Urban Mayors Caucus of Ontario — which represents the province’s large urban municipalities — estimates that our biggest cities are collectively bleeding $100 million a week. The figure could reach $10 to $15 billion nationwide. In Ontario’s capital city alone, Mayor John Tory estimates he’s short $65 million every week this pandemic lasts and figures he’d have to raise property taxes by 56 per cent to make up that shortfall.

That, of course, is a financial and political non-starter.

Last week, the government-relations firm Crestview Strategy hosted a webinar featuring mayors from three of the province’s largest cities, representing about 1.6 million Ontarians. The cities all have the same problem: they are prohibited by law from passing budgets with deficit spending, and their revenue sources have virtually dried up — but they have to continue offering services to their constituents.

“We’ve got 21st-century problems with 19th-century tools to fix them with,” said Bonnie Crombie, mayor of Mississauga, Ontario’s third-largest city.

Crombie said that fully 60 per cent of her city’s budget comes from property taxes, 20 per cent from fees, and just 10 per cent from other government transfers. With property-tax payments deferred and transit being offered for free, she estimates Mississauga is losing $20 million each month. The city has already laid off 2,000 employees and closed libraries and recreation centres, but the bleeding continues.

“We can’t let go paramedics, police, or firefighters,” said Patrick Brown, mayor of Brampton, Ontario’s fourth-largest city. “We can’t stop picking up garbage collection. We have services we simply have to provide to our residents.”

Since everyone agrees that massive property-tax increases are a non-starter, what’s the road ahead for municipalities? Turns out, everyone also agrees the answers will have to come from senior levels of government.

“They’ve helped out everybody else, but they need to help municipalities as well,” said Frank Scarpitti, mayor of Markham, the province’s seventh-largest city.

Brown said the easiest thing for the federal government to do would be to double or triple the gas tax and transfer that money straight to Ontario’s municipalities. That could represent a steady and predictable new source of income.

“Property taxes are the most regressive taxes going,” added Scarpitti. “We need other mechanisms to spread out the costs.”

The mayor of Markham pointed out that the City of Toronto convinced former premier Dalton McGuinty to pass a special new act giving the capital city new powers other municipalities didn’t to find new sources of revenue.

“I’ve never understood why successive governments don’t understand that the issues don’t get less complicated just because you cross Steeles Avenue,” Scarpitti said, referring to the boundary separating Toronto and Markham. “They don’t.”

Before the pandemic hit, growth in the so-called 905 municipalities over the next two decades was expected to be larger than that in downtown Toronto. Post-pandemic, that gap could increase, as more people decide to avoid the more expensive city, particularly if more intend to work from home. The 905 mayors all want some of those same powers Toronto has to deal with their challenges.

“The issues aren’t less complex outside of the city of Toronto,” Scarpitti insisted.

If the answers from both the prime minister and premier of Ontario at their daily briefings have been accurate, it sounds as if Justin Trudeau and Doug Ford have been talking about how to handle this municipal conundrum for weeks now. While discussions continue, one can imagine they’re going something like this:

Trudeau: “Doug, I love how well we’ve been getting along since this pandemic hit. But I’m going to be running a deficit north of $250 billion this year. Are you sure you can’t step in here and help these folks out? After all, municipalities are creatures of the province, not the feds. The constitution says this really is your responsibility.”

Ford: “Justin, my friend, you’ve been a champion so far in the way you’ve helped Ontario deal with this COVID-19 crisis. But, as I like to say, there’s no money printing press in the basement at Queen’s Park. We just don’t have the money to do more. We need your help.”

Who’s right? Well, both of them, of course. Thus the conundrum. But there’s one thing four former provincial finance ministers agree on, regardless of partisan stripe or the time in which they served.

“No municipal government can survive this situation unless the federal government steps in,” says Greg Sorbara, who served as Liberal finance minister from 2003 to ’05 and then again from 2006 to ’07. “The national government is the only level that can monetize this spending through the Bank of Canada. By the time this is over, it’s going to look like a tornado came through followed by a hurricane.”

“Doug Ford can’t afford it, so Justin Trudeau has to do it” is how the situation is summed up by Progressive Conservative Darcy McKeough, Ontario’s “treasurer” (as the job was then called) for two stints between 1972 and 1978. 

Another former Liberal treasurer agrees.

“It falls to the federal government to help,” says 91-year-old Robert Nixon, a four-time Ontario Liberal leader and finance minister from 1985 to ’90. “The national economy will expand and probably pay for all this spending in the long run, but I won’t be around to worry about any of it.”

But former Progressive Conservative finance minister Janet Ecker sympathizes with both senior levels of government, given how awful their balance sheets now look.

“Here’s the newsflash,” says Ecker, Ontario treasurer from 2002 to ’03. “Every level of government faces unprecedented financial pressures, and every level of government will need to undertake substantial reforms and substantial spending cuts to prevent government debt from eventually undermining economic recovery. There will be no painless choices for anybody.”

One thing this pandemic might do is force all levels of government to dramatically reconsider who does what and how the money ought to be raised to pay for it all. For example, in Sweden, municipalities get a chunk of income-tax revenue. Might that be an option for Canadian cities and towns in the future?

There’s also a dirty little secret held among provincial politicians. Many feel that some municipalities have overreached, now getting into nice-to-have program areas rather than must-have core services. Ecker has suggested that now would be the time for a “grand bargain” conference involving all three levels of government. On the agenda: figuring out which level of government should deliver which services and for how much — and how to pay for them. The theory is, why let a good crisis go to waste? Let’s use the opportunity to truly make sense of the hodgepodge of services governments now offer.

But that’s the longer-range challenge. For now, somebody somewhere has to staunch the bleeding.

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