Canadian cities are seeing a steep drop in their revenue as the coronavirus outbreak hits local economies.
Some Canadian mayors are warning that their ability to continue providing public services is being impeded and they need financial support from higher levels of government. With property tax payments deferred, transit systems empty and parking ticket issuance declining, municipalities’ revenue is falling sharply even as demand for many services, such as long-term care, rises.
The coronavirus represents “an unprecedented hit” on municipalities’ finances, said Bill Karsten, President of the Federation of Canadian Municipalities, a national lobby group.
Some major cities, such as Toronto, have billions of dollars of reserves and investments. But for other cities, the cash may run out quickly. Toronto has estimated the financial pressure at $65 million a week, or about 25% of its normal income.
Ottawa City Council projects about $270 million of lost revenue if the impact of the virus were to last until December. Ottawa has placed about 4,000 part-time workers on unpaid leave and is seeking financial support, such as accelerated infrastructure funding or additional gas tax funding, from the federal and provincial governments.
Some government support has been announced, including $243 million in Ontario to help city-funded long-term care. The federal government, which is rolling out more than $200 billion of economic support for Canadians, and the provinces can bolster cash holdings by issuing debt.
But for many municipalities, legal statutes and regulations prevent them from borrowing for operational needs and require that they balance their books. Much of the revenue for municipalities comes from property taxes, which depend on a strong economy to support property prices.
Also, the price of oil, one of Canada’s major exports, has plunged about 60% since January after a price war broke out between major producers Russia and Saudi Arabia. This has impacted the amount of revenue available to municipalities through the federal gas tax program.
