No easy solution as municipalities battle COVID-19 shortfalls
VANCOUVER -- Who should be unemployed? Which level of government should borrow money? And what programs and services don’t justify their cost?
These are some of the thorny questions municipal and provincial leaders are wrestling with as the looming threat of property tax defaults has them bracing for crippling budget shortfalls.
On Thursday, rather than hand them a cash bailout, the provincial government told mayors and district chairs to tighten their belts as it authorized them to borrow against capital reserves like land holdings, with the option of running short-term deficits to have cash in hand to keep paying the thousands of employees that keep our taps running, our garbage cleared and our fires extinguished.
The provincial finance and municipal affairs ministers also told municipalities to hold onto school taxes (collected as part of property tax remittances on behalf of the province) until the end of the year, giving them another source of cash for pressing expenses.
Cutting costs was something municipalities across Metro Vancouver had already done, sending thousands of workers home over the past several weeks.
The majority of city budgets goes to wages. So, with community centres, libraries, city halls and programs shut down to avoid COVID-19 transmission, workers were temporarily laid off or had wage rollbacks, with some told they would have unpaid furlough days (until the end of the year, for some Vancouver staffers).
With the human cost of such cuts high, some cities have been calling on the province to cut cheques to cities and towns immediately so they can avoid further layoffs.
Provinces clearly have more borrowing capacity than individual cities, but the senior economist at the B.C. branch of the Centre for Canadian Policy Alternatives thinks they’d rather Ottawa pick up the tab.
“It seems to be there’s been a deliberate and co-ordinated attempt to have the federal government take the leadership on the broader economic measures,” said Marc Lee.
That approach comes with pitfalls. How does each community’s slice of the pie get determined?
“That gets into the uniqueness of local governments, because what works in one municipality may not work in others,” said Maja Tait, president of the Union of BC Municipalities and mayor of Sooke. “The province has been very open about continuing to work with us, so (Thursday’s announcement) was the first step because we needed to have some direction on what their plans are so every local government could do their own work on their own budgets.”
Surrey’s mayor says he didn’t wait for the declaration of a state of emergency to reign in his city’s spending, but says the knowledge that families are impacted by layoff notices makes each decision heavy and the subject of careful consideration.
“It’s a real tough time to make those decisions, but we have to be stronger in the future and so we can move ahead,” said Doug McCallum.
While most of the city’s staff are working remotely and council meetings are held virtually, McCallum say they’re still moving ahead with approvals for construction projects, currently permitted by the provincial health officer as an essential service, in order to keep the local economy moving and paycheques flowing to as many residents as possible.
So, how should a provincial or federal government determine who gets a financial lifeline? Surrey says it has the demand and ability to continue construction. Should it receive less money from Ottawa or Victoria as a result?
As a first step, the authorization of borrowing measures helps cities and towns bridge the gap as other levels of government determine what other aid they might offer, if any. Every community is interested in seeing cash from senior governments.
“While these new (borrowing and deferral) measures will provide greater certainty and flexibility in the short term, Metro Vancouver will continue advocating on behalf of its members for additional financial support from the B.C. (government) and government of Canada as COVID-19 continues to impact our communities,” said Sav Dhaliwal, Chair of the Metro Vancouver Board of Directors.
Provincial approval to postpone property tax payments to September is high on the list of civic governments’ asks, and it’s something the municipal affairs minister is considering.
She’s also dealing with dire warnings that transit services will be slashed dramatically without a cash infusion in the tens of millions of dollars each month.
“We’re going to continue working with local governments and TransLink to identify how to best proceed given the challenges that frankly none of us had anticipated and planned for,” said minister Selina Robinson in response to a barrage of questions from reporters.
Over the weekend, Vancouver’s mayor was criticized for warning that, should physical distancing orders continue with the unemployment rate continuing to rise, his city could face default by summer.
The city is considering cutbacks on a massive scale, including to first responders, and Mayor Kennedy Stewart insisted that with a survey conducted by a professional, third-party company finding up to 35 per cent of homeowners would be unable to pay all or part of their property taxes, no community would be able to avoid unpleasant decisions.
“We are the only city, to my knowledge, that has done this type of survey across Canada and (on Wednesday I was) on a call with 55 mayors from around the world (who) are interested in this research as well,” he said, adding that the Bank of Canada had asked him to release the survey results to them.
There’s no disputing provinces and cities are in a tight spot — so it makes sense they’re looking even higher for a governmental saviour. Every mayor CTV News Vancouver spoke with expressed a fervent hope that the 75 per cent federal emergency wage subsidy (currently available to private businesses and charities) would be expanded to include them. After all, argued McCallum, if Air Canada can get some help, why shouldn’t the librarian, garbage collector or swim instructor in your community?
As the old adage goes, there’s only one taxpayer. Whether it’s a prime minister or premier signing the relief plan, it’s ordinary Canadians footing the bill.
That said, Lee argues that recessions are the right time for governments to be in the red, since the knock-on effects to the economy in the short-to-medium term are actually positive.
“Typically, when we have a recession, the revenues going into government, whatever level you’re talking about, will tend to decline, and if governments then try to balance their budgets by cutting their expenditures at the same time, that’s reducing money that’s going into the economy, it’s reducing income that’s going to workers and that exaggerates the downturn and makes it worse,” Lee said. “So, typically, the role of government in downturns is to lean against it by spending more and running deficits.”