Expedited gas tax funds welcome, but not the answer to London’s budget hole, mayor says

London City Hall on June 14, 2017.
London City Hall on June 14, 2017. Matthew Trevithick/980 CFPL

A move by the federal government to expedite federal gas tax funding to help municipalities during the COVID-19 pandemic is appreciated, but won’t do anything to address a looming multi-million dollar budget hole facing the city, London Mayor Ed Holder said Tuesday.

Prime Minister Justin Trudeau announced Monday that the federal government would rush some $2.2 billion in planned gas-tax money for municipalities, doling it out in one lump sum this month instead of two planned instalments — one in June, the other later in the year.

It comes as cities across the country face a combined budgetary shortfall of between $10 to $15 billion due to COVID-19, according to an estimate from the Federation of Canadian Municipalities.

London alone is staring down an anticipated $33 million budget hole by the end of August as a result of lost revenues and other pandemic-related costs.

Story continues below advertisement

That amount could change depending on how long the pandemic continues and what measures are taken to soften the blow.

Updated budget figures are expected later this month.

READ MORE: Ottawa speeding rollout of billions in funding for cash-strapped cities amid coronavirus

Holder said that while the accelerated payment may put some cash flow back into the city a few months ahead of schedule, the budget shortfall will remain unchanged.

That’s because money from the federal gas tax fund can only be used for capital spending, not operational costs.

“It doesn’t put new money in the coffers, from the standpoint of the city,” Holder added, noting that both planned gas-tax instalments — expected to be a combined $23.3 million — had already been factored into the city’s multi-year budget.

“Again, we appreciate it, but it doesn’t impact the overall shortfall that we’re dealing with as a municipality.”

Under Ontario’s Municipal Act, municipalities are barred from running deficits, meaning unfunded deficit this year would have to be carried over into next year’s budget to be funded.

The city has already implemented some measures to try and offset the pandemic’s costs, including allocating the rest of the 2019 surplus, about $3.2 million, to the shortfall, and furloughing some 200 full-time city hall staff.

Story continues below advertisement

Previous to that, the city had also deferred or placed on temporary, unpaid leave about 1,300 seasonal, temporary, and casual employees. Thirty-one students also had their contracts cancelled.

READ MORE: London Transit turns to city for additional support battling COVID-19 financial woes

Holder says it’s urgent that senior levels of government sit down and hammer out a plan as soon as possible to avoid putting municipalities in the position of having to make service cuts.

“We’re not there yet, but I think that’s part of what we are going to hear from city administration as they’re working through what the numbers are and what our options are,” he said.

Holder later noted that he believes everything is on the table to be considered.

“We will look at what we have to do to carry on as a municipality for the sake of our citizens.”

READ MORE: COVID-19 costs London, Ont. more than $1M in direct emergency costs to date: report

Ontario Premier Doug Ford was blunt about the funding announcement on Monday, saying while the province was willing to help cities, Ottawa should step up as well.

Trudeau said the expedited spending was a first step as he holds talks with provinces, which have jurisdiction over municipalities.

Story continues below advertisement

Infrastructure Minister Catherine McKenna said the federal government needed to see municipalities go ahead with planned projects, citing as an example the need to boost transit capacity as Canadians head back to work.

She said bumping up spending was “an example of how we see infrastructure is critical to the restart of the economy.”

— With files from Jordan Press of The Canadian Press

Toronto’s mayor frustrated by constitutional argument over coronavirus bailout needs
Toronto’s mayor frustrated by constitutional argument over coronavirus bailout needs