The City of Ottawa plans to borrow from its own tax reserves and cancel tens of millions of dollars in planned capital investments in order to make up a projected $192-million budget deficit tied to the novel coronavirus pandemic before the end of the year.
And officials say the city will need a lifeline from higher levels of government to offset the long-term costs associated with this plan or else municipal services might need to be cut.
City staff provided a financial update to Ottawa council Wednesday indicating that the emergency shutdowns and service disruptions associated with the coronavirus pandemic will result in a revenue shortfall of $241 million for the city’s fiscal year.
Nearly half of that shortfall, $120 million, is tied to lower revenues from the city’s transit services.
The city is also expected to lose out on $53 million thanks to the closures of its parks and recreational facilities, and an additional $21 million tied to the waiving of parking fees and fines during the pandemic.
Further pushing down the city’s bottom line in fiscal 2020 is $77 million in added costs related to the local pandemic response such as personal protective equipment, increased sanitization protocols and increased needs for emergency housing services.
To offset these costs and shortfalls, the City of Ottawa has thus far received $37 million between federal and provincial government support and has also identified $89 million in savings from facility closures and layoffs of part-time employees.
Wendy Stephanson, the City of Ottawa’s chief financial officer, said the city was in a “strong” financial position heading into 2020, with a solid cash flow and strong credit rating, but the pandemic has left Ottawa’s finances “fragile.”
The city is calling on both the federal and provincial governments to provide additional relief funding to get through the financial hardship related to COVID-19 pandemic restrictions on businesses and city services.
These calls are echoed by other Ontario municipalities and by organizations such as the Big City Mayors Caucus and the Association of Municipalities of Ontario.
Under the Ontario Municipal Act, cities are not permitted to run deficits at the end of the year, pushing Ottawa and other municipalities under pressure to find immediate cost-cutting solutions.
Stephenson and her team have created a plan that includes dipping into city reserves and delaying or cancelling planned capital infrastructure projects for the rest of the year to recoup the budget shortfall.
While staff will list the exact capital projects that would be on the chopping block next month, Stephenson said the second stage of Ottawa’s light-rail transit will not be affected and 90 per cent of the city’s planned projects are expected to go forward.
But this plan requires taking loans from the city’s reserves that would need to be paid back in the long-term, either through deep cuts to city services or by hiking transit fares or taxes.
Those demands would bleed into the 2021 budget, Stephenson said.
If the city doesn’t receive sufficient government support to address its $192-million budget gap, council would need to raise property taxes as high as 15 per cent in 2021 to maintain its current service levels.
Mayor Jim Watson said Wednesday that those tax levels are unrealistic, and expressed his belief that a three-per-cent annual tax increase could be maintained amid Ottawa’s pandemic recovery.
Watson said municipalities are a “ping-pong” ball between the two levels of government as the question of whether the province or the federal government is responsible to assist cities is unclear.
But he said it’s critical that higher levels of government step forward to address the costs cities are bearing as the front lines of service delivery during the pandemic.
“We have a $192-million problem. We have solutions for that this year but they’re very much temporary, one-time solutions,” Watson said.
“We need the federal and provincial governments to come to us within the next couple of months, at the latest, before we start our budget process and let us know how they are going to continue to partner with the 444 municipalities that are in the same boat as we are in the province of Ontario and throughout the country.”