How Will Local Governments Deal with the COVID Cash Crunch?

In partnership with the Institute on Municipal Finance and Governance. Featuring Noreen Kassam, Director of Finance, City of Burnaby; Kelly Paleczny, General Manager, London Transit; Mary Persson, Deputy City Manager & CFO, City of Edmonton; and Enid Slack, Director, IMFG

5 Key

A roundup of the most compelling ideas, themes and quotes from this candid conversation

1. Short-term crunch vs. long term needs

Municipalities are facing enormous fiscal pressures because of COVID-19. Cities require two strategies — one to face the immediate financial crunch and another to guide them toward long-term economic stability. Cities must find the money to continue to ‘keep the lights on’ and provide necessary services for residents — and especially the most vulnerable.

2. The burden of debt shouldn’t be kicked down the road

Across the board, cities are faced with a tough calculus. Some short-term solutions — such as borrowing from capital reserves, as BC municipalities are now allowed to do — may come at the expense of longer-term priorities, such as fixing and replacing ageing infrastructure, or building new infrastructure. On the question of debt, one of the panelists suggested that it may be better for municipal governments to find other ways to balance their spending now, instead of passing the burden onto the future.

3. What revenue tools will help us get out of the hole?

During and after the crisis, most cities will not be in a position to raise property taxes — where they get the bulk of their revenues — as residents and businesses get back on their feet. We need other ideas. Road tolls could bring in additional revenue while also limiting a potential spike in individual car usage. A municipal share of the income tax was also discussed.

4. The conversation about public services needs to happen

The financial crunch has provided an opportunity to reflect on the services municipalities provide to their residents. Cities and their provinces need to address whether municipalities will have the necessary resources to meet the needs and expectations of their residents. If a municipality cannot afford to deliver essential services during this challenging time, then other possibilities must be explored. However, every option (e.g. uploading responsibilities, public-private-partnerships, etc.) comes with its own tradeoffs and must be carefully and collaboratively considered.

5. Cities are more than just ‘creatures of the province’

During COVID-19, every order of government has been at the table together, collaborating on solutions. Coming out of the crisis, that collaboration should continue, and there is an opportunity to reevaluate who does what between the municipalities and provinces, and the role of the federal government.