Let Montreal run deficit for 2020, report urges
Facing a $500-million shortfall because of the coronavirus pandemic, Montreal is asking for permission to run a budget deficit for 2020.
That is among the leading recommendations of a report by an expert panel unveiled Tuesday on how to relaunch the city’s battered economy.
The drastic drop in public transit ridership, delayed deadlines for property taxes and expenses like assistance for the homeless have drained the city’s resources, Mayor Valérie Plante said at an online news conference.
“This is despite the recovery efforts we have already made at the city of Montreal to show our goodwill and determination to find solutions,” she said.
The 12-member panel, headed by Université de Sherbrooke public finance professor Luc Godbout, recommended that the city ask the Quebec government to waive its obligation to balance the budget this year. Unlike provincial and federal governments, municipalities are barred from running a deficit in their operating budgets, although they are allowed to borrow for long-term infrastructure projects.
The decrease in transit ridership accounts for half the drop in municipal revenues, Godbout said. And the pandemic could have a long-lasting impact on how Montrealers live, he added.
“Beyond its short-term impacts, the crisis is transforming citizens’ habits, ways of consuming, social interactions, the organization of work and even economic life as a whole,” Godbout said. “In the short term, it is difficult to imagine a return to the socio-economic situation that we had before the start of the pandemic.”
In addition to allowing Montreal to run a deficit, higher levels of government must also step up financial assistance to help the city weather the unprecedented effects of the pandemic, the report said.
“How it’s divided up between Quebec and Ottawa, I will let them find the solution, because ultimately it’s up to them ... to help us cities, since municipalities are on the front lines,” Plante said.
She noted that without financial relief from higher levels of government, the city would be forced to slash expenses or raise taxes.
Montreal has invested heavily in measures for the homeless, food relief and emergency housing during the pandemic, and upper levels of government must assume responsibility for those costs, Plante said.
The report also proposes measures favouring telecommuting, assisting small and medium-size businesses in making a digital transition and helping them adapt their premises to respect social distancing requirements.
Additional rent relief should be made available to businesses at risk of closing their doors, it said.
The committee also said the city should look at the possibility of postponing tax deadlines further and lowering taxes in areas that have been particularly affected by the crisis.
Danielle Pilette, an associate professor at UQAM specializing in municipal planning and finance, said the Quebec government has the power to temporarily set aside
Montreal’s obligation to balance its budget. Doing so would probably be a smart choice, she said, since the provincial government is up for re-election in 2022 and would suffer political consequences from a sharp tax increase or austerity measures in Quebec’s largest city.
Cash-strapped cities across the country have asked the federal government for at least $10 billion to maintain services during the pandemic.