Ottawa, province must help with city funding crisis

Hamilton, like every other major city in Canada, is in unprecedented financial trouble.

The culprit, of course, is this pandemic. It has killed major revenue sources. Rec centre users aren’t paying. Transit riders aren’t paying. Parking revenue is M.I.A. No user fees. Business licence fees, too. And city hall, rightly, is allowing deferred tax payment.

And so, not surprisingly, the books are not balancing. Hamilton’s budget shortfall to the end of May was $23 million. It could hit $60 million by July. Across Canada, transit losses alone are $2.4 billion.

What’s a poor city to do? The problem, or crisis if you like, is compounded by the fact that municipalities are not allowed by law to run deficits. Ottawa can. Queen’s Park can. But towns and cities, being creatures of the province, cannot.

All they can do is cut services and staff or increase taxes. In a place like Hamilton, that’s not sufficient or sustainable. Some will disagree and say the city simply must cut spending to what it can afford in order to pay down the deficit. Interestingly, they usually say that before they find out that their rec centre, favourite program, park or library branch is among the ones that will have to be cut.

The potential solutions are not complex. Provincial governments can follow the lead of British Columbia, which became the first to allow cities to run deficits as a way to cover pandemic budget shortfalls. There isn’t a limit on the size of the deficit, but there is a stipulation that books have to be rebalanced by the end of 2021. That seems like it could be a tall order as the lockdown continues to take a huge economic toll, even in provinces that are further along in reopening, such as B.C.

In addition, that province is allowing municipalities to hold on to education taxes they collect on behalf of the province.

Even though that approach sounds good, and goes further than what other provinces have planned, it doesn’t go far enough, according to the mayor of Vancouver. He appreciates the help, but says it is not adequate and is calling for direct cash injections.

Another option is for senior governments to give municipalities new tools to generate revenue. Photo radar is often cited as an example for Ontario. But it is unlikely new tools alone will get the job done.

All of which brings us to exactly where you would expect: The province and federal government need to come through with money — lots of it. Back in late April, the Federation of Canadian Municipalities pegged the needed cash assistance at between $10 billion and $15 billion. In Ontario, Doug Ford sounded sympathetic and did a few minor things. This week Justin Trudeau’s government agreed to advance to cities their allotted portion of the gasoline tax, but as Hamilton Mayor Fred Eisenberger was quick to point out, that money is already accounted for in the budget.

For years, pundits on the progressive side of the spectrum have been calling on senior governments to partner in a new relationship with municipalities. Notwithstanding that old “creatures of the province” nugget, the reality is that the status quo does not fairly reflect the importance of cities on the day-today lives of their citizens. Towns and cities deliver the most front line services. They have a huge impact on quality of life, in more immediate ways than provinces and the feds do. And yet they have the least amount of flexibility to serve citizens.

It would make sense for Ottawa and Queen’s Park to take this opportunity to build a new relationship with municipalities that deals with the pandemic funding crisis and also sets the table for a more sustainable future. But if that’s asking too much, we’ll take the money, please and thanks.