Since the COVID-19 pandemic was announced by the World Health Organization on March 11, municipal leaders across the province have been working hard to ensure their staff and communities are safe.
They made sure that essential services like water, sewer and garbage collection continued. They asked questions and sought guidance. They closed facilities. They shut down programs. They put up signs. They laid off some staff, but not as a rule. They put money into safety and personal protective equipment (PPE) — money that they had not budgeted for these purposes. They provided tax discounts and extended tax deferral dates to residents and businesses. They adapted. They pivoted. They met virtually, broadcasting publicly.
They did this all while knowing that their municipality was likely losing operating money.
The truth about municipal finances
Across the country, the municipal financial reality is a concern. The Federation of Canadian Municipalities (FCM) has been vocal on this point. Municipal leaders are clear about the dire realities they now face. St. John’s Mayor Danny Breen shared this perspective only weeks ago in a Telegram editorial.
Municipalities are financially precarious at the best of times. They rely upon property and business taxes to run their operations, which include programs and facilities. They can apply for project funding. Small to medium-sized municipalities receive modest municipal operating grants from the provincial government.
Municipalities cannot legally run a deficit and cannot borrow money to cover operating expenses.
The COVID financial hit
As an organization, Municipalities Newfoundland and Labrador (MNL) has been working closely with its members since March. We’ve engaged them through social media, regular regional conference calls and webinars.
The financial impacts of COVID-19 on municipalities here are significant and ongoing. Larger municipalities are losing millions of dollars. Smaller municipalities are still uncertain as to what the actual financial implications are and will be. They may not know until September. Many of our members confirm that they have spent and will spend more money on unbudgeted COVID-19-related expenses.
As with many other sectors, the losses associated with pandemic closures and adaptations are not recoverable. Tax deferrals and discounts, though important for residents and businesses, become lost revenue as the economic impact deepens and more relief is required.
Implications
Right now, the reality for municipalities in our province is bleak. Revenue losses will mean cuts and, at this point, the potential for tax increases. Let us be clear, no one wants to increase municipal taxes, especially not now. Residents cannot sustain it. Businesses definitely cannot.
Municipal leaders are looking at where cost reductions can occur. Essential services are the last on the chopping block. But other facilities and programs that our communities depend upon are in danger.
The financial ask
In April, the FCM called on the Federal Government to provide $10 billion in emergency operational funding for municipalities. On June 1st, Prime Minister Justin Trudeau announced that the 2020-21 federal gas tax funding transfer to provinces for municipal expenditures would be accelerated. While the FCM noted this as a good first step, municipal leaders acknowledge that this is not new money. The gas tax funding is also for infrastructure investments only. It is not the operational funding that they so desperately need.
Four days later, the federal government announced $14 billion in provincial-territory funding to safely restart the economy and to support both public transit and community programs. We are still waiting for further clarity on what this means and how this funding will flow. We do know it targets many important issues beyond municipal needs — child care, seniors, sick leave and PPE. The commitment to supporting municipal operations remains outstanding.
The advocacy need
Municipalities in Newfoundland and Labrador need clarity. They need help. It is not just a municipal issue. Our municipalities — your municipalities —- need advocacy, from everyone.
Municipalities are a critical level of government. They need stable, reliable sources of funding to support their operations, to provide services to their residents and to ensure businesses can operate within their communities. There is so much at stake here if municipalities do not get the operational support that they need in a clear and committed fashion.
This cannot wait. We cannot wait anymore.
Mayor Sheila Fitzgerald, president
Municipalities Newfoundland and Labrador