There's a reckoning coming for Canada's municipalities, and federal aid – if it comes – won't serve as a panacea.
On April 24, St. Albert Mayor Cathy Heron spoke to the House of Commons standing committee on finance about the effects of COVID-19 on municipalities and the $4.6- to $6-million deficit St. Albert faces. She was joined by Federation of Canadian Municipalities president Bill Karsten, who called for $10 billion in emergency funding for municipalities in the next four months.
Canada has well over 3,000 municipalities and all of them are in the same flotilla of leaky boats (quick math suggests $10 billion, spread over 3,000 municipalities, will not be nearly enough to plug the leaks). In Alberta, municipal funding from the provincial and federal governments has been a source of increasing concern for local leaders as both those governments download costs to municipalities and the clock runs out on the provincially managed Municipal Sustainability Initiative, which will be morphing into the Local Government Fiscal Framework in 2022. Meanwhile, municipalities continue to operate in silos, mostly separate from one another, with property taxes and service fees being one of their only forms of revenue.
Now, the impact of COVID-19 is forcing the fiscal issue municipalities have been struggling with. It's difficult to imagine a world post-COVID-19 where municipalities will be able to continue on as they always have.
Heron acknowledged that future during her speech to the standing committee: “As municipal leaders, we’re going to be on the front lines of reimagining our communities in the post-COVID world, but we need the tools to do it,” she said.
But is $10 billion from the federal government the right tool for the job? Job losses are massive. Many businesses forced to close will not reopen. That obviously hits the economy and all levels of government hard. Businesses pay taxes. People pay taxes, and they are typically able to do so because they have a source of income. Our economy won't really go back to "normal" for a long time.
The full financial brunt of COVID-19 has yet to be felt. Municipalities have already made cuts, and they will have no choice but to make more until employment levels get back to more reasonable levels. Unemployment levels in Alberta pre-COVID-19 were already high at 7.2 per cent and money was tight. The province’s plan to get back to balance in one term has been blown out of the water, and its struggle to provide municipal funding post-COVID-19 will be amplified by several magnitudes.
The federal government is already staring down the barrel of a $200-billion deficit (that's more than 10 times the deficit the feds posted in March 2019) and the spending may not be over.
St. Albert-Edmonton MP Michael Cooper thinks federal dollars are better spent propping up businesses – the economic engines of Canada's municipalities.
For St. Albert and all municipalities, if given the choice between raising taxes and cutting spending to deal with the financial shortfall, the latter is the only feasible option for now – even if it means lower service levels. It’s time for local politicians and residents to get very serious about what are truly needs and what are merely wants.
