Mississauga facing possible $60 million deficit due to COVID-19 shutdown
At an April 8 city council meeting, councillors learned that if social/physical distancing measures remain in place until June, Mississauga could face an almost $60 million deficit.
Gary Kent, Commissioner of Corporate Services and CFO with the City of the Mississauga, shared a startling report with council and said that if the current COVID-19-related shutdown persists until the end of the year, the city could be looking at a deficit of $100 million.
"COVID-19 is taking an unprecedented toll on our economy and on our city's finances," said Mayor Bonnie Crombie in a statement.
"The closure of our facilities, cancellation of recreation programming and reduction in transit ridership, has resulted in significant revenue losses. Our immediate priority is the health of our residents but we must also start looking to the future and planning for recovery. Cities are not in the position to run deficits and our primary source of revenue is the property tax. That's why we are asking for support from our provincial and federal partners to weather this storm in the months ahead. We will continue to act in the best interests of our taxpayers while ensuring Mississauga remains one of the best-run cities in the world."
At the meeting, Kent said that the city's financial position is significantly different from what it was when the budget was approved on January 22, 2020. The city, which was recently forced to lay off close to 2,000 part-time employees in response to the pandemic, has lost significant recreation and transit-generated revenue in recent weeks.
The city closed its libraries and recreational facilities in March. The pandemic also forced the city to reduce transit service to ensure that physical distancing measures are being honoured. At the meeting, city staff said ridership has dropped by 75 per cent over the past few weeks.
The city said reduced levels of service and temporary layoffs have offset some of its financial losses.
While the city has routinely budgeted for emergencies such as floods, ice storms and other natural disasters, the challenges posed by the COVID-19 pandemic are unique and unprecedented. Kent told council that municipal reserves are not sufficient to support the city beyond the medium term and that reserves, though potentially a source of funding, should not be dipped into unless absolutely necessary.
At the meeting, Kent presented a model that predicted the city could face an operating deficit of $43.4 million if social distancing measures are relaxed in April. The projected deficit could climb to $59.1 million if current measures last until June. It could hit $100 million if strict isolation conditions remain in place until the end of the year.
The projections do not include other actions council is considering, such as decreasing paid parking fees and waiving other late license renewal fees.
According to the Municipal Act, a city can run a deficit in a given year; however, it cannot budget for a deficit. Municipalities are also not permitted to borrow to fund a deficit. As for how the city will eventually recover, staff said the city can look at raising taxes, raising revenues, cutting spending and using reserves where available.
At the meeting, council discussed the need to press the federal and Ontario governments for help to navigate the crisis, all while acknowledging that both levels of government are currently spending monumental amounts of money to help residents through the pandemic and associated economic downturn.
"The COVID-19 pandemic is the greatest health and financial challenge that we have seen in generations. The economic impact on Mississauga families and businesses will be devastating for many. Our City budget is not immune to the effects of this crisis," said Janice Baker, City Manager and Chief Administrative Officer, in a statement.
"Lost revenues combined with ongoing costs will lead to a deficit in 2020. We continue to work with every area of the corporation to identify areas where costs can be avoided. We can't predict the end of this crisis, which makes it very difficult to accurately forecast the full financial impact. Needless to say, financial assistance will be required from the provincial and federal governments."
The report recommends asking senior levels of government to support municipalities in a number of ways, including by offering an operating grant to help fund current operations and maintain appropriate service levels during the COVID-19 crisis.
The report also says that cities can ask the federal and provincial governments to increase the amount of gas tax funding they typically remit to municipalities.
The report also encouraged the city to press the federal government for promised funding to support major infrastructure projects.
Further budget discussions will be launched at budget committee on June 24.
Cover photo courtesy of @idris.yyz
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