Mississauga Mayor Bonnie Crombie penned a lengthy post on social media making the case on behalf of cities for provincial and federal support so that cities don’t have to resort to double digit property tax increases on residents. The full text of the post is included below…
Let’s talk finances. Specifically, municipal finances.
You may have seen recently that cities across Canada are calling on the provincial and federal governments to provide them with assistance.
Federally, the request is for a minimum of $10 billion, up to $15 billion to cover operating shortfalls. This is a big number and a big ask. But it’s an important ask. Let me try to explain why cities need this money now.
Unlike the federal or provincial governments, cities operate most like a business. To be exact, we are in the service delivery business, providing hundreds of services to residents. From fire, ambulance, police, water, transit, roads, recreation, libraries, shelters, housing, snow clearing, and so much more – the services cities provide impact you most on a daily basis.
Cities don’t budget the way the federal and provincial governments do.
At the beginning of each year, we calculate how much delivering services will cost for the year ahead, then we apply the property tax rate, based on the assessed value of homes in our city, to gather the money we need to provide these services. It varies by city, but roughly 60% comes from the property tax. The remainder comes mainly from user fees (e.g., transit and recreation revenues), fines, debt, and federal and provincial transfers.
The property tax is one of the most inefficient taxes there is. It is essentially an income tax because no matter how much your house is worth, you don’t realize that value until you sell it. Cities essentially tax your income. During these tough times, property taxes cannot be raised without limit. It’s not fair and it’s not an efficient way to make up revenue shortfalls.
So, let’s talk about our revenue shortfalls and our financial picture. In Mississauga, we are currently losing $20M per month. In other cities like Toronto, that number is $65M per week. The cumulative number gets larger, the longer this crisis continues. In Mississauga, we project $60M in losses by the end of June and $90M by September.
The losses area a result of lost transit revenues, recreation fees, and investment income, as well as interest on deferred property taxes and other relief measures we have taken.
Cities have no way to make up this lost revenue.
Legally, we are not permitted by the Province to run deficits. Our debt levels are capped as well. We must budget accordingly each year and only spend what we have. Some will suggest it’s okay to just let cities run deficits next year. While this sounds like an easy solution, it only pushes the problem down the road. Cities have no mechanism to pay back these deficits next year or the year after that, without significant property tax increases.
Without provincial or federal assistance this year, Mississauga projects a 17% property tax increase next year. The numbers are similar in cities across Canada.
Now, we run a tight ship at the City and have strong reserves, but by law, many of these cannot be used for anything but the things they were collected for. For instance, development charges must be used to provide infrastructure to new communities. It cannot be used to cover operating losses. We could borrow more debt, but our infrastructure deficit is already $274M for 2020.
Delaying infrastructure projects only kicks the can down the road, so to speak. We must maintain a state of good repair and at a time when the economy needs to create jobs, our infrastructure projects do just that.
Mississauga has taken measures to scale back and do our part. We have instituted a hiring freeze and we have unfortunately had to lay off 2000 employees. This is not something anyone wanted to do, but it was necessary and financially prudent.
Cutting more staff means cutting services. It’s as simple as that. So, while it’s easy to just say the City should cut, my question to you is where? Our operation is lean – last year we found $2.5M in savings. At the municipal level, cutting jobs means cutting services. So, where do you start? It’s important to note that cities are the only level of government that has laid people off to date. Neither the federal or provincial governments have done this.
All of this brings us back to why we are asking the federal and provincial governments for assistance. Extraordinary times call for extraordinary measures. We need our federal and provincial partners to do something extraordinary. We need them to help cities like they’ve helped people and businesses, the most vulnerable, charities, students, and many others. We thank them for their investments, but now it’s time to invest in cities.
Cities are an essential service. We keep Canadians safe and healthy.
There are many unknowns at this time. For instance, even when we begin to re-open our City, will transit ridership return? If ridership does return, will physical distancing measures mean we have to run twice as many buses to serve the same number of riders pre-COVID19? Will people come back to our recreation centres and enroll in programming? And, given the precipitous decline in the economy, how many people will default on their property taxes?
We do not yet know the answers to these questions and many others. We face an uncertain future and an inability to deliver vital services for our fellow Canadians.
We’re not asking for a bailout, but an investment in essential services that are keeping our economy and our country running. We are economic engines that keep Canada going.
I have written to the federal and provincial Ministers of Finance. You can read the letters, here: https://www.mayorcrombie.ca/mayor-calls-on-ministers-of-fi…/
I ask you to join me in calling on the province and federal government to support cities, our local economy, and to protect the vital services you rely upon.