Almost $60M in losses by end of spring — City of Mississauga predicts consequences of COVID-19 will ‘echo for years’
Staff at the City of Mississauga have outlined the grim financial reality City Hall is facing as a result of COVID-19. Projections factoring in plummeting income and continuing costs show a significant deficit by the end of the year if physical distancing measures continue.
Year-end projections were presented during a virtual council meeting Wednesday, based on physical distancing continuing till April 30, May 31 or June 30. Projections have not yet been released beyond those dates.
Losses relating to COVID-19 by the end of April could be more than $43.4 million, rising to $49.9 million by the end of May and as much as $59.1 million by the end of June. Revenue drops as a result of free transit and closed recreation centres are in the tens of millions, with losses from investments, parking revenue and provincial fines also depleting the city’s coffers.
In light of the ongoing crisis, last week the City was forced to announce the layoffs of 2,000 part time and non essential staff effective April 17. It represents about 35 percent of the overall workforce which has just over 5,700 employees.
Community centre workers, librarians and other staff who remain at home during the shutdown mandated by Queen’s Park, simply created too much financial strain, on top of all the other pressures. The move is projected to save the City more than $8 million if the shutdown continues till the end of June. The City stated laid off staff will be called back as soon as things return to business as usual.
By June 30, reduced revenue from recreation centres and cancelled courses could sit at $23.3 million, while free ridership on MiWay buses will cost $25.8 million.
Factoring in the city’s other revenue streams and planned surplus, Mississauga will still be in the red by December. Assuming the shutdown of public life remains until June 30, the city is projected to have a deficit of $51.9 million at the end of 2020.
It’s unclear if other losses might also add up, such as the municipal impact of frozen real estate markets, longer term impacts of mass unemployment and business shutdowns as well as the lack of revenue from charges linked to construction projects.
In the short-term, deferred property tax, which has been pushed back three months and is responsible for almost 60 percent of the city’s income, will also cause cash flow problems.
The City currently has reserve funds totalling about $905 million, but also has a current infrastructure deficit of about $274 million (with almost $10 billion in assets that have to be maintained), and a shortfall of about $1.5 billion for projects that have been approved but do not have any funding.
Of the reserve fund balance, due to mandated spending regulations, much of the rainy-day money cannot be used outside the stipulated needs, but at least $51 million could directly be used for costs related to the ongoing pandemic, while almost $191 million sits in the tax reserve fund. The gas tax and transit reserve fund currently has a balance of just over $156 million.
Staff and council members look at the figures via video Wednesday
The City’s operating budget for 2020, which does not include capital costs to maintain infrastructure and build new projects, is almost $540 million.
All of it creates a dark financial picture for the municipality, but taxpayers should be heartened by how proactive and transparent the City has been about staff layoffs, financial projections and plans already in place to address the devastating ripple effect of the ongoing public health crisis.
A stiff 4.52 percent tax increase approved in January for the 2020 budget, on the city’s share of the property bill, which when blended with the region’s share and the provincial education portion, came out to an overall tax increase of 3.24 percent, more than a full percentage above Ontario’s inflation rate at the time, now looks like incredibly responsible financial decision making.
By comparison, Brampton taxpayers remain in the dark about impacts on the city and what it is doing. And unlike Brampton Mayor Patrick Brown, who pushed for tax freezes the last two years, even though the city couldn’t afford it, Mississauga Mayor Bonnie Crombie and her fellow council members, aided by veteran City Manager and CAO Janice Baker, have passed responsible budgets with appropriate tax increases to keep their city financially safe.
“We’re of course asking the feds and the province to step up and assist cities during this very difficult time,” Mayor Crombie said during a Wednesday press conference, following the release of the financial projections. “These are extraordinary times, unprecedented times, so they require extraordinary measures. Perhaps different legislation may have to be passed.”
Mayor Bonnie Crombie addresses the public Wednesday; she has vowed to help laid-off City staff and their families
In Ontario, municipal governments, including Mississauga, are not permitted to run a deficit under provincial legislation. Cities are allowed to take on debt in order to fund new capital projects, including roads, stormwater or transit systems, but they are not allowed to do so for operating costs. In the case of COVID-19, where many operating costs (for example, paying transit drivers) remain fairly constant, this leaves the city with serious financial troubles. Fire and emergency services, which have to continue, will cost about $116 million alone this year. MiWay’s operating cost for the year is almost $91 million, (and with free transit because of the need to get essential workers to their jobs there is currently no fare revenue).
MiWay riders do not have to pay during the pandemic to help essential workers get to their jobs
Traditionally, municipalities prepare for disasters by putting away money in reserve funds. These accounts act as long-term savings for the city, with each one waiting to be tapped into in a specific situation. The Winter Maintenance Reserve, for example, is in place for particularly harsh winters, where the budget needs to be expanded to meet heavy snow clearing requirements. As a result, many reserve funds cannot be used to respond to the pandemic because they are earmarked for other needs. Money stored in one of the Stabilization Reserves represents the city’s best bet for emergency relief from the pressures of COVID-19.
Crombie said that, without a change in the rules to allow cities to borrow to fund deficits or significant help from upper levels of government, tough decisions will have to be made.
“If it came down to us acting on our own, which I hope it wouldn’t, we discussed perhaps implementing a different levy, looking at reserves … deferring projects, delaying projects, cancelling projections,” she added. “There are many different initiatives and we’ll have to look through our budget line item by line item to see what can be done.”
Major projects in Mississauga range from the Churchill Meadows Community Centre to the Hurontario LRT and early plans for a bus rapid transit corridor along Dundas Street. At the moment, the LRT is moving forward as planned, while construction at the Community Centre has been suspended.
The Hurontario LRT project is supposed to begin construction this year and billions of dollars of projected investment in the city are tied to it
Some of the planned projects, particularly the LRT, will be huge economic drivers for the City and will bring tens of billions of dollars in investment to Mississauga, mostly from construction but also from things such as attracting more corporate businesses, which in turn will pay commercial property taxes. Increased residential property tax revenues, especially from massive projects such as the 9-tower Rogers M City plan and the 37-tower Oxford Properties plan, will also be significant economic drivers. Any delays to these major projects and all those planned along the lakefront such as Lakeview Village, would create a significant ripple effect.
Massive planned projects from top to bottom include the downtown Oxford development and Rogers M City, and Lakeview Village on the waterfront
For now, the City has halted some of its own municipal projects.
“We’ve closed our own construction, apart from transportation, the most significant project is probably Churchill Meadows which is in the west end. We’ve got good contractors who have been communicating very effectively,” Gary Kent, Commissioner of Corporate Services and Chief Financial Officer at City of Mississauga, said.
But money needed for proposed projects including more than $800 million for rapid transit along Dundas Street and Lakeshore Boulevard, will now be next to impossible to secure in the next year or two, while all three levels of government focus on bailing the country out from the ongoing financial shock of the pandemic.
“When we began to adjust our city services and programming to mitigate the risks of COVID-19, we hoped the shutdown would be short lived. With the recent extension of the Provincial Emergency, it seems likely that our facilities will be closed for some time,” Janice Baker, City Manager, said in a release when the layoffs were announced. “The lay-offs are a direct result of city program cancellations and facility closures, not having work available for part-time employees during the shut-down of non-essential services, and the severe financial pressures we are seeing on our 2020 financial results.”
Since the layoffs, Crombie has been at pains to point out the city is working to top-up COVID-19 benefits laid off employees will receive to reduce the impact on their families.
Modelling released by the province last Friday suggests Mississauga’s June 30 estimation date is a conservative timeline. Ontario’s projections predict as many as 1,600 people could die by April 30 as a result of COVID-19, with up to 80,000 cases by the same date.
The provincial data also showed the pandemic could last between 18 months and two years. While the length of the pandemic and physical distancing measures are not necessarily intertwined, the level of infection will dictate how long closures will last. The rules in place that have stopped residents paying transit fares and stopped the city from running recreation centres are unlikely to end within the first third of the infection time frame, as provincial officials have indicated.
Mississauga’s bleak projections could be on the optimistic side, with a bailout from provincial and federal governments the only solution to major long-term cuts or unprecedented increases in property taxes over the next few years.
“I can tell you the federal government and the provincial government are listening — they’re asking the right questions,” Kent said. “They, like us, just need a little bit of time to come up with all the solutions.”
One thing is clear, whether it’s through local, provincial or federal funding, taxpayers at all three levels, who provide the lion’s share of money that goes into public coffers, are going to have an immense burden on their backs.
Like so much during a pandemic, factors are constantly changing. The numbers released by staff at the City of Mississauga are projections that could change based on a variety of factors; they could go up or down.
While the city does have fairly healthy reserve funds available, they will not be the answer to all its problems. Exactly how the city responds to the crisis in time for the 2021 budget and how the situation has evolved by then remains to be seen.
“What we spoke to council about today was not just the impact of COVID this year, but also in future years,” Kent added. “Of course, we don’t know how quickly it rebounds …[and] there are some delayed revenues that will echo for years to come. [There is] a lot more information to gather and the numbers that we did share today will definitely change, we’re just not sure if they’ll go up or down.”
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