The City of Mississauga Council considered a report from City staff that describes the impacts of COVID-19 on the City’s financial position.
“COVID-19 is taking an unprecedented toll on our economy and on our City’s finances,” said Mayor Bonnie Crombie. “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.”
City’s Current Financial Position
· The City’s financial position is significantly different from the budget approved on January 22, 2020.
· The biggest impact on City finances comes from lost revenues due primarily to a reduction in recreation fees and transit fares.
· This loss is offset by some cost savings due to reduced levels of service and temporary layoffs.
· The City has budgeted for emergencies such as floods, ice storms and other weather-related events. In the past, these have been limited in duration and been targeted to specific geographies or stakeholders, making financial recovery more straightforward.
· The COVID-19 pandemic has affected most stakeholders all at once and municipal reserves are not sufficient to support the Corporation beyond the medium term.
City’s Projected Financial Position
· The projection model in the report identifies pressures on the 2020 operating budget arising from the various COVID-19 impacts. It is unknown how long the physical distancing and self-isolation practices will remain in effect. Scenarios have been developed assuming these practices continue to the end of April, May, June, September and December.
· The preliminary forecast of the impact of COVID-19 is an operating deficit of $43.4 million (April) to $59.1 million (June). This could rise to $100 million by the end of the year if the strict isolation conditions remain in place until then.
· The April 3, 2020 announcement by the Province stopping all non-essential construction will have an impact on the City’s 2020 capital program. This impact will need to be analyzed.
· Projections do not include other actions Council is considering – reduction of paid parking fees, exemption for late license renewal fees for pet and mobile business licences.
· A budget deficit is unavoidable in 2020 as revenues decrease while many costs continue.
· Staff will review Council-established reserves as one of the tools to partially mitigate the 2020 deficit.
· According to the Municipal Act, a city can run a deficit in a given year; however it cannot budget for a deficit.
· Any deficit can be offset through increased taxes in the subsequent year, an increase in revenues or the reduction of expenses or the use of reserves where available.
· The City cannot borrow to fund a deficit.
“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. “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 requesting provincial and federal government support to offer municipalities:
· An operating grant to help fund current operations and maintain appropriate service levels during the COVID-19 crisis, and further allow for service levels to quickly be re-established during the period of recovery.
· A new infrastructure building program by increasing the amount of gas tax to stimulate the economy later this year.
· Approval of project applications under the Investing in Canada Infrastructure Program (ICIP) submitted by the City of Mississauga on October 23, 2019 and November 12, 2019 to help speed economic recovery.
Staff are continuing to monitor the situation and identify options to offset the deficit. The size of the 2020 deficit, the state of the economy and the financial position of the City’s residents and businesses will inform strategies and actions to be considered. 2021 Budget discussions will be launched at Budget Committee on June 24, 2020.