The federal and provincial governments must roll out a powerful rescue plan for cities: the $10 billion emergency fund proposed by the Federation of Canadian Municipalities would be a good start.
There is no financial or social recovery from COVID-19 without cities.
Cities are trying to help residents and small businesses by deferring tax deadlines, creating emergency grant programs and investing in stimulus projects. Still, the ten largest cities in Canada face combined operating budget shortfalls in excess of $3 billion and growing. Property taxes would have to rise by as much as 50 per cent to cover that gap. It makes no sense to hit our residents with massive tax increases when so many are fighting for survival. What’s equally destructive is to close the gap by laying off city staff and slashing services — that directly harms public health, and undermines the national economic recovery.
The federal government has committed an estimated $146 billion to emergency support during the pandemic. One critical sector of Canada’s economy has been bypassed: cities. Canadian cities represent more than 80 per cent of our nation’s population, but only receive eight cents of every tax dollar. COVID-19 relief funds are no exception to this rule.
Municipalities are ground zero for the COVID-19 recession. Our communities experience first-hand the catastrophe of closed businesses, evicted renters, mass unemployment and idled workplaces.
Additionally, some communities have been disproportionately impacted by the epidemic, including urban Indigenous communities, racialized communities, people experiencing homelessness and low-income residents. And it is municipalities that will ensure that the recovery from the pandemic addresses the needs of systemically vulnerable communities.
Seventy per cent of Canada’s GDP is created in metropolitan areas, and cities provide nearly all social programs. From job training programs to affordable housing, Canadian cities will execute the bulk of our recovery strategies.
Municipalities also face unique and unfortunate fiscal challenges from this pandemic. Cities are not legally permitted to run operating deficits, and costs incurred due to public health measures have ballooned for emergency shelters and cleaning measures. To make matters worse, municipal revenues are falling through the floor. Residential and business property taxes, user fees, transit fares and others have all been hammered.
Right now, the options for cities are mostly limited to slashing services or drastically raising taxes. Neither is the right answer. Public health and our commitment to building safe and high-quality communities require us to maintain essential services.
We, as Canadian municipal leaders, will do everything we can in the coming desperate months to preserve the critical front-line services essential to defeating the coronavirus and preserving healthy communities. We cannot succeed without strong, fast help from higher levels of government. The rules need to change. Now.
The federal and provincial governments must roll out a powerful rescue plan for cities: the $10 billion emergency fund proposed by the Federation of Canadian Municipalities would be a good start. Flexible, regionally supported approaches to recovery should be prioritized. Access to the Canada Emergency Wage Subsidy program is imperative. And the Bank of Canada, already buying federal, provincial and corporate bonds at near-zero interest rates, should offer the same for local governments.
Provinces also need to relax the restrictions on cities by waiving balanced-budget requirements and providing their own emergency aid for municipalities. Requiring any government to balance its books during an economic downturn and health crisis is old-fashioned, ideological and self-destructive. It’s a discredited and counter-productive policy, and still rules fiscal affairs for Canada’s municipalities.
Canada’s cities are a vital link in stopping contagion and returning our communities to health. Yet our capacity to do the job is becoming more difficult every day. If cities cancel essential services and eliminate thousands of jobs, the risk of renewed waves of infection will be predictably elevated — and the current recession will turn into a depression. Let’s move quickly to give cities the fiscal tools they need to help defeat this pandemic.
Cities are the economic engines of this country. If cities fail, Canada fails.
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Cities as well as provinces
Cities as well as provinces are under increasing financial strain as their revenue streams collapse. The federal government should distribute special Covid-19 grants to compensate. The federal government can access funds from the Bank of Canada which purchases government bonds with newly-created money, and has been doing so regularly for over eighty years.
After the great financial crisis of 2008 when credit markets froze, the federal government bailed out big banks and corporations through a $200 billion Extraordinary Financing Framework. Provinces and municipalities should receive the same largesse that was given to financial institutions, insurers, car manufacturers, and the issuers of credit cards.
The federal government holds all the shares of our central bank which should operate for the general benefit of Canadians and not just to sustain profits of business and financial elites.
Footnotes:
1. The Great Canadian QE Myth – Part 2
https://crusoeeconomics.com/2019/01/17/the-great-canadian-qe-myth-part-2/
“Prudential Liquidity Management Plan” (PLMP)
This plan, enacted largely in response to the 2008 financial crisis, called for an emergency fund to the tune of approximately $20 billion to be held at the Bank of Canada on behalf of the Federal Government.
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....instead of going straight to the debt market or tax base to fund their $20 billion contingency fund, the Federal Government instead turned to the BoC to monetize new bond issuances. The BoC subsequently purchased approximately $20 billion in new government bonds between 2011 and 2013 and credited the Federal Government’s account at the BoC with this newly-created money.
2. Improving Access to Financing and Strengthening Canada's ...
www.fin.gc.ca/pub/report-rapport/2011-7/ceap-paec-2f-eng.asp
"To soften the impact of the crisis, the first phase of Canada’s Economic Action Plan included measures to provide up to $200 billion to support lending to Canadian households and businesses through the Extraordinary Financing Framework."
3. Call for Renaissance of the Bank of Canada
http://www.comer.org/projects/index.htm
"Through our publicly owned Bank of Canada, which was established in 1935, the federal government has the power to borrow money in huge quantities essentially interest-free, and to make such funds available not only for its own use, but also for provincial and municipal expenditures. Such borrowing helped Canada to get out of the Great Depression, and to finance its participation in World War II. Continuance of this practice until about 1975 played a key role in creating Canada's post-war prosperity and in making possible its social programs.
As federal governments, which control the Bank of Canada, increasingly catered to the private commercial banks, this practice greatly declined. Governments at all levels throughout Canada increasingly had to resort to borrowing from the private banks and other private moneylenders, including foreign sources."
4. The Bank of Canada must do more to help provinces tackle the coronavirus crisis
https://www.nationalnewswatch.com/2020/04/08/the-bank-of-canada-must-do-...
"There is another more simple option. The Bank of Canada could buy new short-term federal debt — at zero interest or prevailing rates, it doesn’t matter because the Bank is owned by the government — and let the federal government transfer funds to the provinces at no net cost. Consider it a COVID-19 grant.
The Bank of Canada was established during the Great Depression to deal precisely with the kind of systemic event we now confront."
Cities have long been the
Cities have long been the underdog and convenient whipping boy for the provinces. Yet the vast majority of the wealth of Canada is generated within them. Though GDP is an imperfect measure, Metro Toronto produces the equivalent in economic activity as the entire province of Alberta or Quebec, and 1/3 more than the six smallest provinces combined. Likewise, the six largest cities produce half of the annual wealth of the nation by dint of merely existing as concentrated natural markets and places of living and earning. The nation’s economy would collapse without them.
But can the GTA, Metro Vancouver (which produces half of BC’s wealth on 1/343 of its land area) or greater Montreal get any federal fiscal respect, let alone support during a time of need? Arguably, throwing public money at the Alberta oil industry has more sway with Canada’s two major federal political parties, even during a once-in-a-lifetime world-wide health crisis. Clearly, they’d rather leave it up to the provinces who have had long records of negligence and willful disregard for their own cities despite their responsibilities under the constitution.
There is something seriously unhealthy about that.
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