A report released last week by the Nova Scotia Federation of Municipalities (NSFM) is providing a real glimpse at how COVID-19 is affecting local municipalities.
The report states that Nova Scotia’s municipalities are facing a collective shortfall this year of $66.5 million. It asserts that the province’s state of emergency required so many Nova Scotians to stay home that it led normal non-tax revenue streams – like transit, recreation, parking, development permits, and more – to almost entirely dry up.
Collectively, municipalities across Nova Scotia are reporting an expected loss of transit revenue amounting to $23,184,740. Expected losses from deed transfer taxes are next, with reduced activity in the housing market, amounting to $11.74 million. Recreation revenues are also down significantly, though cuts to staffing, maintenance, and other expenditures brings this loss total to $8.46 million.
Many municipalities delayed property tax due dates to help homeowners and business owners cope with the difficulties of COVID-19. Delays in these collections leave municipalities coming up short on paying the bills for essential services like fire, police, water, and sewer, and accordingly, many are pulling investments to help with cash flow, or running overdrafts in their operating accounts.
There is an expected loss of $1.51 million in solid waste management, but because this service is often coordinated through inter-municipal service agreements, this number could be significantly larger after actual losses are determined by regional authorities.
There are projected losses of $1.41 million for events no longer being held, and because housing starts are expected to be down, losses of $990,622 are expected due to unbudgeted decreases in the issuance of building and development permits. Additional expenses in investments in IT technology to support remote work and communications to advertise public hearings are also expected, with an anticipated total of $968,786 across the province.
Above and beyond all of this, municipalities reported on additional expected discretionary expenses of $16,714,367 due to COVID-19. Municipalities said that, because of COVID-19, they expected to make decisions about offering tax forgiveness, including offering tax write-downs and tax write-offs, that would sum to approximately $13.5 million.
Within this $16.7 million, several municipalities reported that they expected that they would be increasing their contributions in pre-existing programs designed to support vulnerable populations due to COVID-19. Many indicated that they were deliberating how much to add, but those who had already made these determinations said that the difference due to COVID-19 amounted to $1.14 million.
Many respondents from towns indicated serious concern about the impacts of COVID-19 on tourism, hospitality businesses, and the retail sector, as well as their fisheries. Although most indicated that the total impact of COVID-19 could not be quantified right now, several expressed concern about the long-term sustainability of their commercial tax bases, especially depending on how hard subsequent waves of COVID-19 hit.
Although not included, another component of shortfalls are expected costs resulting from rent forgiveness for the spaces that many municipalities lease to variety of voluntary sector organizations. In many cases, these organizations are no longer generating any kind of income due to COVID-19, and the expected need for relief in this area is expected to be $1.38 million. Municipalities that provide funds for local public health measures are expecting to contribute an additional $658,000 because of COVID-19.
Most municipalities budget for a small amount of interest each year on their cash deposits, on their short- and medium-term investments, as well as some amount of interest on outstanding taxes. Municipalities are expecting to take at least $10.8 million out of reserves to address operating shortfalls, and many others said discussions about drawing on reserves were underway. Collectively, along with decreased interest rates, expected losses in these areas are anticipated to amount to some 10.81 per cent of the overall $66.45 million total, or $7,183,438.
COVID-19 also led to unexpected additional expenses for municipalities, including $3.31 million to supply personal protective equipment (PPE) and Plexiglas service kiosks, and other health and safety measures.
The NSFM argued that the lost revenues are separate from property taxes and are based largely on user fees. Without support from the provincial and federal governments, the NSFM asserts that these unrecoverable costs will be carried forward into next year’s budgeting processes, where they will have to be picked up by the taxpayer.
The average shortfall estimated by municipalities in this survey is equivalent to 2.94 per cent of their total operating budgets. That would mean an average 7.1 per cent hike to residential tax rates in next year’s budgets.
The unique fiscal structure of municipalities only permits this loss to be carried forward into next year, not any future year beyond that. Any lingering shortfall from this year will require next year’s tax rates to be raised by a similar and corresponding amount.
NSFM president Pam Mood says that’s “not practical or fair” given existing cost pressures due to COVID-19 on residents and businesses.
Nova Scotian municipalities have scrambled to make cuts over these past months, axing programs and laying off hundreds of staff. Municipalities have cut 143 Full-Time Equivalent (FTE) positions, and have put off hiring another 116 FTEs.
With limited avenues to generate revenue and an inability to run deficits, the NSFM is requesting this unrecoverable shortfall be addressed through grant money from the provincial and federal governments, pointing to recent announcement by Prime Minister Trudeau that up to $14 billion in federal transfers will be made available to provinces and territories through a Safe Restart Agreement.
Unfortunately for municipalities, there are no other options, but money from other levels of government, unless Nova Scotians are willing to absorb large tax increases in the midst of a global pandemic.
And the argument that expenditures need to be cut further and administrations made leaner holds no water, since that has already been done.
Of course, both the federal and provincial governments have financial challenges of their own to overcome, but municipalities in Nova Scotia are facing unique and far-ranging, and they need help immediately.
Obviously, municipalities across Canada are facing the same basic obstacles, and helping each and every municipal unit would require a vast expenditure from the federal government, and their provincial partners, but this money has to be found.
Municipalities in Nova Scotia have done all they can to stave off disaster this year, and next year promises to be much worse.
Fortunately, there is time to initiate talks so they all get the help they need.