In the coming weeks, Ottawa City Staff will be presenting Council with their draft for Budget 2021. This past year, the COVID-19 Pandemic, and its substantial impact on Ottawa’s economy and the City’s finances has been nothing short of devastating. Going forward it is important that City staff and Councillors be realistic about the economic road ahead of us, and are prepared to make responsible, and at times difficult, decisions about what the City can honestly pay for in the short term.
With several months of data now available, Ottawa’s economic picture, and the impact of the COVID-19 Pandemic, is becoming increasingly clear. Sadly, though not unexpectedly, it is generally not good news. Within a few short months, the City of Ottawa’s once envied and strong financial position is suddenly facing a $181.8 million hole that could require the City to look at furloughing staff, freezing discretionary spending and borrowing against our reserve fund; monies that are reserved to support residents during natural disasters such as seasonal floods, or budget overruns to maintain services. All of these actions could become necessary as provincial law forbids an Ontario municipality from running a deficit.
While the City would have been able to weather this economic storm alone, when the Province and Federal Government came forward with supporting funds it did help to alleviate the pressure on the City. Their support ultimately covered 64.9 per cent of the shortfall, and prevented the City from having to dip too far into financial reserves. In fact, so good was this news that the City is working on a budget for 2021 which would limit the property-tax increase to no more than three per cent – a far cry better than the upwards of 15 per cent Ottawa’s CFO and Treasurer originally flagged as necessary if the City was to maintain existing levels of service going forward.
Ottawa, like much the rest of Canada, has just entered the second wave of the Pandemic. We are moving into winter, which, even under normal circumstances can be a challenging time for businesses such as restaurants; this past August a report from the Canadian Chamber of Commerce found that up to 60 per cent of restaurants may face closure due to COVID-19. Small and medium businesses may not fare much better. A July report from the Canadian Federation of Independent Business stated that 14 per cent of small businesses may close due to COVID-19 as well. The City of Ottawa moved to support local businesses, by waiving monthly patio and right-of-way permit fees, launching a marketing campaign, and offering property tax deferrals for residential and commercial properties, however, businesses still face a multitude of unknowns when it comes to their operations in the short, medium, and long term.
The ultimate financial impact of the Pandemic to Ottawa’s economy will remain unknown for the foreseeable future; anyone who believes they can predict how this next stage of the Pandemic will roll out would essentially need to be clairvoyant. However, the local numbers that we do have are clear; in January of 2020, Statistics Canada reported that Ottawa-Gatineau had 24,720 active businesses, by May 2020 – the most recent month for which they have statistics – we had shed 3,335, or 13.5 per cent, of total businesses, dropping us to 21,385. Needless to say, their next update will likely not show improved numbers as Ottawa, unlike Toronto, Montreal or Vancouver, was the only major Canadian city that actually saw an increase in the City’s unemployment rate from July to August.
Expert economists at Deloitte, in their September financial dashboard, reported that Canada will likely not see a recovery until at least Q2 of 2022; in Ottawa, that is effectively the end of this term of City Council.
Budget 2021 will manage to avoid what would be one of the largest property tax rate increases for Ottawa residents in modern history, largely due to federal and provincial monies as part of a bailout to address 2020 deficits. However, the City must still act and exhibit financial restraint in Budget 2021. We as a city cannot squander the goodwill of the provincial and federal governments, knowing that additional subsidies may be in short supply in 2021 and 2022, when the full financial effects of the pandemic are felt on the local, provincial and national economies.
City staff are currently preparing the draft Budget 2021, it will contain the anticipated, pre-COVID, 3 per cent increase; a product of years of prudent and responsible financial decisions. While the one-time financial support from the other levels of government have allowed for the planned modest increase to go ahead, it is important that we do not break from our tradition of fiscal responsibility and kick the problem down the road, thereby simply setting ourselves up for failure in Budget 2022 when it will be a new term of City Council who will have to answer to residents. Ottawa must remain affordable for residents and businesses, especially in the face of the Pandemic. With this in mind, City staff must take the time to review operating budgets in detail, to identify areas for potential savings resulting from changes in residents’ needs due to the Pandemic, and ultimately bring before Council a budget that demonstrates self-discipline, and reflects the reality of the financial situation of the City, the Province, and the Country.
Additionally, City staff must pointedly review all capital projects not already financially committed to by the City (for instance any life-cycle renewal projects) and identify what projects can be postponed until beyond the 2021 budget year. These projects are all ones that we would like for our communities, however, hard decisions must be made as to whether many of these projects can be put off and re-evaluated for Budget 2022, when we will have a better understanding of the long-term financial implications of the Pandemic and its economic impact.
In June, Ottawa Public Health surveyed residents on how the Pandemic was impacting them. Their report found that one in 10 residents were out of work, and 28 per cent responded that they saw a decrease in their income. It may be too early to know how many Ottawans will lose their job permanently as a result of the Pandemic, however, 19 per cent of respondents said they were currently having difficulty paying for basic necessities, such as housing, food or utilities, and among those that saw a decrease in their income, 20-25 per cent are finding it difficult or very difficult to pay for basic necessities. As of this month, you would have to go back 25 years to find comparable unemployment numbers on a trajectory that is only growing darker by the week.
As stated, the City of Ottawa cannot pass a budget that runs a deficit, this is a luxury reserved for the upper levels of government. Monies borrowed from our own emergency reserve funds must be replenished. We must act now to ensure that we are not creating the conditions that force severe service cuts, or see exponential tax increases in future budgets. As Ottawa residents are facing tough financial decisions, with belt-tightening at home, it is not too much to ask for their municipal representatives to do the same.
An abbreviated version of the above article appeared in the Ottawa Citizen on October 8, 2020.
The motion below was tabled by Councillor Dudas and unanimously passed at the Finance and Economic Development Committee on October 6, 2020.
City Council, Standing Committee and Commission
Conseil, comités permanents et commission
Committee / Commission: FEDCO
Report / Agenda: 17
Rapport / Ordre du jour:
Item / Article: 3
Re: PROPOSED 2021 BUDGET DIRECTIONS, TIMELINE AND CONSULTATION PROCESS
Moved by / Motion de: Vice-Chair L. Dudas
WHEREAS the financial impacts of the Pandemic to Ottawa’s economy will remain unknown for foreseeable future, though economists at Deloitte reported on September 23, 2020 that Canada will not see a recovery until at least Q2 of 2022; effectively the end of this Term of Council; and
WHEREAS City services have seen a dramatic shift in demand and delivery resulting from the Pandemic, for example the precipitous drop in ridership on OC Transpo; and
WHEREAS the City faces increased financial costs due to the Pandemic: e.g. increased sanitation costs, acquiring PPE, etc.; and
WHEREAS the City of Ottawa, like all municipalities in Ontario, is bound by Provincial legislation that it cannot run a budget deficit (without a legislated exemption); and
WHEREAS, according to Statistics Canada, from the January 2020 to May 2020 period, Ottawa saw 3,335, or 13.5%, of businesses permanently close their doors; and
WHEREAS the official declaration of Ottawa’s entry into the second wave of the Pandemic by Ottawa Public Health, underscores that the impacts of the Pandemic on residents and businesses will not be abating in the short or mid-term; and
WHEREAS as reported by Ottawa Public Health, since mid-March, 28% of Ottawa households reported a decrease in income. And of those, 19% are having difficulty paying for basic necessities, such as housing and/or food; and
WHEREAS it is important that the City maintain room in Budget 2021 to support new and unforeseen COVID-related expenses, whether it be PPE, housing programs, or expanding business supports; and
WHEREAS the preponderance of the City of Ottawa’s revenue is generated through direct property taxes on residents and businesses; and
THEREFORE IT BE RESOLVED that as part of the Budget 2021 process, City staff review operating budgets in detail to identify areas for potential savings resulting from changes in residents’ needs due to the Pandemic, with the purpose of bringing before a Council a budget that demonstrates self-discipline and reflects the reality of the financial situation of the City, the Province and the Country; and
BE IT FURTHER RESOLVED that City departmental staff review projects not started, nor tendered or have any dependency on other projects by the City (for instance life-cycle renewal projects), to identify projects that, should the need arise, may be postponed from the 2021 budget year, with the intent to re-evaluate these projects for Budget 2022 when we will have a better understanding of the long-term financial implications of the Pandemic and its economic impacts.