Budget Season
It is municipal budget season! There are countless city council meetings combing through spreadsheet after spreadsheet determining where the City will allocate its funding over the coming year. The debates are fiery, the delegations are passionate, and the stakes are high. It is probably the most exciting time of the year for municipal politics followers. Who needs Netflix when you’ve got hours of budget meetings to watch? (I am partially kidding…but only a little)
This year, municipal budget season is even more intense because of the COVID-19 pandemic, which has created significant budget shortfalls. Since people are not taking transit or using other municipal services such as recreation centres, the city is collecting fewer user fees, thereby decreasing a small but still significant revenue source. Many cities also must increase spending to be in compliance with COVID-19 protocols and protect residents accessing municipal services. As a result, Hamilton is expected to increase property taxes by 4.1%. Toronto will only be raising taxes by 0.7% since they found many areas to reduce costs but also due to the assumption the provincial and federal governments will help fill a $856 million shortfall in their budget.
This week’s readings helped to highlight the budget challenges municipalities face and how they are exacerbated by this pandemic. Unlike provincial and federal governments, municipalities cannot run deficits and have fewer avenues to collect taxes. As creatures of the province, municipalities also have a number of services that they must provide, meaning it is difficult to decrease spending in many areas of their budget. Thus, to balance the budget they must either cut services or increase taxes, neither of which are looked upon favourably by voters.
The IMFG article by Kitchen and Slack discusses how municipalities would benefit from additional tax revenues, particularly user fees. One such user fee they suggest is road pricing, which would not only help raise revenues for cities but also reduce congestion and other negative externalities associated with driving. One other benefit of road pricing is that it can also help to increase density in the city as people prefer to limit the amount they have to travel when they are charged for driving. While Toronto has never proposed congestion pricing, they have considered implementing tolls on the Don Valley Parkway and the Gardiner Expressway. Yet, the implementation of the policy could not move forward as a result of the provincial government’s interference. Indeed, road taxes are not well-liked and many voters outside of Toronto would criticize the provincial government if they did not step in and block the proposal.
However, cities are likely to experience lasting financial pressures because of the pandemic and I suspect the other two levels of government will be reluctant to provide extended financial. As such, I wonder if there will be more political will for the province to allow the municipalities to explore additional sources of revenues, such as road taxes, moving forward.
This year’s budget season is beginning to show how COVID-19 is impacting the functioning of municipalities and I suspect the effects will be long-term. How governance and service delivery will change over time will be an important aspect to watch in municipal politics moving forward.
