COVID-19 triggers $23-$33 million budget shortfall at London City Hall
LONDON, ONT. -- The COVID-19 pandemic has blown an estimated $23 million to $32.8 million dollar hole in London City Hall’s 2020 budget.
The range is based on COVID-19 impacts either ending at the end of June or August.
“The situation does not look good from London, for where our own budget has landed based on the impacts of COVID,” warns Councillor Josh Morgan, who chaired London’s multi-year budget deliberations in February.
The report is the first financial update provided by City Manager Lynne Livingstone and City Treasurer Anna Lisa Barbon to city council, and details the impacts to a long list of municipally-funded services.
The numbers are preliminary and based on the best information received to date.
The lost revenue and new costs include:
- London Transit Commission ($7.7 - $12 million)
- Water/Wastewater Treatment ($2 - $2.8 million)
- Investment Income ($1.85 - $3.1 million)
- London Police Service ($1.75 - $2.6 million)
- OLG Revenue ($1.7 - $2.6 million)
- Hotel Tax Revenue ($1.1 - $1.7 million)
- RBC Place Convention Centre ($1 - $1.2 million)
Municipalities are not allowed to run a budget deficit, so the report warns, “Any unfounded operating deficit is required to be carried over to be funded through the budget in the subsequent year.”
Morgan expects council will direct city administration to continue measures that cut spending, “Things that we did budget and plan for no longer make sense in the current context, and our staff are not going to spend on those...It will mean revisiting some of the priorities that were there before we were in the financial situation we are in."
City staff say they will exercise ‘spending restraint’ this year by minimizing training, holding off purchasing new equipment, and only hiring for critical positions.
Capital construction projects deemed non-essential will be deferred for a year. A list will be prepared at a future date.
The treasurer also recommends redirecting the $3.2 million budget surplus from 2019 towards filling the financial hole.
New assessment growth dollars will only be used for essential growth-related expenses in 2020, freeing up more money to cover pandemic costs.
The staff report about the pandemic’s impact on City Hall finances includes a list of 11 measures council can consider to provide further relief to the community.
The list of potential actions includes:
- Municipal COVID Emergency Benefit - $100 to $200 payment for necessities for OW/ODSP recipients ($1.6 million or more)
- Housing Stability Bank Program - loans for rental/utility arrears for low incomeLondoners ($325,000)
- Close Digital Divide - Additional 1,500 low-income households added to low-cost internet program for three months ($45,000)
- Hotel Tax - Extend remittance of Municipal Accommodation Tax from 30 days to 90 days
The staff report does not include potential property tax write offs, nor potentially lost fees related to planning applications. Currently, those planning fees are believed to only be delayed.
“Higher taxes would only exacerbate the problem," Morgan adds, saying the solution lies in less spending, not higher property taxes.
“I don’t believe that is the place we will go. I think we need to look at spending restraint, because that allows us to make the biggest difference and not put the burden on London homeowners and London businesses.”
Mayor Ed Holder agrees, “Not only are we going to be providing essential services, and maintaining those for Londoners, but we will not be increasing the taxes already approved.”
Morgan recommends council revisit spending decisions during the 2021 annual budget update this fall, which will be looking at planned expenses for 2021 and beyond.
Holder agrees, also suggesting the time to address the multi-million dollar shortfall is during 2021 budget deliberations.
But Councillor Phil Squire says if council intends to change spending commitments in the multi-year budget, outside boards and agencies need to know, now.
“Whether it’s at city hall or our boards and commissions, and making some tough decisions, I think the longer we wait, the more difficult those decisions are going to be.” says Squire.
Both Holder and Morgan say senior level governments will need to provide relief to municipalities, particularly regarding essential services like transit, policing, and firefighting.
“We are like every other business in the province and in the country, we are impacted and we will need support as well,” Morgan says.
City Hall’s Strategic Priorities & Planning Committee will discuss the report, and ways to further mitigate the pandemic’s financial impacts at its meeting on Tuesday.