COVID-19: Local governments need help too

Courtesy of the City of Quesnel:

Editor's Note -- written by Quesnel Mayor Bob Simpson.  He can be reached via email here

As we get more clarity about the federal and provincial support programs designed to help businesses and individuals during this pandemic, pressure is mounting on local governments to “step up” too. But, local governments have limited powers and resources to help their ratepayers at this time without compromising the long term viability of their community. While the federal and provincial governments have multiple sources of revenue, local governments have only one primary source: property taxes. While it’s true that Quesnel City Council has been very successful over the last few years in attracting significant grants to fund major investments in our community, this grant money cannot be diverted to support any losses in property taxation. While property taxes are the main source of annual revenue for local governments, generally all of the property tax collected in any given year is expended during that same year to provide programs and services and to maintain and enhance infrastructure. Unlike the provincial and the federal governments, local governments cannot deficit finance nor do they accrue large unallocated cash reserves. Unlike provincial legislatures and the federal parliament, local governments also cannot borrow cash simply by a majority vote of their elected representatives. While short term borrowing (maximum 5 years) in some circumstances is allowed without referendum (under strict conditions) virtually all borrowing by a local government requires the consent of the majority of its citizens through a referendum. So, the debt funded programs currently being rolled out by the provincial and federal governments at this time are simply not an option for local governments. Local governments are also constrained on when they collect taxes and they must, by law, collect penalties on all late taxes. There are some provisions for local government to flex these timelines, but many local governments would not have the cash reserves on hand to continue to operate their services if they did not collect taxes on July 2 this year. During this pandemic, most local governments are also losing any incremental non-property tax revenue they collect through fees meant to offset the costs of offering services like transit or running an airport or offering recreation facilities and programs. There are still operating and fixed costs that need to be covered for these programs and services, but the fees that would normally help cover these costs are no longer being collected, putting further financial pressure on local government’s property tax revenue. In short, there is limited scope for local governments to “step up” in any major way to help ratepayers at this time. On the contrary, like many businesses and households, most local governments are feeling the financial strain of this pandemic too, and their elected Councils and Boards are eagerly waiting to hear from the provincial and federal governments what support structures they will be putting in place to help local governments through this very difficult time.