N.S. equalization funding to municipalities remains frozen

The Nova Scotia government is not putting any new money into this year's equalization grant for municipalities, despite the financial hit they are expected to take due to COVID-19.

The province provides about $32 million to municipalities to try to ensure each has access to reasonably comparable services at reasonably comparable tax rates through what used to be called an equalization grant and is now called the municipal financial capacity grant.

It is not yet known how much Cape Breton Regional Municipality will get this year. Mayor Cecil Clarke said CBRM usually receives just over $15 million, or about half the total.

"It's our hope that that will be maintained, yet our chief financial officer has not received official confirmation from the department on the final number," he said.

"But I have every reason to believe that the number will be held, by the discussions we've been having with the province over our other infrastructure challenges and cash-flow issues we've been dealing with."

CBRM's finances are in good shape, Clarke said, but with reduced tax revenues and significant shortfalls in other funding sources, such as transit, landfill tipping fees and facility rentals, the municipality will need to borrow to cover operating expenses.

"Across all of the CBRM accounts right now the chief financial officer and the staff have advised me that we're operating in the black, but as we go forward that is quickly going to change," he said.

Some Cape Bretoners argue the province should be providing much larger equalization grants to municipalities, but Clarke and CBRM staff have been in talks with the province for a new deal altogether.

With the pandemic putting extra pressure on municipalities, said Clarke, the province needs to rethink how it funds all of them so they can provide basic services.

"There are unfortunately going to be municipalities that may not survive or may not be able to be viable long term, so we have to take a hard look at all municipal viability," he said.

Nova Scotia's municipal equalization funding has been frozen at $32 million for about seven years.

No cut this year

In what appeared to be a cut, this week the province set the municipal capacity grant at $30.4 million.

Krista Higdon, who speaks for the Department of Municipal Affairs, said in an email the towns foundation grant of $1.5 million used to be included in the $32-million total, but when separated leaves the municipal capacity grant at $30.4 million.

She said the capacity grant amount remains unchanged from last year.

The province has worked with the Nova Scotia Federation of Municipalities on pandemic funding, said Higdon, and this week announced a $380-million loan program to help municipalities while the economy is stalled.

Clarke has called a special meeting for Monday afternoon to ask council to consider taking up the government's offer of a low-interest loan.

Loan considered first stage

He said CBRM's $44-million line of credit comes with a low-interest variable rate, currently set at 1.45 per cent, but the province is offering municipalities a lower-interest fixed-rate loan at 1.1 per cent.

"Ideally, if not required we wouldn't access a new funding mechanism, but by looking at where we're going to be, the lower interest, if we have to trigger it, it is better to use that than our operating line of credit, and by doing so it keeps the operating line of credit more available," Clarke said.

Pam Mood, mayor of Yarmouth and president of the Nova Scotia Federation of Municipalities, has said the loan program is just the first stage of a plan that will be needed to keep municipalities operating this year.

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