Ontario municipalities facing multi-billion dollar shortfall in 2021, with no emergency funding in sight

Ontario's municipalities are projected to face a combined $2.4 billion shortfall in 2021 due to the ongoing effects of the COVID-19 pandemic, according to a new report by the province's financial watchdog.

Hard-hit municipalities may be forced to consider measures such as tax increases or service cuts in 2021 if no additional emergency funding is made available by the federal and provincial governments, states the report by the Financial Accountability Office of Ontario (FAO).

"It's next year where there's going to be a gap," said accountability officer Peter Weltman.

The FAO report provides one of the most accurate accounts yet of the devastating financial effects of the pandemic on the province's 444 municipalities. 

COVID-19 is estimated to cost municipalities $4.1 billion in 2020 and a further $2.7 billion in 2021, due to extensive revenue losses coupled with increased spending.

The FAO report found that a combination of emergency funding and cost saving measures taken by municipalities will "completely mitigate" the massive losses of 2020.

Municipalities staring down an uncertain new year

Municipalities received $3 billion in emergency support this year via the Safe Restart Agreement, a joint federal-provincial program. 

They also saved a combined $1.1 billion through measures such as temporary staffing cuts, public transit service reductions and the closure of facilities and programs.

While the financial outlook is expected to improve next year, the ability for municipalities to handle future losses is uncertain, since there is relatively little emergency funding earmarked for 2021.

What has been announced  — $300 million for transit-related losses and $700 million to cover other losses  — is expected to fall well short of the municipalities' multi-billion dollar shortfall.

Weltman said a concrete plan for additional funding is increasingly urgent, as most municipalities are now in the process of determining their 2021 budgets. Municipalities are not allowed to run a budget deficit by provincial law.

"I think the timing is now for [municipalities] to understand what they're going to have to do to mitigate whatever potential shortfalls are coming their way," Weltman said. 

"So really, it's the next two or three weeks."

Tory says lack of commitment 'not to my liking'

Toronto Mayor John Tory has for months been calling on the federal and provincial governments to confirm an additional round of emergency funding, which he has referred to as the "Safe Restart 2.0" program.

"The response to that so far has not been to my liking," he told reporters Thursday morning. "Neither government has yet committed to having a restart 2.0, which will apply to some of the shortfalls we are going to experience in 2021."

Tory also released on Thursday an open letter to Prime Minister Justin Trudeau and Premier Doug Ford, in which he again called for more funding.

Toronto is forecasting a $1.5 billion shortfall in 2021, which already factors in what Tory calls "substantial savings" identified by the city.

"This will allow us to continue managing through the pandemic, while delivering the high quality services our residents require, when they need them most," the letter reads.