Today, the Financial Accountability Office of Ontario (FAO) released a report detailing the financial hardships that municipalities like the City of Toronto are facing due to COVID-19.
Mayor John Tory has been vocal since the beginning of the pandemic that the City is in a grave financial situation due to COVID-19. The report confirms that the City has been hit harder financially than any other municipality in Ontario, in both total and per capita financial impacts. The City projects the 2020 year-end financial impacts of COVID-19 to be more than $1.7 billion, with the effects continuing well into 2021.
The financial pressures that the City faces as a result of the COVID-19 pandemic has led to significantly reduced revenues in areas such as transit, fees, licences and permits, and higher expenses in areas such as long-term care, housing and public health.
The City has mitigated some of these costs by using a combination $500 million in workforce and spending restraints and cost avoidance, such as voluntary separation, a hiring slowdown, management, non-union and Councillor pay freeze, and the cancellation of the non-union pay-for-performance program.
The City’s budget variance allowed for $34.1 million in available funds, and $669 million in federal and provincial support in the form of the Safe Restart Agreement was provided to the City. The City has submitted its Safe Restart Agreement Phase Two funding application, requesting $543 million to help ease the City’s financial pressures.
The FAO report demonstrates the need for further Federal and Provincial relief funding, as the remaining Safe Restart Agreement funding is inadequate to address the financial shortfall projected by Toronto and other Ontario municipalities for 2021.
The City has accumulated surpluses and reserves over previous years which have been used to finance infrastructure investments or are set aside for specific purposes – some of them provincially legislated – and cannot be accessed to address the operating shortfall created by the COVID-19 pandemic.
S&P recently affirmed the City’s ‘AA’ credit rating – while recognizing that the City will remain under significant pressure to keep delivering essential services, including transit, to its residents while grappling with the financial fallout from reduced revenue and increased public health expenditures in the current fiscal year and into the next.
“The City’s extremely deep and diversified economy will provide a foundation for recovery as the pandemic and associated restrictions ease,” the S&P report stated. “In addition, we believe that Toronto’s prudent financial management and robust liquidity will help to sustain the City’s creditworthiness in the longer term.”
“The FAO report today confirms that Toronto and all municipalities will need a Safe Restart 2.0. Our response to COVID-19 is ongoing and will require ongoing frontline services that we must deliver. The financial pressure of 2021 is looming and we need the support of our federal and provincial counterparts to help relieve that pressure. While we have applied for the second phase of the Safe Restart Agreement funding, we know it won’t be enough to guide Toronto through 2021 and as we move into the recovery phase of the pandemic. I’ve been at the table and I’ll continue to be at the table, working with our provincial and federal counterparts to ensure Toronto has the financial means to continue to fight this pandemic to protect the health of our city and to save lives.”
– Mayor John Tory
“It’s no surprise that Toronto has been harder hit than any other municipality in Ontario. The revenue impact to the TTC alone is $786 million – not to mention the additional costs to our long-term care homes, shelters and health care needs. We know that the 2021 budget will be a challenge, and we are optimistic that the federal and provincial governments will continue to be there for us, as they have been in 2020. ”
– Councillor Gary Crawford (Scarborough Southwest), Budget Committee Chair
“While Toronto has shown surpluses and reserves in previous years, these funds are financing needed infrastructure investments or are set aside for specific purposes. Without additional support from other levels of government, municipalities may be required to implement their own mitigation strategies to increase revenue and decrease spending – impacting our ability to invest in and maintain capital infrastructure to support Toronto residents.”
– Heather Taylor, Chief Financial Officer
Toronto is home to more than 2.9 million people whose diversity and experiences make this great city Canada’s leading economic engine and one of the world’s most diverse and livable cities. As the fourth largest city in North America, Toronto is a global leader in technology, finance, film, music, culture and innovation, and consistently places at the top of international rankings due to investments championed by its government, residents and businesses. For more information visit the City’s website or follow us on Twitter, Instagram or Facebook.
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