City of Ottawa facing $192 million budget deficit due to COVID-19 pandemic

OTTAWA -- The City of Ottawa is warning there could be service cuts, layoffs and fee hikes next year if the Ontario and federal governments don't provide a financial bailout to cities during the COVID-19 pandemic.

Council was told the City of Ottawa is facing a $192 million budget deficit this year due additional costs and a significant loss in revenue due to the COVID-19 related measures.

In a presentation to Council, City Treasurer Wendy Stephanson outlined a plan to dip into reserve funds, delay some capital projects and continue a hiring freeze to help address the budget deficit. Stephanson and City Manager Steve Kanellakos warned there could be layoffs and service cuts in 2021 without help from the upper levels of government.

Staff report Ottawa is facing a $192 million dollar deficit this year. Revenues are projected to be $241 million below budget this year, while the city has faced an additional $77 million in costs due to the pandemic. The city has found $89 million in savings to help cover some of the projected deficit.

Of the $192 million budget deficit this year, OC Transpo is facing a $120 million deficit due to reduced ridership during the pandemic.

Stephanson said a $192 million dollar budget deficit would be equal to a 12 per cent property tax increase this year, on top of the Council directive of a three per cent property tax hike.

Instead, Stephanson said staff have developed a plan to address the $192 million deficit this year.

The city will save $82 million by deferring undetermined capital projects this year and $78 million from the capital close fund.

The city will save $6 million with a "full staffing pause" to the end of the year and use $17 million from the Parking Reserve Contribution. Staff will also borrow $87 million from Tax and Rate Capital Reserves to help offset the transit budget deficit.

Stephanson told Council that if there is no funding from the Ontario and Federal Governments to offset the COVID-19 deficits with OC Transpo, taxes and fees might need to rise to pay back the reserves.

"While enough funds have been found today to make transit whole, those funds will need to be paid back over time to return the borrowed reserve funds to their source," said Stephanson.

"We're not out of the woods, this will impact future transit budgets and overall transit affordability if there's no backstop funding from the province or the federal government."

Stephanson warns that without funding from the upper levels of government, the city will need to raise OC Transpo fares and review transit service.

The Municipal Act does not allow Ontario municipalities to run a deficit.

Kanellakos told Council that staff developed a plan to continue to deliver services to the public during the COVID-19 pandemic.

"We have a plan that will eliminate the deficit to year-end, while ensuring we continue to provide service to residents and respond to the evolving community needs," said Kanellakos, noting the city will defer projects and use reserves to cover the deficit.

"These solutions put a lot of pressure on us down the line in terms of the 2021 budget."

Kanellakos said as staff look ahead to the 2021 budget, the City of Ottawa will need financial help from the federal and Ontario governments.

"We need help this year so that it doesn't carry into 2021. So getting the funding is where we are focusing our efforts because without it I can tell you now that we will not be able to sustain our current service levels into 2021."

Kanellakos added that if there is no funding from the upper levels of government, staff would present a plan in the fall for service reviews, fee reviews and possible service reductions to balance the budget in 2021.

Mayor Jim Watson has made funding requests to both the federal and Ontario governments.

Mayor looking for "great ideas" for savings

Speaking to reporters after the council meeting Wednesday, Watson said he wants councillors and the public to come to him with some ideas of where to find savings.

"It’s always easy to spend money but I need them to come with their great ideas on how to save money and that list is usually pretty short, unfortunately," he said. "If people are serious about maintaining fiscal discipline, we really need some good ideas from the public, when we go out for public consultations, and from members of council and then staff will put those in one report that will come to us later this year as the draft budget."

The mayor said he is still not considering increasing property taxes beyond three per cent, as he promised in the last municipal election.

"That would be the very last thing we would look at. Tens of thousands of people have lost their jobs, many are struggling to pay their rent or mortgage and the last thing we should be doing, as a city, is further burdening their financial plight at this time," Watson said.

Watson remains optimistic the other levels of government will come through with funding for the city, but said jurisdictional squabbling is playing a role in why there hasn't been any support yet.

"The federal government rightfully says the municipalities are the responsibility of the province; the province is saying we need the financial heft and support of the federal government. We're a bit of a ping pong ball between the two levels of government," he said. "We continue to have very thoughtful discussions with ministers in both governments … because we need an answer in the next couple of months. Most municipalities start to put their draft budgets together in August and September."