Edmonton

'The Great Reset': Rethink of city taxes needed in post-pandemic world, says Edmonton mayor

With COVID-19 walloping the finances of Canadian governments and citizens alike, Edmonton’s mayor is calling for a complete rethink of how municipalities are funded.

Massive economic disruption will change how governments pay for services, Don Iveson says

Edmonton Mayor Don Iveson would like to give a tax break to businesses which have suffered economically as a result of the coronavirus. The Army and Navy on Whyte Avenue has been temporarily boarded up while its doors are closed. (Jason Franson/The Canadian Press)

With COVID-19 walloping the finances of Canadian governments and citizens alike, Edmonton's mayor is calling for a complete rethink of how municipalities are funded.

"I'm starting to think of this as The Great Reset of many, many things," Mayor Don Iveson told CBC Radio's Edmonton AM on Wednesday. "It presents a number of other opportunities for things to change because of the scale of disruption to so many of the systems we rely on here —  trade, food systems, energy systems and also public policy. 

"Quite frankly, how we've paid for local, provincial and federal services up to this point is all going to have to change because the scope and growth of the economy is likely to be massively disrupted by this."

The City of Edmonton is facing a civic shortfall for the year of between $90 million and $260 million "before even accounting for what delinquencies on property taxes could ultimately look like for our city," he said. 

The shortfall is due largely to the combination of lost revenues and extra costs as a result of public health measures taken to prevent the spread of coronavirus. More than 3,000 employees have been laid off to keep costs down, he added.

Council is expected to make its final decision Wednesday on the municipal tax increase for residential and commercial ratepayers.

Iveson has proposed options that would give hard-hit businesses a break, by effectively applying the tax hike — shaping up to be the lowest in two decades —  only to residential taxpayers. 

But the current municipal taxation system is simply not geared to be a "wealth tax," with the ability to reduce the burden for those who can't afford it, he said.

"Those are not very finely-tuned tax mechanisms to provide targeted relief to struggling businesses or households," Iveson said about his proposals, to be debated by council.

"I think it's time for a reset for how we pay for everything in our city and I look forward to that conversation. But at this point, we're still in crisis-management mode." 

Last week, the Federation of Canadian Municipalities asked the federal government to help cities that were collectively projecting a year-end shortfall of between $10 and $15 billion. 

By law, cities are not allowed to run operating deficits. They must balance their books by year's end.

"The feds are saying, 'Well, that's provincial responsibility constitutionally, you should ask them.' The provinces are saying they need help from the federal government," Iveson said.

"All to say, the entire system that was in place six weeks ago — which didn't work very well for cities to begin with — has been completely disrupted and is going to have to be rebuilt."

Iveson acknowledged that all levels of government have had to make extraordinary financial decisions as a result of the pandemic. 

The federal government is closing in on $150 billion in direct support, while deferrals, credit supports and liquidity measures are expected to push the response into the hundreds of billions.

"There is going to be a financial reckoning for all of the borrowing the federal government is doing and I think printing money is — one of the right answers right now," Iveson said.

"They have that tool. We don't."

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