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B.C. Municipal Affairs Minister Selina Robinson, seen here on Nov. 17, 2017, said cities in her province will be given permission to maintain a deficit for this year.DARRYL DYCK/The Canadian Press

B.C. has become the first province to allow cities to run deficits – something that is prohibited across the country – as a way of coping with massive budget holes created by the COVID-19 pandemic.

B.C. Municipal Affairs Minister Selina Robinson announced Thursday that cities in her province will be given permission to maintain a deficit for this year. There is no limit set on the size of the deficits, but cities will have to bring their books back into balance by the end of 2021.

Although other provinces, such as Quebec and Ontario, have floated the deficit idea, they have yet to take action.

In addition to the one-year ability to run deficits in B.C., Ms. Robinson said the province will allow cities to borrow from their internal capital reserves – money that is typically saved up to pay for future buildings or roads or utilities – for five years at zero per cent.

And, she said, cities won’t have to remit the school taxes that they collect on behalf of the province until the end of the year.

“This will help meet their immediate demands,” she said, noting that the package announced Thursday is preliminary.

But Vancouver’s mayor says the measures don’t go far enough. Kennedy Stewart has been pleading for straight cash injections from the province and warned repeatedly this week about the dire state of the city’s finances.

“I do not believe [the provincial measures] will be enough for us to avoid more layoffs and cuts to services,” said Mr. Stewart, whose city will now be able to access almost $740-million in internal capital reserves for temporary borrowing.

“New measures allowing municipalities to borrow from capital reserves will not help us fill our $110-million budget gap in the long run, as these loans need to be paid back in full. This will happen either through savings due to cuts or property-tax rate hikes.”

The new measures give cities more leeway to manage the sudden drops in revenue and the subsequent problems with cash flow as the various fees they collect evaporate and they face possible problems with property owners not paying their taxes this year. Meanwhile, cities still must try to maintain essential services.

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Besides direct cash injections, Mr. Stewart and other mayors had been asking for the province to allow every resident or business to take advantage of the province’s unique tax-deferral program. That program currently allows seniors and people with families in special circumstances to defer taxes at a reasonable interest rate, with the province covering the missing amounts for cities in the meantime. That ability was not included in the measures announced Thursday.

Brian Kelcey, a Toronto-based urban-policy consultant who has been talking to multiple cities about their pandemic challenges, said B.C.'s measures go well beyond what other government’s have offered cities.

“No other higher order of government has done this much with this much detail to address the problems of cities,” Mr. Kelcey said.

However, he said it doesn’t solve the long-term problems some cities might have with a permanent loss of tens of millions of dollars.

He believes that the federal government will need to step in at some point and provide money for essential-services staff in some cities,.

Richmond Mayor Malcolm Brodie welcomed the new measures, calling them “reasonable and helpful and good.”

But he said there are some complications with all the measures, including the requirement that cities will still have to pay the regional government for utility costs and for the taxes collected on their behalf by August, which is a tight time frame after cities have lost so much revenue during the current shutdown.

Sooke Mayor Maja Tait, also president of the Union of B.C. Municipalities, said cities will have different abilities to use capital reserves to help pay their bills in the interim. A city that has been saving up for a future road or building that wasn’t going to be started for another several years could use that reserve without a problem.

But other towns will have projects that were on the point of going ahead that they want to stick to, in order to provide employment and provide a long-needed community amenity.

“You wouldn’t want to borrow against that reserve and then have to shelve the project.”

With unemployment skyrocketing during the coronavirus pandemic, personal finance columnist Rob Carrick offers some tips on how to deal with creditors and make a bare-bones budget.

The Globe and Mail

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