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The federal government will direct regional development funding to small businesses located in downtown Montreal, Ottawa and Toronto, pictured here, because of the significant hardship COVID-19 shutdowns have caused.AndresGarciaM/Getty Images

The federal government is breaking with tradition and using regional development agencies to help the downtown cores of Canada’s biggest cities to recover from the economic effects of the COVID-19 pandemic.

Agencies such as the Atlantic Canada Opportunities Agency, FedDev Ontario and Canada Economic Development for Quebec Regions are best known for directing their funding in rural regions that rely on seasonal industries or areas that are struggling to deal with the loss of manufacturing jobs.

However, Economic Development Minister Mélanie Joly said that empty office towers in cities such as Toronto, Ottawa and Montreal have caused significant hardship to small businesses in those areas. As a result, the federal government will direct regional development funding to companies located in downtown sectors in those cities.

“Our downtown cores are devastated,” she said in an interview, acknowledging the “philosophical change” to the agencies’ mandates.

Ms. Joly said the government will work in partnership with provincial and municipal authorities to ensure the funding helps to stabilize the economy in downtown areas. The government will announce $30-million for funding in Montreal on Monday and make similar announcements later in the week for Toronto and Ottawa.

The federal government gave $962-million in additional funding to regional development agencies as part of its response to the COVID-19 pandemic. Nearly one-third of the additional funding is going to Western Economic Diversification Canada, which is already active in big cities. As such, there is no specific announcement planned for cities such as Calgary or Vancouver.

Pierre Filion, an expert in downtown and inner city planning at the University of Waterloo, said it remains to be seen whether the new federal funding will be sufficient to deal with the unprecedented crisis.

He said that even if the federal spending in cities goes up by tens of millions of dollars, the money “won’t go very far. ... It won’t bring people back."

Still, he said there is a case for increased federal spending in cities that are facing hits on their hospitality sectors, tourism industries, public transit and businesses that cater to residents of condo towers in urban cores.

“If the crisis lasts years, the urban sector that will be the most affected is the downtown areas. People will continue to work from home and the towers will be empty,” he said.

The opposition parties are suspicious of the new spending, given that the Liberal Party’s electoral strength resides in large part in urban ridings in the biggest cities in the country.

NDP MP Peter Julian said the priority for the federal government should be ensuring that programs that offer rent relief or wage subsidies to the companies function adequately and are not hindered by criteria that are too stringent.

“The government isn’t responding to clear problems with existing programs. So many businesses are excluded and they seem to be making it up as they go along,” he said.

Conservative MP Bernard Généreux, who represents a riding east of Quebec City, said regional agencies should remain dedicated to areas outside of big cities such as Montreal and Toronto.

“We are going to keep an eye on this,” he said. “If the government wants to help big cities, it should not be done at the expenses of the regions.”

Ms. Joly said the government is not pursuing a political agenda with its emergency response spending.

“Our objective is to help our companies to survive, that’s it, that’s all,” she said.

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