Hamilton faces tough choices to fight deficit

News Jun 16, 2020 by Kevin Werner Stoney Creek News

Hamilton homeowners could see potentially double-digit tax increases within two years, capital projects delayed, the city’s reserved funds depleted and cutbacks in all services because of the coronavirus pandemic.

The troubling scenario was presented by Mike Zegarac, corporate finance general manager, at the June 15 general issues committee virtual meeting. He outlined a potential $60-million to $122-million deficit depending upon how long the city is forced to keep adhering to the province’s emergency orders.

Hamilton’s financial problems could extend well into 2021 and even 2022 with tax increases anywhere from seven to nearly 14 per cent.

“I’m feeling anxious given there isn’t a commitment from (the federal government to help municipalities),” said Zegarac, as he fielded questions from concerned councillors during the June 15 general issues committee meeting.

Since the city was closed down in March, Hamilton has seen costs jump $25.3 million for transit and $7.5 million for public health, while revenues have dropped $9.2 million in recreation fees, $4.5 million in Provincial Offences Act fines, $27 million in lost transit fares, $4.5 million for parking, $3 million in Ontario Lottery and Gaming slots and $3.2 million in building permits.

Meanwhile, the city’s April 2020 property tax payments declined 20 per cent — collecting $29.5 million less than in April 2019 — after the city allowed residents to delay paying their taxes on April 30 for 60 days. The city waived penalties and interest, which also cost the city millions of dollars in lost revenue.

In addition, the Hamilton Police Service has seen $725,000 in extra costs to its 2020 budget due to the pandemic.

“Not only are we facing an immediate fiscal challenge,” said Mayor Fred Eisenberger, “but we are facing 2021, and 2022 as challenges because transit is not going to come flying back the way it has in the past; the economy is not going to turn on a dime.”

In an attempt to contain rising costs, councillors agreed with finance staff to use the remaining $11.2 million in federal gas tax to start a COVID-19 reserve fund. Staff suggested, but did not recommend, delaying 127 capital projects — totalling $29.1 million — but the move would force the projects to be paid for by higher taxes in the future. Staff did recommend using $1.1 million expected to be saved from approved capital works and placed in the COVID-19 reserve fund.

Staff will also examine 10 reserve funds, from the red light camera project, social housing transition, airport capital and parking capital, to see if money in those funds can be used to offset the deficit.

But the biggest unknown is if the municipality will actually receive a financial bailout from the federal government. Discussions among the federal and provincial governments with municipal leaders have continued to take place, said Eisenberger. But so far, there has been no commitment from the federal government.

“I think they fully understand the dilemma that municipalities are in,” said Eisenberger. “They are waiting for the province to meet at the table. It will take a little longer to get some sort of agreement. I remain optimistic that the federal-provincial governments will sort it all.”

But other councillors say the federal and provincial governments have forgotten municipalities in their fight against the pandemic.

“I’m concerned there seems to be a lack of agreement from the feds and province with municipalities,” said Stoney Creek Coun. Brad Clark.

“We are basically looking at draining our reserves, putting off capital investments we have already approved, and all we are hearing from the province is them repeatedly stating that they can’t do it alone. They need the feds.”

Eisenberger has already stated that the federal government needs to double the federal gas tax revenue to municipalities, a move the Liberals did in 2019 when Hamilton received $64 million. Hamilton has already incorporated its estimate $32 million in 2020 gas tax funding into its budget. Councillors approved a list of items in an attempt to stabilize the city’s spending problems, including requesting the federal government double the federal gas tax funding.

The additional $32 million in gas tax funding would allow the city to boost its COVID-19 fund to help offset the deficit, but not totally cover it, said Zegarac.

If the city does nothing to stop its financial bleeding, Zegarac said trouble looms.

“We would have some risk in 2021,” he said. “We could have some liquidity challenges.”

Eisenberger said if the federal government doesn’t come through with a financial bailout package for municipalities, including Hamilton, it would devastate the city’s economy.

“If they fail to come through with some sort of assistance, it will set us back, if not five years, then 10 years in terms of economic recovery,” said Eisenberger. “That is going to be a detriment to people employed and restoring the economy.”

Hamilton residents could face double-digit tax increases because of pandemic spending

News Jun 16, 2020 by Kevin Werner Stoney Creek News

Hamilton homeowners could see potentially double-digit tax increases within two years, capital projects delayed, the city’s reserved funds depleted and cutbacks in all services because of the coronavirus pandemic.

The troubling scenario was presented by Mike Zegarac, corporate finance general manager, at the June 15 general issues committee virtual meeting. He outlined a potential $60-million to $122-million deficit depending upon how long the city is forced to keep adhering to the province’s emergency orders.

Hamilton’s financial problems could extend well into 2021 and even 2022 with tax increases anywhere from seven to nearly 14 per cent.

“I’m feeling anxious given there isn’t a commitment from (the federal government to help municipalities),” said Zegarac, as he fielded questions from concerned councillors during the June 15 general issues committee meeting.

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Since the city was closed down in March, Hamilton has seen costs jump $25.3 million for transit and $7.5 million for public health, while revenues have dropped $9.2 million in recreation fees, $4.5 million in Provincial Offences Act fines, $27 million in lost transit fares, $4.5 million for parking, $3 million in Ontario Lottery and Gaming slots and $3.2 million in building permits.

Meanwhile, the city’s April 2020 property tax payments declined 20 per cent — collecting $29.5 million less than in April 2019 — after the city allowed residents to delay paying their taxes on April 30 for 60 days. The city waived penalties and interest, which also cost the city millions of dollars in lost revenue.

In addition, the Hamilton Police Service has seen $725,000 in extra costs to its 2020 budget due to the pandemic.

“Not only are we facing an immediate fiscal challenge,” said Mayor Fred Eisenberger, “but we are facing 2021, and 2022 as challenges because transit is not going to come flying back the way it has in the past; the economy is not going to turn on a dime.”

In an attempt to contain rising costs, councillors agreed with finance staff to use the remaining $11.2 million in federal gas tax to start a COVID-19 reserve fund. Staff suggested, but did not recommend, delaying 127 capital projects — totalling $29.1 million — but the move would force the projects to be paid for by higher taxes in the future. Staff did recommend using $1.1 million expected to be saved from approved capital works and placed in the COVID-19 reserve fund.

Staff will also examine 10 reserve funds, from the red light camera project, social housing transition, airport capital and parking capital, to see if money in those funds can be used to offset the deficit.

But the biggest unknown is if the municipality will actually receive a financial bailout from the federal government. Discussions among the federal and provincial governments with municipal leaders have continued to take place, said Eisenberger. But so far, there has been no commitment from the federal government.

“I think they fully understand the dilemma that municipalities are in,” said Eisenberger. “They are waiting for the province to meet at the table. It will take a little longer to get some sort of agreement. I remain optimistic that the federal-provincial governments will sort it all.”

But other councillors say the federal and provincial governments have forgotten municipalities in their fight against the pandemic.

“I’m concerned there seems to be a lack of agreement from the feds and province with municipalities,” said Stoney Creek Coun. Brad Clark.

“We are basically looking at draining our reserves, putting off capital investments we have already approved, and all we are hearing from the province is them repeatedly stating that they can’t do it alone. They need the feds.”

Eisenberger has already stated that the federal government needs to double the federal gas tax revenue to municipalities, a move the Liberals did in 2019 when Hamilton received $64 million. Hamilton has already incorporated its estimate $32 million in 2020 gas tax funding into its budget. Councillors approved a list of items in an attempt to stabilize the city’s spending problems, including requesting the federal government double the federal gas tax funding.

The additional $32 million in gas tax funding would allow the city to boost its COVID-19 fund to help offset the deficit, but not totally cover it, said Zegarac.

If the city does nothing to stop its financial bleeding, Zegarac said trouble looms.

“We would have some risk in 2021,” he said. “We could have some liquidity challenges.”

Eisenberger said if the federal government doesn’t come through with a financial bailout package for municipalities, including Hamilton, it would devastate the city’s economy.

“If they fail to come through with some sort of assistance, it will set us back, if not five years, then 10 years in terms of economic recovery,” said Eisenberger. “That is going to be a detriment to people employed and restoring the economy.”

Hamilton residents could face double-digit tax increases because of pandemic spending

News Jun 16, 2020 by Kevin Werner Stoney Creek News

Hamilton homeowners could see potentially double-digit tax increases within two years, capital projects delayed, the city’s reserved funds depleted and cutbacks in all services because of the coronavirus pandemic.

The troubling scenario was presented by Mike Zegarac, corporate finance general manager, at the June 15 general issues committee virtual meeting. He outlined a potential $60-million to $122-million deficit depending upon how long the city is forced to keep adhering to the province’s emergency orders.

Hamilton’s financial problems could extend well into 2021 and even 2022 with tax increases anywhere from seven to nearly 14 per cent.

“I’m feeling anxious given there isn’t a commitment from (the federal government to help municipalities),” said Zegarac, as he fielded questions from concerned councillors during the June 15 general issues committee meeting.

Related Content

Since the city was closed down in March, Hamilton has seen costs jump $25.3 million for transit and $7.5 million for public health, while revenues have dropped $9.2 million in recreation fees, $4.5 million in Provincial Offences Act fines, $27 million in lost transit fares, $4.5 million for parking, $3 million in Ontario Lottery and Gaming slots and $3.2 million in building permits.

Meanwhile, the city’s April 2020 property tax payments declined 20 per cent — collecting $29.5 million less than in April 2019 — after the city allowed residents to delay paying their taxes on April 30 for 60 days. The city waived penalties and interest, which also cost the city millions of dollars in lost revenue.

In addition, the Hamilton Police Service has seen $725,000 in extra costs to its 2020 budget due to the pandemic.

“Not only are we facing an immediate fiscal challenge,” said Mayor Fred Eisenberger, “but we are facing 2021, and 2022 as challenges because transit is not going to come flying back the way it has in the past; the economy is not going to turn on a dime.”

In an attempt to contain rising costs, councillors agreed with finance staff to use the remaining $11.2 million in federal gas tax to start a COVID-19 reserve fund. Staff suggested, but did not recommend, delaying 127 capital projects — totalling $29.1 million — but the move would force the projects to be paid for by higher taxes in the future. Staff did recommend using $1.1 million expected to be saved from approved capital works and placed in the COVID-19 reserve fund.

Staff will also examine 10 reserve funds, from the red light camera project, social housing transition, airport capital and parking capital, to see if money in those funds can be used to offset the deficit.

But the biggest unknown is if the municipality will actually receive a financial bailout from the federal government. Discussions among the federal and provincial governments with municipal leaders have continued to take place, said Eisenberger. But so far, there has been no commitment from the federal government.

“I think they fully understand the dilemma that municipalities are in,” said Eisenberger. “They are waiting for the province to meet at the table. It will take a little longer to get some sort of agreement. I remain optimistic that the federal-provincial governments will sort it all.”

But other councillors say the federal and provincial governments have forgotten municipalities in their fight against the pandemic.

“I’m concerned there seems to be a lack of agreement from the feds and province with municipalities,” said Stoney Creek Coun. Brad Clark.

“We are basically looking at draining our reserves, putting off capital investments we have already approved, and all we are hearing from the province is them repeatedly stating that they can’t do it alone. They need the feds.”

Eisenberger has already stated that the federal government needs to double the federal gas tax revenue to municipalities, a move the Liberals did in 2019 when Hamilton received $64 million. Hamilton has already incorporated its estimate $32 million in 2020 gas tax funding into its budget. Councillors approved a list of items in an attempt to stabilize the city’s spending problems, including requesting the federal government double the federal gas tax funding.

The additional $32 million in gas tax funding would allow the city to boost its COVID-19 fund to help offset the deficit, but not totally cover it, said Zegarac.

If the city does nothing to stop its financial bleeding, Zegarac said trouble looms.

“We would have some risk in 2021,” he said. “We could have some liquidity challenges.”

Eisenberger said if the federal government doesn’t come through with a financial bailout package for municipalities, including Hamilton, it would devastate the city’s economy.

“If they fail to come through with some sort of assistance, it will set us back, if not five years, then 10 years in terms of economic recovery,” said Eisenberger. “That is going to be a detriment to people employed and restoring the economy.”