On Thursday night, city council will meeting its second special session in the midst of the global COVID-19 pandemic, and a big portion of the conversation is going to be about the City of Guelph’s financial picture in the near and long term. According to the City’s Treasurer and General Manager of Finance, she’s confident that Guelph’s balance books are in good shape to ride out the storm.
“I feel like now that the first three to four weeks have passed here, this week’s the first time we’ve started to settle into a little bit of a normal pattern, and get get back to some of those regular priorities,” said Tara Baker by phone on Thursday.
In the meantime, Baker and her department have been trying to stay on top of the massive disruption to their well-prepared and executed budget in the midst of the emergency actions being taken. That means both new spending, and a loss in revenue with City facilities shutdown.
“Our ultimate goal is to try and manage expenditures to the revenues coming in, and while we’ve had a quick decline of revenue, expenditures are still outpacing revenues at this point,” Baker explained. “We’re hopeful that in the next week or two that we will start to see that expenditure reduction occur and keep it in line with our revenues coming in.”
April will be a key month, according to Baker, because April 30 is when the next property tax bill is due for Guelph ratepayers. Baker said that Guelph collects around $100 million in tax money in April, May, and June, but the financial department is anticipating that they will not collect 100 per cent of the revenue owed. Baker explained that she and her staff are doing “sensitivity analysis” to determine the health of the City’s accounts if they’re still collecting only a portion of the normal tax base.
“I think we’re going to be fine,” Baker said. “I think based on our projections, we’re okay. We’re trying to manage expenditures with the revenue that we have coming in.”
The City also has some wiggle room thanks to the Provincial government’s announced deferral of the quarterly property tax remittance to school boards, which Baker says will free up $17 million in cashflow for the short term. “We also have not had to take any measures to redeem investments early, so we just have our normal redemption rotation,” Baker added. “We will have cash available as those investments redeem in May and June.”
As a precaution against the further loss of revenue, one of the measures that council will consider at Thursday evening’s meeting is the implementation of a Temporary Borrowing Policy, which is a first for the City of Guelph, and a measure allowed in the Municipal Act in times of “unexpected interruptions of normal business.”
“I felt that it was prudent and responsible to ensure that we had contingency financing in place,” Baker said. “We’re not necessarily going to be using that contingency financing, but it’s there in case we need it.”
Baker wanted to make that point clear that the City is not applying for an unlimited credit card for spending. “This is not something that will continue year-after-year, and the bylaw is very specific to 2020, and that it would be paid off by the end of the year,” she said. “It’s really just a cash flow mechanism to get us through these three months just in case property tax collection really dips substantially.”
Ontario law bars municipalities from carrying a debt, and while a municipality can take on a deficit, the treasurer has to bring forward to council measures to balance the books by the end of the fiscal year.
Borrowing from reserves is one way that the City can round off a deficit if one is accrued, but the City can’t plan to run a deficit at the end of the year. Having said that, Baker has been planning for a proverbial rainy day for years by recommending that each year-end surplus be deposited into the City’s reserve accounts.
“It’s why we’ve been putting money in the bank for a number of years, just in case these types of situations occur,” Baker said. “At the same time, we’re also very cognisant of trying to manage that deficit and mitigate it to be as low as possible. so that we don’t have to dip into the reserves too much.”
Baker added that the emergency measures now being implemented will be reviewed during the 2021 budget process at the end of the year as the City develops the complete financial picture. Speaking of the big picture, the City’s expectant initiation of multi-year budgeting might be delayed until the current crisis has passed.
“We are having those conversations internally right now,” Baker said.
In terms of the regular order of business, Baker notes that the end-of-year external audit is proceeding, albeit at a slower pace since her staff is working from home. “Some of our normal work is getting extended or deferred into later months, and we’ve had to refocus on short-term special reports and contingency methods,” she said. “We’re kind of redirecting our focus to what’s most immediate.”