TRADUCTION Impacts of COVID-19 on Quebec Municipalities and Municipal Economic Recovery Plan Submission to the Standing Senate Committee on ...
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TRADUCTION August 5, 2020 umq.qc.ca [YouTube, Twitter, Instagram logos] Impacts of COVID-19 on Quebec Municipalities and Municipal Economic Recovery Plan Submission to the Standing Senate Committee on National Finance UMQ The voice of local government
Background • The Standing Senate Committee on National Finance is looking to determine how to respond to the health, economic and social crisis resulting from COVID-19, as well as measures that should be taken to facilitate the economic recovery. • To express the municipal issues with a single, strong voice and make decision-makers aware of the impacts of COVID-19 on Quebec municipalities, the Union des municipalités du Québec (UMQ) submits this brief on the impact the crisis is having on municipal finances and the main solutions identified to aid Quebec’s economic recovery. • Quebec local governments firmly believe that a coordinated response from all levels of government is the only way out of this crisis. This approach will protect everyone’s health while providing for a sustainable economic recovery in Quebec. The voice of local government For over 100 years, the UMQ has represented local governments from every region of Quebec. The UMQ’s mission is to provide strong leadership for effective, autonomous local governments by mobilizing municipal expertise, supporting members in carrying out their duties and promoting enhanced municipal democracy. UMQ members, representing over 85% of the population and land area of Quebec, are grouped into affinity caucuses: local municipalities, central municipalities, regional county municipalities, major cities and municipalities in the Montreal area. UMQ The voice of local government
Impacts of COVID-19 on Municipal Finances Municipal Economic Recovery Plan National Housing Strategy UMQ The voice of local government
Highlights of COVID-19 Impacts on Municipal Finances – The COVID-19 crisis will result in substantial revenue losses, somewhere between $787 million and $1.4 billion, for all municipalities by the end of 2020. – Expected losses in the public transit sector are estimated at between $544 million and $668 million in 2020, or nearly 60% of all losses expected. – The cooling real estate market will also have a significant impact on municipal finances, with expected losses between $160 million and $420 million because of declining revenues from transfer taxes and construction and renovation permits, or roughly 20% of total losses. – Conversely, the cancellation of recreation and culture activities has led to a net savings of $347 million for municipalities in the short run. However, future savings are uncertain, as lockdowns are gradually being lifted and could have additional financial implications. – Other revenue losses need to be taken into account but have not been included in the analyses presented so far. These include additional contributions to community organizations, increased expenditures related to waste management, future revenue losses related to the slowdown in tourism and weaker pension plan performance. UMQ The voice of local government
Summary of expected revenue losses Impact on public transit Impact on real estate market Other financial impacts
Expected losses of between $787 million and $1.4 billion for 2020
– Of all the revenue losses considered, municipalities are expected to absorb losses totalling between $787 million and $1.4 billion.
A large portion of those losses are expected in the areas of public transit (60%), transfer taxes (20%) and fines and tickets (7%).
– These estimates of revenue losses and spending increases represent only some of the losses suffered by municipalities;
additional losses will stem from waste management and lost revenues in the tourism sector.
Main categories of municipal revenue losses ($ millions; 2020)
[Translation $26 million and $84 million
Spending increase associated with police overtime
$544 million and $668 million
Police services
Revenue losses associated with public transit
Public transit $7 million and $40 million
Revenue losses associated with portfolio investments and interest
$158 million and $418 million
on non-payment of taxes
Revenue losses associated with cooling real estate market
Portfolio investments and interest on non-payment of taxes
Transfer taxes and construction permits
Sources: Data, RCGT, 2020; UMQ analysis, 2020]
$52 million and $250 million
Revenue losses associated with fewer fines and tickets
Fines, tickets, parking
UMQ The voice of local governmentSummary of expected revenue losses Impact on public transit Impact on real estate market Other financial impacts
Estimated revenue losses between $680 million and $1.3 billion over three years for public transit sector
– Based on scenarios analyzed by the UMQ and its municipal partners, revenue losses in an optimistic scenario are estimated at
$544 million in 2020. Losses of up to $134 million will continue in 2021 for a total loss of $678 million in 2020 and 2021. In a
pessimistic scenario, a potential third wave of infection and economic downturn could cause a cumulative loss of $1.3 billion
between 2020 and 2022.
– These losses, 87% of which will occur in the area served by Montreal’s transit authority, take into account lower revenues from
user fees due to declining ridership, as well as losses related to licence fees and the gas tax.
[Translation Cumulative revenue losses caused by declining ridership in
transit systems and related losses
Change in revenue losses caused by declining ridership in
$ millions; 2020 to 2022
transit systems and related losses
Cumulative losses in public transit
$ millions; 2020 to 2022
Optimistic Pessimistic
Optimistic Pessimistic
Sources: Data, RCGT, 2020; UMQ analysis, 2020]
UMQ The voice of local governmentSummary of expected revenue losses Impact on public transit Impact on real estate market Other financial impacts
Losses in public transit sector will represent nearly 60% of total losses
– Based on analyses conducted by the UMQ and its municipal partners, losses for all areas that have transit companies will total
$544 million in an optimistic scenario and $668 million in a pessimistic scenario.
– This situation is highly problematic for municipalities because they are responsible for the residual deficit in public and para-
transportation services. Without financial support, those losses will be over and above existing municipal contributions.
[Translation STL: 10% (between $49 million and $60 million)
Exo: 12% (between $59 million and $70 million)
Revenue losses related to public transit
[names of transit companies remain unchanged in English]
$ millions; 2020
Sources: ARTM, 2020; CMM, 2020; UMQ analysis, 2020]
STM: 68% (between $333 million and $400 million)
RTL: 10% (between $49 million and $60 million)
UMQ The voice of local governmentSummary of expected revenue losses Impact on public transit Impact on real estate market Other financial impacts
Estimated losses of between $160 million and $418 million by year’s end from the slowdown in the residential sector
– The COVID-19 health crisis is also having a significant impact on the real estate market: new and future homeowners are losing
their jobs; businesses are forced to remain closed because of government orders; it is difficult to show properties, etc.
– Based on market changes and the losses suffered by municipalities since the crisis began, revenue losses are expected to be
between $160 million and $418 million by the end of 2020.
[Translation Estimated revenue losses related to transfer taxes and
building and renovation permits across Quebec
Average revenue losses related to transfer taxes and building
$ millions; March to December 2020; n= 1,095 municipalities
and renovation permits by municipality size Loss of 16%
$ millions; March to December 2020; n= 120 municipalities Loss of 40%
Transfer taxes Building permits
Sources: MAMH, 2018 Financial Report; Data, RCGT, 2020; Analysis
Less than 2,000 residents
UMQ, 2020]
2,000 to 9,999 residents
10,000 to 24,999 residents
25,000 to 99,999 residents
100,000 or more residents
UMQ The voice of local governmentSummary of expected revenue losses Impact on public transit Impact on real estate market Other financial impacts
Among other expected financial impacts, losses related to minor offences could total $250 million
– Losses related to fines and tickets are also significant for all Quebec municipalities. A drastic reduction in traffic and lost parking
revenue have resulted in significantly less cash coming in: a decline of between $52 million and $250 million by year’s end.
– Spending increases related to overtime in police services will total between $27 million and $84 million, depending on how long
overtime is needed (three to six months or more), while losses related to portfolio investments and interest on uncollected taxes
will total between $7 million and $41 million.
[Translation Estimated losses for other key revenue items across Quebec
$ millions; March to December 2020; n= 1,095 municipalities
Average COVID-19 losses on other key revenue items
$ thousands; March to December 2020; n= 120 municipalities Tickets; Police; Portfolio investments; Interest on taxes
Other revenue and expense items Sources: MAMH, 2018 financial report; Data, RCGT, 2020; UMQ
analysis, 2020
Less than 2,000 residents; 2,000 to 9,999 residents; 10,000 to NOTE: “Other key revenue items” includes revenue from interest,
24,999 residents; 25,000 to 99,999 residents; 100,000 or more investments, parking, fines, tickets and increased spending on police
residents overtime.]
UMQ The voice of local governmentGiven the impact of COVID-19 on municipal finances, the UMQ is calling on the federal government to fast-track the signing of an agreement with the Government of Quebec to release the necessary funds for the benefit of the people of Quebec. UMQ The voice of local government
Impacts of COVID-19 on Municipal Finances Municipal Economic Recovery Plan National Housing Strategy UMQ The voice of local government
Municipal Economic Recovery Plan
– Construction sites were shut down for over a month, which temporarily halted many promising projects for
municipalities and regions while driving up costs specifically related to repeated delays and supply chain
backlogs.
– While the economy remains fragile, infrastructure investments are often seen as the best stimulus tool:
Every dollar invested in infrastructure generates up to $1.64 in economic growth.
Every $1 billion invested helps create 18,000 direct and indirect jobs.
– To ensure a swift and effective recovery, infrastructure projects need to be fast-tracked to make up for the
loss in the Quebec economy’s productive capacity. Investments that will not generate widespread inflationary
pressures should be given priority.
– To get out of the crisis, the UMQ has developed a municipal economic recovery plan based on a gradual
resumption of activities beginning in mid-May 2020. This plan targets four priority areas: 1) sustainable
development; 2) the launch of infrastructure projects; 3) the economic vitality of outlying regions; and
4) support for local businesses. The plan includes 29 measures, which are prioritized based on when they will
be completed: 1) during the crisis; 2) during the recovery; and 3) during the stabilization period.
– The recovery will depend in part on our ability to bounce back, to act quickly, to be flexible and to adapt.
However, the key issue for governments will be to come up with measures to put us on a sustainable growth
track and minimize the loss of our economy’s productive capacity. Poorly targeted measures could contribute
to a very slow recovery and trigger a loss of wealth.
UMQ The voice of local governmentMunicipal Economic Recovery Plan Priority Area 1: Sustainable development – To achieve a sustainable and green economic recovery, respect for the environment and social stability must factor in and complement one another. – Pausing the economy will have a positive impact on greenhouse gas emissions. During the recovery, however, we need to ensure the forced shutdown serves as a collective incentive for us to reduce our carbon footprint by making massive investments in public transit, reducing supply chain complexities and maintaining our new teleworking habits. – Furthermore, it will be important to create winning conditions to strengthen social cohesion. A rental vacancy rate of 1.8%, combined with delayed housing starts and the ambitious goal of completing nearly 11,000 units by July 2020, will have a major impact on the most vulnerable, particularly homeless people. Priority Area 2: Launch of Infrastructure Projects – Construction sites were shut down for over a month, which temporarily halted many promising projects for municipalities and regions while driving up costs specifically related to repeated delays and supply chain backlogs. – Infrastructure investments are often seen as the best stimulus tool for investing in the economy. Every dollar invested in infrastructure generates up to $1.64 in economic growth. Every $1 billion invested helps create 18,000 direct and indirect jobs. – Construction sites that were shut down when the crisis began must be reactivated as soon as possible, and infrastructure projects need to be fast-tracked to make up for the loss in the Quebec economy’s productive capacity. Investments that will not generate widespread inflationary pressures are required. UMQ The voice of local government
Municipal Economic Recovery Plan
Priority Area 3: Economic Vitality of Outlying Regions
– The lockdown measures and the closure of many regions to non-essential travel will have unprecedented
economic repercussions. Recovery will be more difficult for outlying regions given that their economies often
depend on just a few industries.
– Additionally, economic diversification in the regions hinges on the tourism industry. Unfortunately, tourism
will be seriously disrupted for the entire year with the cancellation of the high season. Collateral damage will
extend to local businesses, restaurants and hotels. According to Destination Canada data, visitor spending in
Quebec could drop 31% to 56% and result in a shortfall of between $4.8 billion and $8.8 billion.
– Supporting key companies and local businesses to help them through the crisis will be crucial. Investments are
needed in promising keystone projects to ensure connected, attractive and interdependent regions.
Priority Area 4: Support for Local Businesses
– The Canada–United States border closure, the widespread closure of non-essential businesses and
construction site shutdowns have resulted in nearly unprecedented economic impacts:
o Quarterly GDP down 14.7%;
o Unemployment up to 24.2%;
o Loss of $9.3 billion in workers’ wages and salaries;
o Contraction of global trade of between 13% and 32%; and
o North American exports down more than 40%.
– The viability of our businesses of all sizes, in all regions, hinges on three levels of adaptation: securing
partners and customers, changing business models and embracing technological change.
UMQ The voice of local governmentMunicipal Economic Recovery Plan Recommendations for the Government of Quebec Recommendations for the Government of Quebec and the federal government 1. Fast-track major public transit projects under the PQI 2020–2030. 16. Allow e-filing of bids on GETS as soon as possible. 2. Provide financial support for public transit operating costs to 17. Maintain and enhance programs available to the regions in make up for lost ridership and added hygiene-related costs. order to invest in projects with a regional scope. 3. Release funding announced under the National Housing Strategy. 18. Immediately release funding earmarked for supporting 4. Implement a rental support program for homeless tenants as of businesses in outlying regions and community vitalization. July 1 and for housing maintenance. 19. Fast-track plans to ensure high-speed Internet access and better 5. Provide financial support to non-profit cultural, sports and cell service in outlying regions. community organizations. 20. Fast-track the transfer of 5,000 government employees to 6. Propose a dedicated program for municipal festivals and events. Quebec’s outlying regions through relocation. 7. Support local production, processing and marketing to improve 21. Support the Quebec tourism industry by introducing measures Quebec’s supply chains, consistent with international agreements. encouraging people to book vacations in Quebec. 8. Encourage retail grocers to buy local products within a given area, 22. Provide funding for the operations of municipal airports that consistent with international agreements. maintained essential services during the health crisis. 9. Encourage manufacturers to contract with local suppliers within a 23. Expand municipal economic development powers to support given area, consistent with international agreements. businesses. 10. Launch a national telework deployment plan. 24. Support, protect and shorten critical supply chains that serve 11. Get shovel-ready municipal projects off the ground by fast- outlying regions (e.g., modal shift to rail or marine). tracking and streamlining approval processes. 25. Create a network of companies able to convert their production 12. Strike a balance between small- and large-scale projects (small in the event of a crisis. being less than $4 million in financial assistance). 26. Support non-profit organizations whose mission is to stimulate 13. Diversify investment targets by broadening the eligibility criteria commercial development and the revitalization of downtown cores. for the Gas Tax Fund (GTF) and TECQ program for municipal projects 27. Help businesses embrace technological change (geolocation, under the three-year Capital Investment Program (CIP). online orders, deliveries, etc.). 14. Quickly release the funding announced under the PQI 2020– 28. Create a transaction platform to encourage local, regional and 2030 to fast-track investments in the local road network. domestic purchasing. 15. Facilitate the launch of private industrial, manufacturing and 29. Launch a “buy local” awareness campaign. property development projects that already enjoy social licence. UMQ The voice of local government
As part of the municipal economic recovery plan, the UMQ is calling on the federal government to make the
following priorities:
o Support economic recovery through investments in public infrastructure and facilitate the use of
available funds based on needs on the ground: Expand eligibility criteria for the Gas Tax Fund (GTF) and
the Programme de la Taxe sur l’essence et de la contribution du Québec (TECQ), fast-track the transfer of
funds already available such as the Fonds pour l'infrastructure municipale d'eau (FIMEAU) and the
Programme d’aide financière aux infrastructures récréatives et sportives (PAFIRS), etc.
o Support the connectivity of all segments of society to guarantee or optimize the productivity of
economic players: Fund public transit operating costs, develop a national telework deployment plan, boost
high-speed Internet and cell service in outlying regions, support critical supply chains, support
technological change within businesses, finance the operating costs of municipal airports, etc.
o Back municipalities that are supporting their residents and the various segments of society: Release the
funding announced under the National Housing Strategy (see next section), implement a rental support
program for homeless tenants as of July 1 and for housing maintenance, provide financial support to non-
profit cultural, sports and community organizations, etc.
UMQ The voice of local governmentImpacts of COVID-19 on Municipal Finances Municipal Economic Recovery Plan National Housing Strategy UMQ The voice of local government
National Housing Strategy
• As part of Canada’s National Housing Strategy (NHS), $5.77 billion over 10 years was allocated to the Federal
Provincial Territorial Partnership in Housing. Of that amount, $4.3 billion was provided to the provinces and
territories under bilateral agreements.
• Quebec is the only province that has not reached an agreement on the terms and conditions for payment of
this support, worth $1.4 billion for the province. The Government of Quebec is seeking an asymmetrical
solution that recognizes Quebec’s unique situation.
• Compared with most of the other provinces, Quebec’s approach to housing assistance is focused on
developing and maintaining a social housing stock administered by housing authorities. The province’s Accès
logis [housing access] program plays a critical role in delivering this housing stock. It was created in 1996
following the federal government’s withdrawal from the social housing sector.
• The most vulnerable people in our society are being hit hard by the current housing problems and the
proposed assistance could be a first step in solving these issues. Indeed, several Quebec municipalities have
rental vacancy rates well below 2% (the housing crisis threshold).
[Translation 1.1% Rawdon
1.3% Joliette
1.5% Montreal
1.8% Rivière-du-Loup
1.5% Gatineau
1.4% Saint-Georges
0.9% Granby
1.5% Montmagny
1.1% Drummondville
0.4% Saint-Hyacinthe 2% housing crisis threshold]
UMQ The voice of local governmentAs part of the NHS, the UMQ is calling on the federal government to do the following:
o Quickly reach an agreement with the Government of Quebec for the payment of the transfer
earmarked for Quebec under the NHS; and
o Ensure that this agreement aligns with programs already in place in Quebec, first and
foremost Accès logis, given that social housing stakeholders are already accustomed to
working with them.
UMQ The voice of local governmentUMQ The voice of local government
For more information, please contact
Marc Balestrino ‖ Policy Advisor, Local Finance and Taxation ‖ Cell: 514-258-1886
mbalestrino@umq.qc.ca
Union des municipalités du Québec
2020 Robert-Bourassa Boulevard, Suite 210, Montreal QC H3A 2A5
514-282-7700 umq.qc.ca [YouTube, Twitter, Instagram logos]
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