Financing Local Government and Development in Canada in the Aftermath of a Global Pandemic: Continuity and Change

En cette période postpandémique, les administrations locales se retrouvent dans un contexte budgétaire difficile. S'appuyant sur les idées formulées au fil des ans par Richard Bird, l'auteur réexamine certains thèmes omniprésents dans les discussions et les analyses des finances municipales, tels que les avantages de l'imposition basée sur les bénéfices réalisés localement, les contraintes hiérarchiques qui pèsent sur la prise des décisions budgétaires, et la réalité d'une crise budgétaire perpétuelle au niveau local. Le fait de devoir financer un large éventail de dépenses pour les services publics au moyen d'une étroite base de recettes a entraÎné des tensions intergouvernementales et un débat persistant sur la capacité de l'assiette de l'impôt foncier à répondre aux demandes qui pèsent sur elle. Le financement des administrations locales peut se décrire au moyen des termes emprunt, dépense et imposition. La pandémie de COVID-19 a eu des répercussions sur chacun de ces aspects du processus décisionnel budgétaire des municipalités. La réglementation en matière d'emprunt est restée limitée par la hiérarchie;la pression pour augmenter les dépenses s'est accrue;et les recettes fiscales et tarifaires ont été défavorablement touchées. De plus, il semble probable que l'assiette fiscale des municipalités sera réduite compte tenu de la controverse entourant les droits d'aménagement. L'auteur utilise des données de l'Ontario pour illustrer les effets de la pandémie sur la santé budgétaire des municipalités. En outre, l'article utilise le tableau de bord de la santé budgétaire urbaine (Urban Fiscal Health Dashboard) de Richard Bird pour illustrer les aspects de la santé budgétaire à long terme des administrations locales de l'Ontario. Tout au long de cet article, l'auteur soulève des questions qui méritent d'être approfondies à la lumière de la contribution de Richard Bird à notre compréhension des mécanismes et des implications de la prise des décisions budgétaires locales.Alternate abstract:In the post-pandemic environment, local governments must confront a challenging fiscal environment. Drawing on insights provided over the years by Richard Bird, the author re-examines certain pervasive themes found in discussions and analysis of municipal finance, such as the merits of benefits-based taxation at the local level, the hierarchical constraints on municipal fiscal decision making, and the reality of a perpetual fiscal crisis at the local level. The underlying issue of having to finance a broad set of expenditures on public services from a narrow revenue base has resulted in intergovernmental tensions and continuing debate over the capacity of the property tax base to meet the demands placed on it. Financing local government can be described in terms of borrowing, spending, and taxing. Each of these areas of municipal fiscal decision making was affected by the COVID-19 pandemic. Borrowing rules remained hierarchically constrained, pressure to increase expenditures grew, and tax and fee-based revenues were adversely affected. Further, it seems likely that the municipal fiscal base will be narrowed given the controversy around development charges. The author uses data from Ontario to illustrate the impact of the pandemic on municipal fiscal health. In addition, the paper includes the Richard Bird Urban Fiscal Health Dashboard to illustrate aspects of the long-run fiscal health of Ontario's local governments. Throughout the paper, the author raises questions that merit further research informed by the perspective that Richard Bird brought to our understanding of the mechanics and implications of local fiscal decision making.

How the new fed municipal bond facility capped municipal-treasury yield spreads in the Covid-19 recession.

For over two centuries, the municipal (muni) bond market has been a source of systemic risk, which returned early in the Covid-19 downturn when borrowing from securities markets became costly for many private and public entities, and some found it difficult to borrow at all. Indeed, just before the Fed announced its unprecedented intervention into the muni market, spreads of muni over Treasury yields rose in line with the unemployment rate and appeared headed to levels not seen since the Great Depression, when real municipal gross investment plunged 35 percent below 1929 levels. To prevent such a calamity, the Fed created the Municipal Liquidity Facility (MLF) to purchase newly issued, (near) investment-grade state and local government bonds at ratings-based interest rate spreads over the safe OIS benchmark yield. In general, these spreads were initially about 100 basis points above average spreads under more normal market conditions and were later lowered by 50 basis points in August 2020. Despite a modest take-up, our study documents the MLF prevented muni spreads from rising much above those margins (plus a modest 10 basis point fee) and limited the extent to which interest rate spreads could have amplified the impact of the Covid pandemic. To establish the MLF the Fed needed Treasury indemnification against default losses. There were concerns about whether the creation of the MLF could induce moral hazard among borrowers and could undermine the efficiency of the bond market if the facility had lasted too long. Partly for this reason and because the muni market had settled down by yearend 2020, the Treasury terminated the MLF at that time. Future assessments of these downside aspects will help answer the question whether the program's benefits addressed here exceeded its costs.

Financing of tourism and recreation in municipal programs during the pandemic period: The case of Odesa1

The threat of rapid spread of COVID-19 infection was felt primarily by residents of big cities and in the economy of resort towns the tourism and recreation sector suffered the most. At the same time, the need for travelling and recreation in conditions of forced isolation and the need for rehabilitation of citizens has not decreased. Accordingly, the municipal authorities should carry out appropriate organizational and financial measures aimed at maintaining the functioning of the domestic market of recreational and tourist services. The study aims to analyze the indicators of financing tourism and recreation within the socio-economic programs of urban development in order to develop recommendations based on the results to improve this funding within the adaptation to the conditions of the pandemic period. This was done by analyzing the development programs of the city of Odesa in Ukraine, the effect of which extends to the pre-pandemic period of 2019, as well as the years of the pandemic 2020–2022. In substantiating the budgeting mechanism within urban development programs built on a systematic approach at the stage of comparative assessment of recreational expectations based on the modified Vroom model one took into account such indicators as: percentage of recreation costs, variability of prices for recreational services, anxiety associated with the consequences of the COVID-19 pandemic, etc. Within the proposed mechanism recommendations are aimed at justifying decisions regarding the variability of funding in urban programs relevant to the development of recreation and tourism, namely, by increasing the funding from the development budget and increasing control over the implementation of these programs, as well as improving the coordination function in order to prepare the ground for the implementation of “4P” and “people-first” models in recreation and tourism at the municipal level. © Mykola Petrushenko, Hanna Shevchenko, Nina Khumarova, Alina Krivenceva, 2022.

THE EFFECTIVENESS OF PUBLIC ACCOUNTABILITY MECHANISMS IN THE SOUTH AFRICAN LOCAL GOVERNMENT CONTEXT: DURING AND POST COVID-19 PANDEMIC

This paper extensively investigates the effectiveness of public accountability mechanisms in the South African local government context during and post the Coronavirus Disease 2019 (Covid19) pandemic. Therefore, this paper argues that the adopted public accountability mechanisms at the municipal level are rigid and not adaptive to the new normal ushered in by the Covid-19 pandemic. The Covid-19 pandemic forced many countries including South Africa, to adopt policies to control mass gatherings and community events, as they are believed to be superspreader events. Local governments habitually used public meetings to inform communities about issues and consult them about development programs affecting them directly before the Covid19 pandemic. This paper is purely conceptual, relied profoundly on literature to fortify the argument. This study utilizes a qualitative research technique to achieve the objectives of this study. The study reveals that the adopted and established public accountability mechanisms at the local government sphere are not adaptive and effective to the new normal. The conclusion that can be drawn from this paper is that there is an urgent need for the government to revisit and formulate more adaptive and effective public accountability mechanisms.

Municipal financial vulnerability in pandemic crises: a framework for analysis

Purpose>This paper explores how global pandemic crises affect the financial vulnerability of municipalities.Design/methodology/approach>This paper is developed from the relevant literature an analytical framework to examine municipal financial vulnerability before a global pandemic crisis and in its immediate aftermath by mapping and systematizing its dimensions and sources. To illustrate how it can be used and evaluate its robustness and flexibility, such a tool was applied to Portugal and Italy, two countries that particularly suffered from the Covid-19 crisis.Findings>The application of the analytical framework has shown how financially vulnerable municipalities are to global pandemic crises. Financial vulnerability relates to issues ranging from institutional design to internal financial conditions and the perception of the capacity to cope with a crisis. Results further reveal that vulnerability has an inherent contingent nature in time and space and can lead to paradoxical outcomes.Research limitations/implications>This paper provides a tool that can be useful for both academic and public policy purposes, to further appreciate municipal financial vulnerability, especially during crises.Practical implications>Municipalities can use the framework to better manage their financial vulnerability, strengthening their anticipatory and copying capacities, while oversight authorities can use it to help municipalities become less financially vulnerable or, at least, more aware of their financial vulnerability.Originality/value>Municipal financial vulnerability to global shocks has not been explored extensively. Also, the Covid-19 pandemic is different from previous global crises as it affected society overnight with the implementation of lockdown and social distancing measures.

Solving the Municipal Budget Mystery: Fiscal Accountability in Canada’s Cities, 2021

Institute staff members are subject to a strict conflict of interest policy. While some of the municipalities we look at released their results late, and we have reservations about below-the-line adjustments that can cloud understanding of the municipality's fiscal capacity we generally award high scores for these municipalities' financial statements. In most cities, simple questions such as how much the government plans to spend, how its plans compare with its current activities and what its plans imply for its capacity to deliver future services are impossible for non-experts to answer. [...]many municipal budgets understate the size of city operations, omit key activities and exaggerate the costs of capital projects. [...]the big price tags in cash-based capital budgets likely bias councillors against investing in some long-life infrastructure and induce them to raise too much money up front to finance the projects they do undertake.