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City estimating $4 million in lost revenue and costs associated with COVID-19

Current forecast provides financial breakdown until the end of April
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The impacts of COVID-19 have been widespread across multiple sectors of the economy and city hall is not immune, as the city is forecasting a financial impact of $4 million in lost revenues and costs related to operations during the crisis by the end of the month.

Greater Sudbury's finance and administration committee met virtually on April 14 to hear a report on the financial implications that the city is dealing with during its response to COVID-19.

From a very basic overview, the $4 million is broken down into three parts - approximately $2 million in lost revenues, approximately $1.5 million in budgeted costs intended for other services but redirected to the COVID-19 response, and approximately $0.5 million in additional, unplanned costs directly related to the COVID-19 response.

The city's CAO, Ed Archer gave a detailed breakdown of the report on Tuesday, highlighting where exactly losses and additional expenditures fall.

"This information reflects our best understanding of the circumstances the corporation finds itself in as a consequence of its response to the COVID-19 virus, this of course is a global issue and one that has been fairly dynamic," said Archer.

"There's been significant changes to operations, services have been suspended, there have been significant restrictions placed on the services that are continuing, to facilitate safety to the people using our service, and importantly as well, safety to our employees."

The city suspended bus fare collection on March 20, and is expected to make more changes to GOVA's service in the coming week, namely scaling back the frequency of some routes. Reduced ridership, coupled with no bus fare resulted in an impact of $250,000 over the last 12 days of March.

At that rate, the city is projecting a loss of approximately $650,000 for every month that the crisis continues.

While a significant hit to the city's revenue, ward 5 Coun. Robert Kirwan found some silver lining in the losses associated with transit services.

"I'm really pleased that we decided to waive fees for transit, because when you look at the loss of revenue of $650,000 per month, that really means $650,000 that we're leaving in the pockets of some of the people who can least afford the costs of what COVID-19 is imposing on this city," said Kirwan.

"A lot of our other revenue losses were from loss of rental or loss of money from the casino, but this $650,000 is being kept in the pockets of our citizens and then being used to at least stimulate a little bit of our economy."

From March 17 to April 3, the city experienced revenue losses totalling approximately $600,000 related to the closure of facilities such as pools, arenas, ski hills and community halls, with the biggest chunk coming out of arenas at approximately $400,000.

With the decision to not charge interest penalties on all overdue tax accounts, the lost monthly revenue is approximately $250,000.

Additionally, on March 24, council voted to suspend the charging of interest on overdue water and wastewater accounts through June 4. Additionally, there will be no imposed non-sufficient funds charges for customers who are on pre-authorized plans and there will be no water shut-offs for arrears before June 4.

The city does not have data at this time as to what the financial impact of suspending interest charges on overdue water accounts could be, though residents are still asking questions if there is further relief on the horizon when it comes to their water bills.

Ward 6 Coun. Rene Lapierre says that he has been getting calls from residents with regards to water costs. 

The same question had been brought forward at a previous council meeting with councillors indicating that residents in their riding were pointing to the fact that more people are staying home, washing their hands more frequently, and thus could see higher than normal water bills.

"In regards to the cost of water, what I was wondering is how would we get an estimate of if we were to reduce the water rate by half, or postpone it, before we were to put a motion like that forward how would we get information on how that could impact us?" said Lapierre.

Archer explained that due to the way that water bills are calculated by meter reading, there is a delay in the process and residents likely won't have seen any significant impacts to their water bills as of yet.

"The process for water billing currently involves manual meter reading and so there is a bit of a delay between the timing of the meter reading and the consumption information being available and the bills actually being issued," said Archer.

"So for residents so far, there have been relatively few opportunities to see the effects of additional work from home than there might be anticipated to be because the billing cycle hasn't really caught up with the time that we're talking about here."

If council did choose to tweak water rates, it would come with further reaching impacts than day-to-day revenue for the city, hitting either the city's capital master plan or pushing them to draw on reserves.

The city does not make profit on water bills, as the purpose of water rates is only to charge the amount necessary to keep the system operating, with no profit margin built in.

"Under the Municipal Act we have to collect 100 per cent of the costs associated with treating and delivering water," said Ed Stankiewicz, executive director of finance assets and fleet. 

"If there is some kind of relief provided it would impact the capital plan that council approved in December of last year and/or it would have to have a contribution from the reserve to ensure that we have a balanced budget for water and wastewater."

As far as assistance from upper levels of government available to municipalities, they are few and relatively modest at this point in time. They include the delay of remittances without penalty (i.e. WSIB premiums, employer health tax, GST) or payments such as municipal payment of educational taxes collected.

The benefit of these delays is associated with the interest that can be earned by holding these remittances and payments and earning interest on them.

City staff is continuing to monitor both federal and provincial announcements and to collect the direct and indirect costs and lost revenues of their COVID-19 response.

You can read the full report and financial breakdown from Tuesday's meeting here.