Trudeau Readies Virus Aid for Struggling Canadian Cities

(Bloomberg) -- Prime Minister Justin Trudeau unveiled C$2.2 billion ($1.6 billion) in financial support for Canadian municipalities whose revenues have plunged amid Covid-19 lockdowns.

The funding will take the form of an advanced payment of the federal Gas Tax Fund, money already earmarked for provinces which in turn funnel it to towns and cities within their jurisdiction, Trudeau told reporters Monday in Ottawa.

“We're demonstrating a first step forward with support for municipalities as they face a cash crunch,” the prime minister said. “From testing clinics to programs for seniors, cities and towns provide essential services so it's crucial they have the resources they need.”

Towns and cities usually receive this money annually in two installments, and Ottawa will be delivering this fund in one payment in June to fund infrastructure projects, the Canadian leader said.

Since municipalities can't run deficits to cover operating costs, Trudeau said Ottawa is working with provincial governments to help inject cash. Towns and cities are a provincial jurisdiction in Canada so Trudeau has to walk a fine line in helping mayors without overstepping the federal government's role.

Providing support for public transit systems will be a priority for the government, as will other essential services such as trash collection. Trudeau also stressed this would only be the first tranche of fiscal support to be provided to municipalities.

“Further announcements will require a cooperation and partnership with the provinces who have jurisdiction over municipal funding,” Trudeau said at his daily press briefing.

The Federation of Canadian Municipalities made a public request in April for at least C$10 billion in emergency funding from the federal government.

Toronto's downtown financial district has become a ghost town since shutdowns to stem the spread of the virus were put in place in early March. Mayor John Tory said in mid-April a three-month shutdown and six-month recovery period will cost the city about C$1.5 billion in a “best-case” scenario, largely due to lost revenue.

The cost of direct government support measures is now at around C$153 billion to help soften the blow of the Covid-19 pandemic on the economy. The fiscal package includes wage subsidies, loan programs for companies, emergency benefits for laid-off workers and commercial rent grants.