The pandemic has created a massive breach in the City of Toronto’s finances.

The 2020 budget was approved by the city council just before the pandemic. It amounted to just over $13 billion, of which almost $100 million was needed (and expected) from other governments to ensure the city stayed within provincial law, which states that municipalities may not budget for a deficit.

In early April it was announced there would be a deficit of some $780 million, but that was updated in mid-month to some $2.5 billion.

The deficit is produced by two factors. On the one hand the city has lost revenue. TTC fares are substantially down, permit fees are non-existent, and many businesses will have trouble paying property tax. On the other hand, the city is enduring new expenses, including providing hotel space for the homeless, increased public health expenses and so forth.

Providing for the homeless is a particularly important problem. All governments have required physical distancing of two metres, yet the city shelters, which sleep more than 5,000 people a night, have a standard that requires cots and mattresses to be less than one metre apart and also has people in bunk beds, which are contrary to regulations.

If COVID-19 starts to spread among the homeless in the way it has tragically spread through long-term care homes, our hospitals will quickly be overwhelmed, and since many of those without homes have compromised health systems, many will die.

The city began its response with finding hotel rooms for those who had tested positive or were associated with those who had, and that was a start, however expensive. But it dealt with only a small fraction of the problem.

I am reminded of The Spirit Level, a book published a decade ago. It produced a pile of evidence showing that the more equal a society, the better off everyone is, both rich and poor. Societies that have a population with lower economic disparities have less mental illness for everyone, higher life expectancies for everyone, less criminality, fewer suicides. That adds up to reduced social costs for taxpayers to bear. If we reduce homelessness, we will all be better off.

As understandable as the city’s deficit is, there’s the question of how it might be dealt with.

The provincial government in British Columbia has passed a law permitting municipalities to run a deficit. As many municipal leaders have remarked, the change hardly is a solution: how can municipalities be expected to pay that deficit down in the future? In the case of Toronto, covering this year’s deficit next year would require a property tax increase of some 25 to 30 per cent. Not bloody likely.

A second response would be for the senior governments that have substantial tax revenue sources to cover the deficits. Governments dislike turning money over to other governments without controls, so how this would be done is open to question. In any case it is a short-term response.

One hopes that the pandemic will result in rethinking many of the public issues such as homelessness. Perhaps that would be the time to directly address the thorny issue of city finances and the fact that too many city services depend on shared cost arrangements with other governments, and because of that some of those services are inadequately funded.

Providing good housing for all is one such service and will require capital funds for new housing that cities should be able to generate on their own. Rethinking city tax revenue sources is in order, perhaps giving cities access to sales tax revenue.

A crisis such as the pandemic creates the opportunity for change that should not be missed. Let’s hope our city leaders are strong enough, or can be pushed far enough, to seize the opportunity for progressive change in city finances. It would be a useful legacy from this disaster.