Interest & Penalty Revenue – The foregone revenue on waived interest and penalties for property taxes until the end of June 30, 2020 is estimated to costs $1.2M. In addition, the reduction of interest rates as well as reduced cashflows for investment resulting from the COVID crisis could result in an additional revenue shortfall for our investment income of an estimated $1.3M for the year.

Municipal Accommodation Tax (MAT) – The COVID crisis has had a severe impact on the hotel industry with many facilities being partially or fully closed beginning on or around mid-March. Occupancy rates for the 1st quarter of 2020 are typically lower than in the spring and summer months where travel is more prominent due to vacations and sports travel. Based upon the quarterly results from 2019, Administration has projected a decline in revenues of 15% during this 1st quarter and further reductions for both the 2nd and 3rd quarter. The revenue shortfall estimated for the 1st quarter (Jan to March) is approximately $80,000. The actual shortfall will not be known until some time after June 30th as a result of the deferral of the MAT tax remittance date from April 30th to June 30th which was approved by City Council to assist hotel operators with immediate cash flow impacts. Current projections, which are based upon prolonged periods of low occupancy for this industry, suggest that the total shortfall could be in the range of $1.6M. Any shortfall may limit future investments in the tourism industry as the MAT tax revenues are shared equally between TWEPI and the City’s Tourism Development Infrastructure and Program Reserve.

Cashflow Implications

The ability for municipalities to sustain prolonged periods of revenue shortfalls is dependant upon maintaining liquid cash reserves. As previously reported to City Council, the City’s investment strategy has been very conservative and risk adverse maintaining most cash reserves in short-term liquid investments such as Guaranteed Investment Certificates with Canadian financial institutions. While the reported annual investment yields have been lower than could otherwise be realized, the ability to access cash on relatively short notice with limited cost is available. The City is currently in a very strong financial position with strong liquidity and as such, it is not expected at this time that we will need to access the line of credit in the near term. Finance staff are however continuing to monitor corporate cash flows to ensure our liquidity remains strong.

In addition, Administration is currently working on a report to City Council with regards to the preparation of the 2020 Final property tax bills which will result in the billing and collection of the remaining budgeted tax revenues for the balance of the year. Offsetting those revenues may be expenditures related to the provision of property tax relief. However at this time, it is too early to determine with any certainty the overall impact and therefore how best to align municipal property tax relief with affected taxpayers. Should the impacts of the pandemic shut down be protracted for an extended period or create more significant long term financial hardships that do not recover within a timely period, corporate cash flows could be negatively impacted. The City currently maintains a placeholder with the ability to draw upon a $100M line of credit available through