As an expert in municipal public finance, this idea is a bad one without other changes being made. Let me explain. COVID-19: Alberta considers allowing municipalities to temporarily budget a deficit https://edmontonjournal.com/news/local-news/should-municipalities-be-allowed-to-run-deficits/wcm/48bb0fb9-42a0-49fa-9f72-bf19b524c84c /thread

For those unaware, municipalities in Canada face strict budgetary, legal, and service provision constraints that are different and bind more firmly than those faced by the federal and provincial governments and these bind direct actions they can take

Unlike the federal & provincial govts, municipalities are not permitted to run operating deficits: they must balance their operating budgets and they cannot borrow to fund current operating expenses.

Should they be allowed to borrow? We need to learn more first.

The primary source of revenue for municipalities are property taxes and user levies (user fees, regulatory charges, and proprietary charges). These makeup more than 70% of municipal revenues.

These revenues, however, are at significant risk due to the COVID-19 lockdown & the resulting economic slowdown. Municipalities are facing severely reduced revenues from user levies and they are likely to find the default rate on property taxes to rise substantially in near term

So just cut spending some will say. Municipalities must meet their obligations as set and prioritized by the government regardless of their fiscal capacity. They must continue to meet their core responsibilities (water, waste, police, fire, transit, etc.)

Together these factors seriously constrain the fiscal capacity of many municipalities. Municipalities that have larger reserves will have more room to maneuver; however, municipalities with smaller or no reserves will have very limited fiscal capacity.

Given the limited revenue tools devolved to municipalities, the limits on being able to use user levies to fund other activities, & the unique nature of this economic crisis, increasing intergovernmental transfers from higher orders of government would be a more prudent approach.

If you 'want' to give the ability for municipalities to run operating deficits, to do it without expanding their fiscal authorities to other and more flexibile revenue tools then you are going to put municipalities into a really challenging position

Not only for the future ability to pay that debt, but also to deliver essential services.

Want more information? Check out my books: Funding the Canadian City https://www.ctf.ca/ctfweb/EN/ItemDetail?iProductCode=CITY and User Fees in Canada https://www.ctf.ca/ctfweb/EN/publications/product_detail.aspx?prod=USER&cat=Books