The City of Vancouver currently has 55 active contracts with U.S. vendors representing a value of approximately $16.5 million, according to an internal memo authored by city manager Paul Mochrie.
The memo to council, which has since been posted to the city’s website, said 63 per cent of the contracts are for software systems — and staff recommends the contracts stay in place for now.
“Staff do not recommend terminating existing contracts with direct U.S. suppliers, as the spend is currently limited, and largely in areas where there would be operational implications should these contracts be terminated,” said Mochrie in the March 4 memo.
At the same time, Mochrie suggested council could make decisions to end contracts with U.S. companies when extension or renewal discussions are made regarding the delivery of goods and services.
“As a non-tariff response to U.S. trade measures, and irrespective of product prices, council could make a policy decision to exclude U.S. suppliers from specific procurements, accepting the risk that such a policy could result in increased costs to Vancouver taxpayers,” Mochrie said.
He noted Canadian retaliatory tariffs on U.S. goods will have the effect of diminishing the competitiveness of those products in future procurement processes, assuming alternative sources of supply.
But to avoid potential misalignment with strategies adopted by senior governments, staff recommends council defer any decision regarding exclusion of U.S. goods from city procurement processes “pending more clarity regarding federal and provincial decisions on non-tariff measures.”
Meanwhile, Mochrie said the city has “substantial financial exposure” to retaliatory tariffs via procurement from Canadian suppliers who source their goods and services from the United States.
“It is estimated that this could add $6 to $11 million per year to the city’s procurement of goods used in regular operations [such as electrical fixtures, pipes and food],” he wrote.
“Much of this would add costs to capital projects, where contracts are generally structured to pass the risk of high materials procurement costs due to tariffs/taxes to the city.”
'Case-by-case basis'
The city procures some goods and services that are currently only manufactured in or available from the United States.
“For these, barring supply issues, there may be opportunities to source Canadian goods to replace the simpler contracts, e.g., for food and beverage,” he said.
“For more complex goods and services, trade-offs will have to be assessed on a case-by-case basis, e.g., overhauling sewer design to move away from ductile iron pipe.”
Navigating what council can or cannot do to immediately reduce the reliance on U.S. companies for goods and services is also limited because of international trade agreements.
Currently, three main trade agreements prevent the city from indicating a preference for local or Canadian vendors, or content for contracts over $75,000.
Those agreements are the Canadian Free Trade Agreement, the Canada-European Union Comprehensive Economic and Trade Agreement, and New West Partnership Trade Agreement.
“The risk of not abiding to these obligations can initiate a dispute process or a legal claim under Canadian common law procurement principles or statutory frameworks,” Mochrie warned.
Property tax deferral
At the same time, Canada and the U.S. are co-signatories to the Canada-United States-Mexico Agreement and the World Trade Organization Agreement on Government Procurement, which do not impose any procurement obligations on Canadian municipalities.
“Accordingly, the city does not have an obligation to provide equal access to procurement opportunities to U.S. vendors,” Mochrie said. “Based on this, excluding U.S. suppliers from any new purchasing or future procurement agreements would not constitute a breach of applicable trade agreement obligations.”
Mochrie’s memo was in response to council’s request Feb. 11 to direct staff to explore a series of measures to help business owners fight back against an expected economic blow coming from tariffs imposed by U.S. President Donald Trump.
One of the suggested measures was property tax deferral for commercial properties, which staff has considered to be a non-starter. Under the Vancouver Charter, property tax deferrals cannot be enacted for specific classes of properties unless mandated by the provincial government.
“Because approximately 80 per cent of businesses in Vancouver lease their premises, in these cases any deferral benefit will/may be enjoyed by the landlord, unless they explicitly choose to pass it on to their business tenants,” Mochrie said.
“While a property tax deferral may help with short-term cashflows, these amounts would have to be repaid at some time on the not-very-distant horizon [and] may cause further hardship in the future.”
Pandemic response
Mochrie said it is anticipated that “large-scale mitigations and support” to businesses, workers and consumers impacted by tariffs will be provided “to the extent possible” by senior governments.
“The City of Vancouver has neither the financial capacity nor the regulatory levers to provide substantial short/medium-term mitigations or subsidies to local businesses,” he said.
“Also, as a key distinction from the pandemic response, there is presently no basis to expect that the impacts of trade restrictions on the Canadian economy will be short-lived and followed by a robust recovery. As such, it is recommended that in response to U.S. tariffs and Canadian counter-tariffs, the city focus on long-term resiliency rather than shorter-term tactics.”
Mochrie said the city’s “greatest opportunity for impact” relates to the zoning, building and business licensing regimes. He noted substantial work was already underway as part of the city’s 3-3-3-1 permitting improvement program and other regulatory reform initiatives.
X/@Howellings
