An economic downturn is a period of declining economic activity characterized by reduced business activity, rising unemployment, falling incomes, and decreased consumer spending. For municipalities, downturns create a challenging double impact: revenues decline as property values stagnate, development slows, and user fee collections drop, while demand for services increases as more residents need assistance with housing, food, job training, and other supports. Unlike federal and provincial governments that can run deficits during downturns, municipalities must balance budgets annually, forcing difficult choices between service cuts, tax increases, or reserve depletion. Economic downturns also pressure municipalities through reduced grants from higher governments facing their own fiscal challenges. Maintaining adequate reserves during good times helps municipalities weather economic downturns without severe service disruptions.