Municipalities in Ontario have
been agitating for new revenues particularly given the sluggish growth in provincial government grants. Well, apparently at least one municipal councilor in Thunder
Bay also believes that cities
need more revenue tools.
This is in spite of the evidence that Ontario municipalities
have seen their revenues grow quite robustly over time.
According to the
Financial InformationReturns maintained by the Ontario Ministry of Municipal Affairs, between 2000
and 2015, total municipal revenues in Ontario more than doubled growing from
$22.7 billion to $47.8 billion.
While
the growth rate has slowed somewhat since the 2009 recession, it remains that
since 2000 these revenues have grown at an annual average rate of 5.2 percent.
This is much faster than either
Ontario’s population or GDP growth.
Of course, all this talk really marks the eve of the start of the formal portion
of the 2017 City of Thunder Bay budget process. Needless to say, a call for new revenue tools and laments of
provincial downloading are part of a budget process that needs to justify tax
increases for the coming year. How
have Thunder Bay’s municipal revenues been doing of late? Figure 1 plots the
total value of four major revenue sources: residential taxes, non-residential
taxes, user fees (net of Thunder Bay Telephone), and government grants. Figure 2 plots the annual average
growth rates of these revenues from 1990 to 2015 and for associated
sub-periods. The data is from the
City of Thunder Bay and from the provincial Financial Information Returns.
Between 1990 and 2015, residential tax revenues grew from
31.1 to 118.3 million dollars – an increase of 279 percent.
On an average annual basis, these
revenues have grown at a rate of 5.7 percent a year.
Non-residential tax revenue (i.e. business taxes) grew from
32.2 to 48.7 million dollars, a total increase of 52 percent making for an
annual average increase of 1.9 percent.
User fee revenues have grown from 27.5 to 89.5 million dollars for an
increase of 226 percent or an annual average increase of 5.3 percent.
Meanwhile, government grants have
managed to increase from 69.3 to 80.4 million dollars for a total increase of
16.2 percent and at an annual average rate of 1.4 percent.
Of these four major revenue sources, grants from the
provincial and federal government have displayed the slowest growth with
non-residential taxation the second slowest growth rates. Residential taxes and user fees have
displayed the most robust growth and far in excess of any growth in the city’s
economy, inflation rate or population. I suppose the only good news is that the
growth rate of revenues from residential taxation moderated between 2010 and
2015 going to an annual average of “only” 3.7 percent as opposed to 6 percent
for the period 2001 to 2009.
Differential growth rates between residential and non-residential taxation have altered the balance between these two revenue sources. In the case of property taxation, whereas the split between
residential and non-residential revenues was 50/50 in 1990, there has been an
increase in the residential share and a decline in the non-residential share to
the point where 70 percent of the property tax burden now comes from
residential taxes (See Figure 3).
Given the robust increases in revenues from residential property taxation in Thunder Bay over the last 25 years, one is curious as to what new revenue
tools the City of Thunder Bay might have in mind that would spare residents
from what according to a City Councilor is “really, a regressive form of
taxation.”
