The
results of the 2016 Census for major northern Ontario
cities draws attention to what I think is growing
evidence that high and rising
municipal property tax and user charge burdens have been inducing tax migration
to surrounding lower tax townships and municipalities.
In many respects, northern Ontario
cities are in a tough spot given that they have declining tax bases as a result
of weak economic growth, dispersed urban areas to serve, weak population growth,
and fixed costs and obligations to comply with provincial legislation affecting
municipalities.
At the same time, necessity is the mother of invention and
northern Ontario municipalities need to seriously consider innovating the way they
deliver services if they do not want to spark more pronounced future population
exoduses. By innovating, that
means finding cheaper ways to do things.
They may also need to deal with the fiscal spillovers that they
provide to surrounding communities in a manner that currently allows many surrounding residents
access to some urban services and amenities and yet without the higher urban charges.
Given that it is currently municipal budget season, a
comparison of fiscal municipal indicators across the five major northern
Ontario cities is in order: Timmins, Sudbury, Thunder Bay, North Bay and Sault
Ste Marie. For lack of a better
term, I shall collectively refer to them as the Northern Ontario Five or NO-5.
The data for the comparison comes from the Annual BMA Consulting Reports on
municipal finances for the years 2005 and 2015.
Figure 1 plots the net municipal levy per capita for the
NO-5.
This has gone up in all five
cities and currently ranges from a low of $1,319 in Sault Ste. Marie to a high
of $1,528 in Thunder Bay.
Figure 2
plots the annual average growth rate of the net municipal levy per capita between
2005 and 2015 and it ranges from a high of 5.1 percent in Sudbury to a low of
3.8 percent in Thunder Bay.
Given
that inflation has been ranging at about 2 percent, these growth rates are all
well above the inflation rate.
After subtracting inflation, they are also above the growth rate of real
per capita GDP in Ontario, which over the last decade has been barely at 1
percent.
When it comes to the costs that NO-5 residents have to face,
there are also the rapidly rising water and sewer charges.
With the exception of Sudbury, these
have also seen substantial growth over a ten-year period.
Figure 3 illustrates that the average
residential costs for water and sewer currently range from a high of $1,120 in
North Bay to a low of $781 in Sault Ste Marie.
Figure 4 shows that the annual average growth rate from 2005
to 2015 was highest in North Bay at 12.4 percent and lowest in Sudbury at just
under half a percent.
Its
not just the property taxes that are potentially driving residents out of the NO-5, it’s
the total combined package of rising taxes and municipal charges for water and
sewer.
Finally, if rising taxes and water/sewer charges are not
enough, there is always the prospect of what the future might bring if interest
rates begin to climb.
Some of
these northern cities have acquired substantial amounts of debt and face the
prospect of even more debt in order to renew aging infrastructure. Then there are the usual plans for large scale quality of life projects ranging from arenas to galleries which will likely also entail municipal contributions.
Figure 5
presents total per capita municipal debt outstanding for the NO-5.
One would venture that of these five
cities – North Bay and Thunder Bay face the more challenging fiscal future
relative to the Sault, Sudbury and Timmins given the large amount of debt per
capita already acquired.
However,
if I were in Timmins, I would be concerned given that in percent terms, its per
capita municipal debt has grown the fastest.
All in all, it is going to be a challenging future.
