Friday, 17 February 2017

Fiscal Comparisons for Major Northern Ontario Cities


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.