Ontario's Partial Post-Pandemic Employment Rebound

 

Like just about everywhere else in the world, Ontario was hit hard by the job losses that resulted from the assorted lock-downs and coronavirus containment strategies of the COVID-19 pandemic.  Figure 1 presents seasonally adjusted monthly employment data from Statistics Canada for Ontario from 2006 to the present.  From February 2020 to June 2020, Ontario lost 990,000 jobs or 13.2 percent of its employment. These losses, however, were not uniform in size across the major urban centers of the province.  

 

 

 

Figure 2 plots the ranked employment losses from the start of the pandemic in February when the monthly employment losses began to June 2020 when the rebound begins and going  from worst to best performers.  Hardest hit with a 25 percent drop in employment was Belleville, followed by Windsor at 18 percent and then Thunder Bay at 16 percent. The three lightest hit cities were Ottawa with a 10 percent drop, Brantford at 7 percent and Guelph at just below 7 percent.  

 

 

 

With the exception of Barrie, all of these cities have managed to bounce back since June as Figure 3 illustrates.  The largest rebound as was the largest drop happened in Belleville.  Belleville saw employment rise 25 percent and was followed by London at 16 percent and Kingston at 15 percent.  The smallest rebounds aside from Barrie which appears to have continued to shrink were Guelph at 6 percent, Sudbury at 5 percent and St. Catharines-Niagara at 4.5 percent.  

 

 

 

Despite the rebound, only two of these urban areas have managed to recover enough employment to be at more employment than the start of the pandemic drop in February – Kingston and London – though not by much.  Others still have a gap and it varies substantially.  Ontario as a whole is currently at about 96 percent of its February 2020 level of employment. Figure 4 ranks the cities by their employment in February 2021 as a percentage share of their February 2020 employment.  Thunder Bay, Windsor, Sudbury, St. Catharines-Niagara and Barrie have recovered the least.  Thunder Bay is only at 93 percent of its pre pandemic level of employment followed by Windsor at 92 percent, Sudbury at 91 percent, St. Catharines at 88 percent and Barrie at 84 percent.  On the other hand, after Kingston and London, Brantford and Guelph are at just over 99 percent of pre-pandemic employment.  

 

 

 

Overall, Ontario has seen a remarkable 12 months with massive employment losses and a rather large rebound, but which only puts it back at about 2018 levels in terms of employment.  There is still  a lot of recovery to go.

Ontario’s Spring 2021 Budget: The Future Looks Bleak for Health Care

 

Well, the Ontario 2021 budget came out yesterday and it is rightly preoccupied with the COVID-19 pandemic.  COVID-19 funding and support will continue to flow for the next couple of years and along with the $20.1 billion of support in 2020-21, there will be an additional $6.7 billion and $2.8 billion in the subsequent two years before the government anticipates a return to  some type of normalcy. 

 

For 2020-21, the deficit is estimated at $38.5 billion and for the 2021-22 fiscal year it is expected to be $33.1 billion and then $27.7 billion the year after.   However, the government has actually proposed a fiscal plan for getting to a balanced budget –but it is very long-term.  Deficits are projected to continue falling until 2029-30 when there will finally be a $900 million-dollar surplus – assuming the projections for economic growth and spending take shape and indeed, that the world should last so long.

 

Figure 1 presents the numbers for total revenues, total expenditures and the deficit out to 2029-30 but also puts them into historical perspective.  The numbers are from the Fiscal Reference Tables for the 1990 to 2019 period with GDP numbers from Statistics Canada and the Ontario 2021 Budget for the years after up until 2029. If these projections come to pass, Ontario will have run since 2008-09 a total of 21 budget deficits before reaching “balance” in 2029-30 resulting in accumulated deficits of $284.9 billion.  By 2029, Ontario will be taking in $210.1 billion in revenues – up 35 percent from 2019-20 – and then spending $209.1 billion- up 27% from the same reference point. The net debt that will rise from $397.2 billion in 2020-21 to reach an astounding $585.3 billion by 2029-30 and a net debt to GDP ratio that will remain just short of 50 percent for an entire decade.  Moreover, as the stock of debt rises, so does debt service and its rises from $12.5 billion in 2021-21 to $20.6 billion in 2029-30 – an increase of 65 percent.

 

 

 

It indeed will be the roaring twenties when it comes to the growth of net debt and debt service costs in Ontario.  Ontario’s fastest growing expenditure category from 2021 to 2920 will be debt service costs.  The average annual growth rate for nominal health spending is expected to be 2.6 percent.  Education will grow at an annual average of 1.1 percent, post-secondary education at 1.2 percent, children and social justice comes in at 0.6 percent annually (so much for children as the future) and interest on the debt at 5.1 percent. 

 

The results for health care spending are particularly at odds with the Ford government’s commitment to increasing hospital capacity and long-term care.  While base health spending – that is not including the short-term COVID-19 bump -  is projected to grow at 2.6 percent a year, it means that given population growth of about 1 percent annually and inflation of 2 percent, real per capita spending on health will at best stay flat and even decline somewhat.  

 

This will come after nearly a decade of relatively flat real per capita provincial government health spending in Ontario and it seems to conflict with government claims it is going to boost health and long-term care. We do seem to be heading for a rather dire fiscal future in which the budget is not going to be balanced, the public finances are not sustainable and spending on important things like health will actually decline in real per capita terms.  It is indeed a rather bleak looking future for health care in Ontario despite all the government spin.

What Ontario Needs to Do In Today's Budget

 

The Ford government will table Ontario’s 2021 budget on March 24, at a time when there’s an overflowing plate of pressing policy issues. Along with continuing the fight against COVID, sorting the ongoing fallout in long-term care, promoting economic recovery and addressing solvency issues in the university sector, there’s also the matter of the province’s finances.

Indeed, there are probably not enough hours in a day for the government to deal with the onslaught of policy issues and their cost-benefit calculations. So, one must prioritize.

First is COVID-19, which is seeing a renewed rise in cases. Given the public fatigue with restrictions, it’s now a race between the virus and vaccinations. The vaccination process is ramping up, but speed is the question. To vaccinate 14 million Ontario residents (with just one dose) by the end of June requires dispensing nearly one million shots a week effective immediately. Ontario usually orders enough flu shots to vaccinate 30 to 40 per cent of its population every year with five to six million flu shots dispensed in just a few months. As such, it should be well within the province's technical ability to effectively double that rate in an emergency. Indeed, Premier Ford has affirmed the province’s ability to administer 4.8 million vaccine shots a month. Yet it’s currently running at about a quarter of that rate—or about 1.2 million shots a month—because in the end, you still need a consistent and abundant vaccine supply.

Second, there’s the economic recovery, both short and long-term. According to the Financial Accountability Office of Ontario (FAO), the broad-based lockdowns have resulted in a 5.9 per cent drop in Ontario real GDP in 2020, the largest annual decline in economic output on record. However, assuming vaccines are distributed to the general population over the course of 2021 and government lockdown restrictions are progressively eased (and this third wave does not spiral out of control), Ontario’s economy should rebound strongly. The latest labour force numbers from Statistics Canada suggest employment is rebounding, with 100,000 jobs created in February and the unemployment rate falling a full percentage point to 9.2 per cent.

However, most of Ontario’s February employment gains were in part-time work with notable increases in accommodation, food and retail trade. These are fragile gains for an economy that seems to always be teetering on the brink of yet another lockdown. Moreover, the long-term picture is more ambiguous. On the one hand, the U.S. economy is recovering robustly, and given Ontario’s integration of exports and production with American business and supply chains, one might expect smooth and sustained growth prospects once the pandemic is behind us. The province’s northern resource sector will certainly benefit from the uptick in commodity prices for minerals and lumber.

At the same time, the Biden administration is sending mixed signals on its degree of economic engagement with its traditional partners. One of President Biden’s first actions was an executive order imposing strict new made-in-America rules for U.S. government spending with limited exceptions, meaning the spillover from the U.S $1.9 trillion stimulus program could cut Canadian companies out of the procurement process.

And third and finally, there’s the elephant at the cabinet table—Ontario’s fiscal picture. According to figures released in the fall, the 2020-21 fiscal year was expected to see a $38.5 billion budget deficit followed by $33.1 billion in 2021-22 and $26.2 billion in 2022-23. This would see Ontario’s net debt climb to $472.9 billion from $335.2 billion in 2019-20. While one could opine that the scale of deficits and pace of debt accumulation is mainly a function of the short-term rise in spending needed to fight the pandemic and the short-term collapse in revenue, the government must provide some plan to balance the budget over the medium term. Next week’s budget is a good place to start.

In a sense, these three policy problems are all related. End the pandemic and the economy will recover. Once the economy recovers and growth resumes, government revenues will recover and it’s reasonable to expect the deficit to shrink. The problem is, this has been the standard way to deal with Ontario’s budgetary shortfalls—hope you can grow your way out of it. One might term it faith-based fiscal planning, and its track record has not been successful.

According to figures from Finances of the Nation, the last time Ontario’s budget yielded even a small surplus was in 2000-01. Since then, there’s been a budget deficit every single year with nominal net debt rising from roughly $130 billion to reach nearly $400 billion by 2020-21. Apparently, there’s never a good time to deal with Ontario’s long-term structural gap between revenues and spending. If its not a recession, it’s a global financial crisis. If it’s not a financial crisis, it’s weak economic growth. If it’s not weak growth, it’s a need to invest in the future given low interest rates. And now, with a pandemic, one does not have to be very imaginative to see where this is going.

In the absence of a concerted effort to address its structural fiscal gap, the pandemic will pass but Ontario’s net debt will continue to grow.

This originally appeared in the Fraser Institute Blog, March 22^nd, 2021.

Paying Municipal Councillors

 Last evening's Thunder Bay City Council Meeting was notable for a number of items - the shelving of the Multipurpose Turf Facility tender but not the project, the lack of a major and substantive discussion on the city's growing tax arrears problem - but especially for the operatic self-flagellation of councilors as they reluctantly approved their pay increase in a scene oddly reminiscent of the coronation scene in Mussorgsky's Boris Gudonov.  The councilors finally convinced themselves to vote in favor of giving  themselves a pay increase that in the end will add about $3000 to a $200 million 2021 operating budget.  The crowning moment was the vote when 12 councilors voted in favor, but the Mayor in a grand gesture of fiscal rectitude and atonement for the increase in costs of the Turf Facility project to $46 million, voted no.  It was all really patently quite silly on a number of levels and perfect evidence that in the end, you get what you pay for even with municipal councilors.  

A couple of points.  First, at a base salary of $31,852 the salary paid to a City Councilor suggests that the job is really not very important and is something best taken up by people who either  have time on their hands, are desperate to supplement their income, perhaps are looking to make connections for their own private business interests, or are political careerists looking for a stepping stone to higher public office.  The purpose of being on Thunder Bay City Council should not be as a recruiting farm team for local political parties seeking provincial and federal candidates.

It is not that running for office is about the money but public office does involve a sacrifice of time, career and family and the current compensation is insufficient given the opportunity cost of what you need to give up to do the job effectively.  This means that in the end, while public service and commitment should be the main drivers of running for office, it is difficult to attract the best candidates especially given the character assassination involved that passes for a political campaign these days. If anything, the problem with Thunder Bay City Council is that for a city of just over 100,000 and twelve Councilors plus a Mayor, there is too much quantity and not enough quality.  A smaller council of eight councilors plus a Mayor would allow for compensation that better reflects the responsibility of the position and attract the caliber of person needed to make decisions on a municipal corporate budget of hundreds of millions of dollars.

Second, is the interesting message that City Administration has sent regarding what they recommend as an appropriate increase for councilors.  As it stands, the City Administration basically recommended that the raise should be tied to half the rate of inflation in the City for 2020 which was calculated at 0.55% based on an inflation rate of 1.1%. It is interesting that when putting forth budget proposals to the councilors, this same rule is not adhered to by City administration as historically the initial budgets proposed  have been well above the rate of inflation in the Thunder Bay.  Indeed, municipal employee pay increases in Ontario have even managed an exemption from current provincial legislation limiting public sector salary increases to 1 percent annually. In the end, why pay more to attract better candidates? City Administration in some respects has a vested interest in keeping the quality of city councilors where it is, as their lives would definitely become much more difficult if the quality of councilors increased.  

It really is a classic case of the bureaucracy completely capturing the legislative and policy process.  No doubt, the local community cable channel borrowing from the BBC would be well advised to produce and air a sitcom called Yes, Councillor.  The first episode could feature amusing discussions on staffing and pay increases between city managers and the councilors. On the other hand, this pretty much already occurs every Monday evening on the local cable channel.  We should look into getting Netflix to air the meetings -  as a revenue generating reality show.

Thunder Bay's Worsening Tax Arrears Problem

 

This Monday evening, one of the items on the discussion plate at Thunder Bay city council will be the newest report on tax arrears.  This year’s report shows that the problem is definitely worsening in terms of the number of properties in arrears as well as the value of those arrears and the revenue foregone.  This year’s list also features the waterfront Delta Hotel which owes $865,277 in taxes to the city of Thunder Bay.

 

Indeed, 2019 sees a jump in both the number of properties in arrears as well as the value as Figures 1 and 2 illustrate. The total number of properties in arrears grew from 266 to 389 – an increase of 46 percent while the value in total arrears grew from approximately $2.5 million to $4.4 million – an increase of 76 percent.  The total value of tax arrears since 2008 comes in at over 10 percent of the value of the tax levy.  Residential properties in arrears grew from 232 in 2018 to 338 in 2019 – an increase of 46 percent.  Non-residential (i.e. business properties) in arrears grew from 34 to 51 – an increase of 50 percent.  Along with the Delta Hotels, some prominent businesses in arrears include the owners of Kangas Sauna as well as Arnone Transport. 

 

Now of course, some might be inclined to argue business has been hard hit by Covid-19, especially in the travel and accommodation sector given Delta Hotel's tax bill but the reality is the money owed is from 2019.  Part of the longer-term problem is the economy has been slowing in recent years and tax rates increasing.  Part of the problem is also that it is apparent that some businesses are engaging in creative payment solutions – essentially not paying their taxes – until they absolutely have to.  It is a bit of a creative financing game that essentially defers taxes into the future while allowing firms to retain the money in the present. 

 

Perhaps the penalties for deferring your taxes in this fashion are not sufficiently large for businesses?  According to the City of Thunder Bay:

 

“All payments must be received by the City by the due date to avoid penalty. Penalties will not be cancelled if you did not receive your bill. You will be charged a late payment penalty of 1.25% on your outstanding balance if your bill is not paid by the due date and on the first day of every month on any outstanding balance. The Not Sufficient Funds (NSF) fee is $40.”

 

However, one wonders if the creative business approach to property taxation offers a way out for beleaguered homeowners to register their displeasure with the City of Thunder Bay?  Just imagine if all those leaky pipe home dwellers actually got organized and started to withhold their payments by six months or so – on an average bungalow with say a $4,000 tax bill, you are probably looking at penalties of about $50 dollars a month (an upper bound based on $4000 - remember you pay in  installments so  the penalty on a missed installment is less).  True, after six months or so that is a substantial amount of change but just imagine if large numbers of homeowners in Thunder Bay got sufficiently incensed to seriously disrupt the City of Thunder Bay’s short-term cash flow – the penalties six months or a year later be damned?  Irresponsible? Yes.  One should always render unto Caesar what is Caesar’s.  Still, one really wonders what it will take to get City Council’s attention? Perhaps business is showing us the way forward?

COVID-19 Case Count Developments Update: Ontario and Thunder Bay District

 Once a month is usually sufficient to provide an update of the COVID-19 case count numbers and associated trends but things are moving rapidly this month, especially in Thunder Bay, so an update mid-month is timely.  Today's daily case count was 1,268 for Ontario bringing the total up to 319,373 while for Thunder Bay there was an increase of 51 bringing the total count up to 2,390.  Figure 1 does the Ontario COVID-19 daily case count plot with LOWESS smooth for trend and it appears the downward trend has come to a halt with an uptick now being detected.  The new variants seem to be responsible for increasing case counts around the province and if they continue to gain hold we will have the third wave. However, the trend for deaths from COVID-19 remains on a downward path as illustrated in Figure 2. 

 

 

As for the Thunder Bay District, well based on Figure 3 we are still upward bound.  As our District Chief Medical Officer of Health has noted, the coronavirus is probably everywhere in Thunder Bay but that still has not blunted the public's enthusiasm for carrying on as usual if one is to judge street traffic levels as well as  store and mall parking lots over the last week.  The public's seeming lack of concern seems to be at odds with local public health officials and politicians.  The Mayor of Thunder Bay mid last week was on CBC Newsworld and making a case for Thunder Bay as a hot zone and the need for additional assistance including being included in the province's drug store pilot for AstraZeneca distribution.  

The only odd thing was that the Mayor's lobbying effort was a little late given that the program had already been effectively announced the previous week meaning the provincial planning for this had been in the works for some time.  Thunder Bay's case count ascent has been underway since January. One suspects that many variables go into the province designating hot zones (not that anyone is transparent and willing to reveal what they are)  and Thunder Bay is probably considered still a low "risk" because its spread is largely contained to itself given its relative isolation.  If a growing hot zone is adjacent to a large metropolitan center of millions of people, the problem has a different dimension.  Despite some remarks on social media that this is party politics at work, it is not.  It is geography.

In Ontario as cases start to mount and the new more contagious variants spread, it is becoming increasingly obvious that the only thing that will blunt this upsurge is widespread vaccination.  On the plus side, the vaccine delivery process is starting to ramp up but it is now a question of speed.  However, to vaccinate 14 million Ontario residents (with just one dose)  by the end of June requires that we dispense nearly 1 million shots a week.  This should not be a problem given that Ontario usually orders enough flu shots to vaccinate 30-40 percent of its population every year. In an average year 5-6 million flu shots are dispensed in just a few months.  It is not beyond the province's technical ability to effectively double that rate in an emergency.  Indeed, the Premier has stated that the province has the ability to administer 4.8 million vaccine shots a month. Yet it is currently running at about a quarter of that rate or about 300,000 shots a week because in the end you need a vaccine supply.

So here is the ultimate race.  The public is tired of following rules - not that they were ever particularly good at doing so aside for a few weeks last spring when they were actually terrified. As it became apparent that the result of getting COVID-19 for 90 percent of the population was a relatively mild illness, they have been doing their own interpretations of what social distancing and social gathering restrictions mean. At the same time, the virus has been evolving - while the public response has been devolving so to speak - and becoming more contagious so case counts are starting to rise again.  And the final element - the supply of vaccine - which is still not coming in quick enough and probably never will given that we do not have the capability to manufacture our own.

It Is Not Over Yet

 

On Monday evening, Thunder Bay City Council halted the process of constructing a new indoor multi-use turf facility by voting to not award the tender for the project.  This does not mean that the project is dead.  Rather, it was a decision made by the majority of councillors – many of whom are in fundamental agreement with the project but not its timing or cost – to not go with the current lowest bidder.  From an initial proposed $33 million, the project including interest on the 25-year debenture has now climbed to $46 million. That the project is not dead yet was confirmed by the Mayor in an interview this morning on CBC radio as well as other public comments made by proponents of the project.  This push to continue the project is also occurring despite what appears to be a rather large – albeit unscientifically polled – majority of 80 percent opposed.

 

The meeting on Monday evening was made remarkable by the concerted push by council members supporting the project to become increasingly strident about the need to invest in the multi-use turf facility project.  The standard claims about improving quality of life and attracting people to Thunder Bay were made but then the debate went a bit off the rails.  One councillor embarked on a sarcastic speech that essentially amounted to bullying the other councillors into seeing things his way by shaming them by arguing that they preferred to do nothing rather than something.  One is surprised that the councillor did not regale the councillors with a lengthy speech about how doing nothing does not make history.

 

The same councillor also tried to guilt the opponents with a fairness argument that other sports groups had gotten city-built facilities and now it was the turn of the groups using the Turf facility.  Indeed, in striking a coalition of support, the list of users for the facility now goes beyond soccer and apparently includes some eleven groups including Thunder Bay’s legendary pickleball players.  Moreover, the facility can even be used to host conventions.  It apparently is a reincarnated Events Center also - which incidentally a half-decade ago was also unable to garner federal and provincial support.  With all the proposed users, one wonders how many children will actually get field time to play soccer?

 

However, Thunder Bay’s grand recreational expansions of the past were done at a time of a much more buoyant tax base and economy.  It is not the 1970s anymore.  True, there will always be griping and opposition to spending on large projects but the other pressing issues facing the City – social housing for the homeless, crime, water infrastructure via the leaky pipe drama affecting thousands of homeowners – were conveniently not brought into the picture. Moreover, treating the turf facility as an isolated stand alone project when there are other infrastructure projects to be decided  - including a new police station - is disingenuous to say the least.

 

The councillor then began to draw comparisons with the Thunder Bay Art Gallery project despite the fact that the $30 million gallery project was largely being funded by its own fundraising campaign with a five million dollar contribution by the City of Thunder Bay as opposed to the Turf facility which will see its entire cost funded by the City via its own money  and a debenture. The Turf facility project was initially advanced as going ahead with partners at the federal and provincial level and funding from these other levels has never materialized.

 

The Mayor was somewhat more diplomatic saying he did not want to make comparisons but then proceeded to draw comparisons to the hospital project twenty years ago when the City made a $25 million contribution to the largely provincially funded project that was to be funded by a temporary tax levy increase.  The Mayor neglected to mention that after the funds had been raised, the tax levy was never removed and became permanently entrenched.  Moreover, unlike the Turf facility which had a private sector proposal for alternate facility that was rejected by City Council, hospital construction and operations in Ontario have always been largely public sector driven.  Even more, hospitals are seen as public necessities whereas sports facilities, while valuable and important, are difficult to place on the same level.

 

More interesting were the comments on the CBC radio interview this morning where the Mayor stated that the City’s finances were very good with only a $1.15 million deficit projected for 2021 and the lowest tax increase in a decade and that we could obviously afford the project.  Making long term commitments based on one year’s finances is never a good idea particularly giving recent City Budget projections calling for tax increases of 3-4 percent in years to come.  Moreover, not so long ago there was a wringing of hands over the cost of COVID-19 and only a few weeks ago the Mayor was again lamenting the need for more provincial financial support. 

 

The thing here is that in the end, in true Thunder Bay fashion, there were two groups involved in getting a new facility that were unable to work together.  One side earlier on seems to have successfully torpedoed the alternate group’s private sector proposal and have essentially gotten key city politicians and administrators on side with their idea for the publicly funded facility.  The initial proposal was for $33 million and was expected to garner support from other levels of government.  As noted, the total cost is now expected to be $46 million and shovels have not even gone into the ground yet, which once begun will no doubt reveal cost surprises. Given the history of rising costs in Thunder Bay public sector projects some councillors have rightly begun to balk. 

 

Yet, in the end I think the project will not die.  In Thunder Bay, proposed public spending projects are never too costly to completely die - they just need to evolve and stay the course.  The reason the Events Centre died in 2015 was the complete dearth of support from other governments. This time they can apparently at least tap into the Federal Gas Tax money.  The next two weeks are going to see a lot of horse-trading and behind the scene maneuvering led by the Mayor in particular in an effort to salvage the project in some format. Some of it will involve providing assurances regarding the state of the finances of the city and project costs.  As many have noted, all Monday’s vote did was turn down the current bid.  Even many of those who have been publicly branded by proponents as short-sighted civic do nothings for not supporting the project are actually not opposed to the turf facility – they are concerned about the timing and cost of the project.  If there is a convincing operatic performance by proponents that we can afford this after all, it will go ahead.  Unfortunately, this is simply business as usual when it comes to public spending and project development in Thunder Bay and continues Thunder Bay’s increasingly outdated civic vision.

 

 

Thunder Bay COVID Cases Trending Up Rapidly

Today's case count for the Thunder Bay District was 46, coming on top of 61 the day previous.  A LOWESS plot of the daily cases clearly show the steepness of the upward trend.  The Federal Health Minister this morning on CBC radio noted the situation in Thunder Bay is very serious and potentially exponential.  Given that exponential growth is a growth pattern that shows larger increases over time - that is the slope of a profile is getting steeper rather than diminishing - one might opine that we are probably already there.  The per capita new case count in Thunder Bay district is now the highest in the province.  When the plot is examined over the course of the year, Thunder Bay never really had a "first wave" and indeed its current wave occurs in two phases - a first one starting in November (circa Day 275) that in the end plateaued but never really subsided and a second one that begins to pick up speed the first week in January (circa Day 350) and has never really slowed down.  At present there are now 389 active cases and 35 hospitalized of whom 8 are in the ICU. Have a nice weekend.

 

 

Building a New Vision for Thunder Bay

 

Pandemics are ultimately associated with great economic and social change as once the pandemic subsides, there is never a full return to the previous world.  In Thunder Bay, the changes wrought by the pandemic have emphasized and highlighted many of the city’s problems.  Along with continuing high rates of crime, homelessness, racism, mental illness, and the growing effects of a changing climate, the lineups at food banks have been increasing and there even seems to be a return to a wild west frontier mentality with increasing numbers of people being stopped by police for driving under the influence. Thunder Bay has always been a city with a mean frontier edge to it whether it is on the city’s roads, its bars, or its school parks and playgrounds.

 

The recent surge in COVID-19 cases particularly in lower income homeless residents accentuates the reality that there are really two Thunder Bays – a Thunder Bay of growing poverty as employment and health becomes more precarious given job loss and city businesses hard hit by the pandemic and one of secure largely broader public sector driven employment.  The evidence of the social and economic changes that have emerged over time are there for all to see - if they want to.  

 

Figure 1 shows that the decline in homicide rates in Thunder Bay that had been occurring in tandem with the rest of the country came to an end circa 2007 – perhaps not entirely coincidentally at the tail end of the massive economic shakeup of the regional forest sector crisis.  They have since been rising and Thunder Bay invariably emerges year after year as the murder capital of the country. Figure 2 shows that over the last decade, overall building permit values – which signal new investment – have trended downwards and residential permit values have been largely stagnant. Figure 3 shows that housing starts have essentially been flat at low levels compared to the pre-1990 period.  Figure 4 shows that over the last 20 years, employment has trended downward with the pandemic providing the expected additional downward spike at the end of the series. 

 

 

 

 

 

 

 

 

Over the longer term of its economic history, as captured by the evolving population size shown in Figure 5, Thunder Bay has essentially been stationary since the 1970s.  That is important because population still is an important economic indicator in that population growth tends to respond to economic opportunity and Thunder Bay’s lack of population growth is the one long-term indicator of the state of its economy. Our city’s population peaks in the late 1970s and 1980s and has actually trended slightly downward since.  One wonders about the coincidence between the end of growth in the 1970s and the onset of a monopoly municipal government in place of the formerly competitive municipalities of Fort William and Port Arthur.

 

 

 

It is true that the Thunder Bay CMA population is larger at about 125,000 or more and has actually trended slightly upwards in recent years.  However, it is the official population of the City of Thunder Bay within its city boundaries and not the CMA population and residents external to Thunder Bay city proper that matter because in the end it is the tax base of the City of Thunder Bay that pays for services in the city via the tax levy.  Yet, what is quite remarkable is that despite the lackluster growth in major indicators, there has been substantial growth in the tax levy of the City of Thunder Bay and associated municipal employment as Figures 6 and 7 demonstrate.  While the rate of growth of the tax levy has declined over the last five years, it has grown faster than both population and inflation combined.

 

 

 

 

All this coincides with the growing disquiet many residents feel with respect to the direction the City has been taking.  Yet, in the face of mounting evidence of substantial issues  there seems to be an increasing sense of detachment from the public by the Mayor, City Councillors and Administrators given recent decisions such as the pursuit of expensive major capital projects like the proposed new Indoor Turf and police facilities, the silence on the epidemic of home plumbing issues linked to City water, and a pathological preoccupation with seemingly superficial issues like tourism signs and sporting events. True, our city councillors are always quick to articulate their concerns about the problems facing Thunder Bay and indeed much of their meetings are taken up by pious words too numerous to count but in the end, they are either unable or unwilling to systematically tackle the future.

 

A key part of the problem is that our patterns of civic decision making are rooted in a mid-twentieth century vision of where Thunder Bay needs to go.  My take on that vision – which I articulated in an earlier post – bears repeating and can be summarized as follows:  Thunder Bay is a regional center and strategically located full-service high-tech urban oasis set in a pristine natural wonderland with a wonderful quality of life on crucial east-west trade and transport routes whose full potential is unrealized.  Indeed, the entire City’s potential is unrealized and what Thunder Bay needs is continual infrastructure investment to attract people and effective communication of our potential to convey the message of how wonderful we are.  While Thunder Bay may have social problems, they are not any worse than other places and have been blown out of proportion by the national media. City residents need to have a positive attitude, stay the course on this strategy, and we need to invest in the public services and infrastructure to make it all happen.

 

This is in essence what continues to drive civic policy in Thunder Bay even though since amalgamation in 1970 the City has stayed static in population, its industrial mainstays have largely disappeared, and its grain transportation role shrunk to a shadow of its former glory.  While there indeed has been some employment diversification into a knowledge economy and the health and education sectors that have helped provide a market and business opportunities for some entrepreneurs, it remains that this has been largely a rear-guard maintenance action that has barely kept pace with the employment losses.  Moreover, much of this employment growth has been in broader public sector employment making it increasingly tied to political decision making in Toronto or Ottawa.  Our political clout is not as large as we like to think given the higher population growth in southern Ontario.

 

Key to this local vision is the level of municipal spending, employment and infrastructure investment partly geared towards keeping the economy going via construction projects.   This spending is financed by government grants and by tax increases levied increasingly on the residential tax base given the departure of the industrial mainstays who provided the base for the past development of a very generous level of municipal spending and programs.  Tax increases are justified by “a build it and they will come philosophy” but it has become apparent that after fifty years we have built a lot and not too many have joined us.  When the point on practically zero population growth is mentioned, the response is that we have large numbers of temporary residents whether they be students or visitors from outlying First Nations requiring services.  However, we do not seem to have accurate numbers documenting this aside from the ones City Councillors and Administrators like to throw out - numbers like “20,000 or 30,000 more” during meetings without supporting empirical evidence.  More to the point, there is the question as to why municipal ratepayers should even be providing these additional services out of a local property tax base?  Where are the provincial or federal governments in all of this?  Indeed, in the wake of rising cases recently, the pandemic has revealed just how truly stretched our resources are given that Thunder Bay is serving as a regional health and social service support center on a city budget.

 

We have an expensive vision of local and regional municipal government spending based on an economic base that no longer exists.  That vision is justified by a “build it and they will come philosophy” that continues after waiting 50 years for results.  Thunder Bay continues to invest and prepare for the next boom and yet that boom never comes or is much more subdued than expected.  Even the most recent mining strategy released by the city’s Community Economic Development Commission continues in this tradition by documenting the prospects of 7,000 jobs over the next decade - nearly a decade after the prospects for the Ring of Fire’s mining boom were first pronounced. 

 

When the Mayor and Council are criticized, their rebuttal takes the form of dubious arguments such as the need to invest today for tomorrow and how we need to invest in our quality of life.  Who can argue with quality of life or renewal of aging infrastructure? Yet, it turns out that much of this money is being spent on just two things – administration and protection.  We have one of the highest per capita tax levies of major cities in the province and spend the highest per capita amount of 27 major Ontario municipalities on administration, police and fire while managing to be one of the lowest spenders on the remainder.  The need for a re-balancing of spending priorities is obvious.

 

Taxes and fees go up but that is justified by our civic leaders as all right because our cost of living and property values are lower thereby resulting in lower taxes relative to bigger cities with more expensive housing meaning they can be raised more because they are a bargain compared to Toronto.  This is debatable but not the main point.  If the cost of living here was truly lower resulting in a surplus for local residents in excess of what they need, why we might not want to keep money in our own pockets rather than simply hand it over to the local municipal-protection-administrative-construction complex is a question that Thunder Bay politicians do not want to answer. 

 

What is to be done?  The mindset and vision that has permeated our local municipal political and economic decision-making culture needs to change.  That is more difficult than you can imagine given how entrenched the current vision has become and the short-term municipal political and bureaucratic interests tied to specific projects and expenditures.  It is beyond the abilities of any one individual to change an entire municipal tax and spending culture but change needs to start somewhere. It probably also is more than just a municipal culture vision as in the end the outlook of the entire community has been permeated by the current mindset.  It is also a new community vision of what Thunder Bay ultimately can or cannot be and do.

Changing Thunder Bay’s municipal tax and spending culture requires four steps.  First, there needs to be a recognition that there is indeed a problem and we are a long way away from that given the substance of debate at City Council.   Second, once the problem is recognized, there needs to be a meaningful reorientation of priorities.  The current expenditure review process is insufficient because it merely presents a smorgasbord of specific tasks and projects to horse trade over given that administrators and councillors look at parts rather than the whole system.  The reorientation needs to be at a broader level. Third, in keeping with the reorientation of priorities, it needs to be followed by a major reorganization of services. Fourth, this should then lead to renewal – a renewal of the local municipal and community vision affecting taxes and expenditures and ultimately the quality of life in Thunder Bay.

 

In the end, the new vision must be one that acknowledges that we need to live within the economic limits of how the Thunder Bay economy has evolved and the fiscal resources available.  Within this new limited resource base, there needs to be a shift in priorities away from the current big-ticket items of protection and administration and towards the social and environmental needs of Thunder Bay’s citizens and their growing diversity.  It will be a big change and it requires leaders with a municipal and regional vision that goes beyond short-term spending to create short-term employment projects in the hopes that we can buy time until the next boom comes.  After 50 years of treading water, it is time to swim in a new direction.