IT's Back....Again! The Turf Facility Project

 

Like a zombie that keeps coming back to life, the multi-use indoor turf facility project is back on the agenda at Thunder Bay City Council this evening as a report is received on the eight outside proposals that were commissioned.  And in an apparently blatant disregard for transparency, the details of the discussion will not be shared with the public.  However, the decision has been further complicated by a new application for federal funding on which the City awaits an answer with the funding apparently tied to building a facility that conforms to green and inclusive community building conditions.  This of course raises the question as to what the actual price tag for such a facility will ultimately really be.

 

This application is for approximately $22 million dollars and that is expected to cover about half of the costs so we are looking for a total price tag of about $44 million of which half would supposedly come from federal funding.  And yet, the question is whether the costs of the new building will now change substantially given that it must conform to the requirements of the federal funding program.  City council rejected the proposal to build the facility when it was $39 million so getting it for substantially less in terms of City dollars may be attractive to those on council who like to pay lip service to the Zeller's Rule - the lowest price is the law. 

 

At the same time, the application process for the new funds is competitive and Fort William First Nation has also asked for $25 million from the fund to build a long-term care home.  As elastic as the federal budget constraint seems to be these days one suspects it is unlikely Thunder Bay’s cabinet representative is going to be able to swing both projects.  After all, Minister Hajdu’s star seems on the wane given what some might interpret as a demotion from Health. 

 

The minister was not even able to use her clout to secure a return to international flight status for Thunder Bay’s airport for the coming winter getaway travel season meaning no return to direct flights to places like Cuba and the Dominican Republic in January and February.  And as Indigenous Services Minister, it would be awkward to say the least to have funding for the turf facility approved in her hometown while the needs of indigenous long-term care are neglected. 

 

So, Thunder Bay seems to be about to embark on another divisive and argumentative round of talks over a project that many in the community are now opposed to in the wake of numerous other city issues with good odds that nothing is going to happen.  Even if a project is approved, often it does not happen as those waiting for the transitional housing project on Junot Avenue have discovered. 

 

Still, the fact that this project still resurfaces and has its proponents begs the question of why so many members of council are so devoted to seeing it go ahead and staking so much political capital on the project considering the other problems this city faces.  There is a lot going on here. There are homeless encampments in the city, there are homeless people wandering the streets of major thoroughfares at peak traffic times soliciting funds at intersections, there are hundreds showing up for meals at the local soup kitchens.  Homes are still having their front lawns dug up in the wake of the sodium hydroxide leaky pipes fiasco that has affected thousands of homeowners.  And tax rates having been rising over the last few years well in excess of the amounts necessary to fund City services.

 

With so much on its plate and an election coming soon, who benefits from continuing this discussion?  Good question.

 

 

COVID-19 Wave Score: Ontario 4, Thunder Bay 1

 

It has been a while since I have plotted the COVID-19 daily case counts for both Ontario and the Thunder Bay District but with the gradually mounting numbers of recent days, now is as good a time as any to look back at the big picture for both the province and our region. The evidence suggests that for the time being matters are well in hand likely the result of Ontario’s high double vaccination rates as well as the gradual easing of restrictions with the maintenance of mask wearing in public indoor spaces.

 

Figure 1 plots Ontario’s daily cases since the start of the pandemic and there have indeed been four waves with the second and third waves the most severe. Our fourth wave is underway, but it is subdued relative to the second and third waves.  Yet this fourth wave seems to have two components based on Figure 1 – a first upswing that appears to have peaked about mid-September and followed by a short decline and then a second upswing that does seem to coincide with the broader reopening of Ontario in mid-October.  Figure 2 does a better job of separating out these two components of the fourth wave with the current upswing starting at about day 640 which corresponds to the last week of October – several days before Halloween.

 

 

 

 

Similar charts are presented for Thunder Bay District in Figures 3 and 4.  Figure 3 reveals that over the course of nearly two years, Thunder Bay only had one very long wave that started circa Day 250 (around the first week of October 2020) and then rose over the course of the next four months to peak during the first week of March 2021 before starting a gradual decline to the current daily levels.  However, Thunder Day district also appears to be in the process of seeing a gradual upswing as Figure 4 illustrates with numbers over the last few weeks distinctly higher than they were in August. Still, over the course of the long haul, Ontario has had four distinct waves while Thunder Bay's relative isolation in the end resulted in only one.

 

So, going into the Christmas season and the winter, the current trends show there is likely to be a continued increase in cases though we should hopefully be spared the surges of previous waves provided vaccine provided immunity does not wane, school children begin to be vaccinated in large numbers, and booster shots make their way into the older population in a timely manner.  Many recent cases are in the school age population and given that COVID-19 is generally not very severe in the very young, that has also spared hospital ICU capacity.  So, for the time being this is what the pandemic looks like – ever present and persistent- but likely to stay in abeyance provided new and more lethal variants do not emerge.

City Council's One Percent Solution

 

After projecting a positive variance of $3 million for the 2021 budget year, it would appear the final tally for a budget surplus for 2021 will be coming in at $5.6 million.  Thunder Bay will have its seventh consecutive positive budget variance making for accumulated variances of $26 million over seven years.  Much of the savings will come from lower-than-expected COVID costs for which the city has received a lot of federal and provincial support.  While Thunder Bay budgeted for a $7.2 million cost from the COVID-19 pandemic this year, a third quarter variance report now forecasts COVID costs at $5.5 million, based on trends to the end of September.

 

Figure 1 plots the annual tax levy increase since 2015 against the corresponding surplus at year end.  For example, in 2015, the tax levy increase was $9.4 million – a 5.7 percent increase on a $164.7 million levy the year previous. The year’s end saw a positive variance of about $1 million which on $174 million tax levy was just over one-half of one percent.  Since 2015, however the size of the surplus has increased substantially, often coming close to matching the size of the tax levy increase that year.  In 2017 for example, the levy increase was $5.96 million – a 3.3 percent increase – but the year-end surplus came in at $5.6 million – almost 95 percent of the value of the original levy. For 2021, we have a first – a surplus of $5.6 million – which is larger than the original levy increase of $4.3 million. 

 

 

The surplus is generally put into city reserve funds which in general is a prudent strategy.  However, the fact that there are consistent surpluses means that there has been a consistent practice of overestimating expenditures and underestimating revenues.  Given that the tax increases have been much larger than what was required given the ultimate need, one can only conclude that this has become a sort of forced savings strategy.  The City of Thunder Bay raises the tax levy more than is needed with the goal of boosting its reserves for whatever long-term plans they might have for spending from those reserves. 

 

Thunder Bay has been raising taxes consistently more than it has needed to for some time now and that money comes out of the pockets of its residents.  During the pandemic, while other cities were trying to keep tax increases at zero, Thunder Bay managed an increase of 2.7 percent in 2020 and 2.1 percent in 2021.  Accompanied by generous provincial and federal COVID-19 support, the result has been large and growing surpluses.

 

One could pose the following counterfactual.  If Thunder Bay had been able to anticipate the surplus each year and implement a tax increase incorporating the surplus and balancing the budget, what would have the alternate tax levy increase have been? Figure 2 plots the actual percentage tax levy increase since 2015 and the alternate increases.  In 2017, for example, the budget could have been balanced with an increase of 0.2 percent but instead there was an increase of 3.3 percent.  Last year – 2020 - saw an increase of 2.7 percent but all that was needed is an increase of 0.6 percent.  Meanwhile, if 2021 continues on this track, it means that rather than a 2.1 percent levy increase, there could have been a levy reduction of nearly 1 percent.

 

 So, here is the thing.  Over the period 2015 to 2021 the actual tax levy increase has averaged 3.1 percent.  The average levy increase required to meet expenditures has been 1.1 percent.  City council for 2022 has directed administration to prepare a municipal budget with a 2.25 percent levy increase.  I would suggest that based on the City’s financial performance to date that they could easily cut that in half.  One percent sounds about right.

Health Spending in Ontario: Restraint of the 2010s is Over for Now

 

The Canadian Institute for Health Information (CIHI) release of the National Health Expenditure Trends 2021 provides a much awaited first macro snapshot of what happened to Canadian health spending during the COVID-19 pandemic.  Canada is expected to spend a new record of $308 billion on health care in 2021 — $8,019 per Canadian. It is also anticipated that health expenditure will represent 12.7% of Canada’s gross domestic product (GDP) in 2021, following a high of 13.7% in 2020.  A new feature of the numbers this year is the government COVID-19 response funding which in 2021 constitutes 7% of total health spending.  The COVID-19 response funding includes money for treatment costs, testing and contact tracing, vaccination, medical goods, and other related expenses and is a separate category from the standard ones used. 

 

Once one starts to examine and analyze spending both including and excluding the COVID-19 response spending provided, as well as adjusting for inflation and population growth, the picture looks more variable depending on the categories examined, the financing sector considered, and the province involved.  For example, private sector health spending was hit quite hard and categories such as other professionals and hospital spending also saw declines in real per capita spending. 

 

When provincial-territorial government health spending is examined, their real per capita total health spending in 2020 rose 8.1 percent but once the COVID-19 response is factored out their spending declined by about one percent though it is also expected to rebound in 2021.  Hardest hit in provincial-territorial health spending in 2020 in terms of percentage declines in real per capita spending: physicians (-5.8) other professionals (-6.1), drugs (-2.3) and hospitals (-0.5).  Meanwhile, public health grew 4.1 percent, other institutions (including long-term care) grew 1.2 percent while capital spending grew 10 percent.  

 

These results are not unexpected given the decline in surgeries and physician visits brough about by the pandemic. The closing of outpatient departments and postponing of medical visits and procedures during the height of the pandemic meant a reduction in some aspects of health service provision and health spending. According to CIHI’s own analysis of COVID-19’s effect on hospital care services, from March to December 2020, overall surgery numbers fell 22% compared with the same period in 2019, a drop of 413,000 surgeries.

 

 

 

Moreover, real per capita spending growth net of the COVID response funding also varied across provinces in 2020 (See Figure 1).  While Newfoundland and Labrador, Prince Edward Island, New Brunswick, Quebec, Manitoba, Saskatchewan, and Alberta saw a decline in real per capita spending net of COVID-19 response funding, Ontario, British Columbia, and Nova Scotia saw small increases with Ontario the largest at 1.2 percent. New Brunswick, Quebec and Alberta saw the biggest declines in real per capita health spending at -3.3, -3.5 and -3.6 percent respectively.  This demonstrates that during the health system disruption of the pandemic, the decline in service provision at least as measured by real per capita spending, was greater in some provinces relative to others.

 

In 2019, Ontario’s total provincial government health spending was $63.1 billion and in 2020 including the COVID-19 response funding it soared to $72 billion.  In 2021 it is expected to reach $75.2 billion including the COVID funding response. Even when the COVID-19 response is removed, Ontario still saw increases in health spending with provincial government health spending net of COVID forecasted at $67.4 billion in 2020 and $71.7 billion in 2021.  Moreover, these increases continue once adjustments are made for population and inflation.

 

 

Figure 2 plots real per capita provincial government health spending in Ontario in $2020 from 1975 to 2021 calculated from the CIHI data.  Spending growth moderated substantially after 2010.  Whereas the average annual growth rate of real per capita provincial government health spending from 2000 to 2009 averaged 3.1 percent, for the period 2010 to 2019 it grew below 1 percent. However, when COVID-19 spending is factored in, real per capita provincial government spending grew 8.1 percent in 2020 and 2 percent in 2021.  When you factor out the COVID-19 response, the growth rates are 1.2 percent and 3.9 percent respectively.

 

 

Finally, Figure 3 looks at real per capita provincial government health spending growth by major categories.  Hospitals declined in 2019 by 1.2 percent but then grew at 2.1 percent in 2020 and can be expected to grow 1 percent in 2021.  Other institutions (including long-term care) also shrank half a percent in 2019 but then grew 4.4 percent in 2020 and is expected to grow 18.6 percent in 2021.  Physician spending grew 1.8 percent in 2019, then shrank by half a percent in 202 and is expected to rise 1.7 percent in 2021.  Other professionals (e.g., provincially funded dental and optometry) fell 2 percent in 2020 but can be expected to grow 6 percent in 2020. Provincial government drug spending in real per capita terms fell in both 2019 and 2020 but is expected to grow 9 percent in 2021.  Public health saw increases close to 10 percent in each of the three years reported in this chart.  Administration on the hand has shrunk in each year including an 18 percent drop in 2020.

 

So, the impact of the pandemic on provincial government health spending in Ontario after the COVID-19 response has been factored out appears to be a renewed focus on making health a priority at least for the immediate future.  Whereas pre pandemic the focus appears to have been on restraining expenditure growth, the stops are off for the time being.  Whereas real per capita spending growth was under one percent for the 2010s, there is a reversal underway with major increases in other institutions (mainly long-term care), other professionals and drugs.