The start of a new year is always a time for reflection on
the past and a looking ahead to the future.
During a pandemic which has yet to see its end, the temptation is to
simply to hunker down and focus on the present. Yet, Thunder Bay is a city that
needs to look ahead given the collection of challenges that it faces. One could summarize the challenges as
threefold - the social fabric, the economy and civic finances – which are often
considered as separate compartments, but which move together as one given, they
are all related and intertwined. Our
tendency is always to compartmentalize because that is of the course the
easiest way to try and understand the problems, but it is important to realize
that the solutions themselves are not organized in watertight compartments.
To start with, there is the deteriorating social fabric that
has created two Thunder Bays – a Thunder Bay of crime, homelessness, poverty
and addiction and another that is a relatively prosperous enclave that on a day-to-day
basis does not see the other side. Intertwined
with all of this has been a history of racism with respect to Indigenous
peoples in the community. Occasionally, there is spill over between the two worlds
especially with respect to crime and addiction but for the most part they are
indeed two separate worlds. One of the
best recent overviews of poverty and social issues in Thunder Bay comes from a
2019 community report by the Wellesley
Institute documenting Thunder Bay social and developmental indicators that
lag the provincial average as well as note a high proportion of households with
an average income below $20,000 .
Indeed, compared to the rest of the province, a higher proportion of
youth in Thunder Bay live in low-income households.
The deteriorating social fabric has generated a growing
long-term demand for emergency services. Indeed, many of the demands made on
police, paramedics and fire are social and domestic disputes or relate to
mental illness. The statistics for crime
are telling because while total criminal violations per 100,000 are down
somewhat, those for homicides have been on an upward trend for quite a few
years now as Figure 1 illustrates. Table
1 illustrates the rate per 100,000 for several select criminal code violation
categories and they suggest that despite an aging population and a decline in
some types of crime, Thunder Bay has become a more violent place in general as
the number of total violent criminal code violations per 100,000 has grown by
17 percent since 2015.
Per 100,000 population, homicides have been the highest in
the country for several years now while the city’s booming gang related drug
trade has also resulted in a nearly 50 percent increase in total drug
violations since 2015. At the same time,
the pandemic itself has resulted in fewer
service calls for police especially around property crimes given more
people are at home thereby better safeguarding property. However, other emergency services – namely
the Superior North EMS paramedic services have seen an increase in service
calls per capita and are
forecasting large increases well into the 2020s. Indeed, even city officials have acknowledged
that the rising demand for emergency services in general is leading to cost
increases that are unsustainable
when it comes to the city budget.
Aggravating the social distress by fueling homelessness is
the rising cost of housing in the city both in terms of rents as well as the
price of homes. While Thunder Bay’s
housing prices remain a far cry from Vancouver or the GTA, since 2010 they have
grown at an uncharacteristically fast pace with the average MLS price being
$144,034 in 2010 and forecast at $289,186 in 2022 as illustrated in Figure 2. While the demographic trend towards smaller
households and low interest rates have been factors as demand drivers, also important
is the slow pace of new residential construction in Thunder Bay on the supply
side. Housing starts are at their lowest
point in decades while new apartment construction has been unable to fill the
gap. The average of course masks the
range in prices and there are homes approaching $1 million in Thunder Bay. As for rents, since 2010, the average rent
for a 2-bedroom apartment in Thunder Bay has grown from $761 to $1,089 while
the rent for a larger three bedroom went from $867 to $1,358 – increases of 43
and 57 percent respectively.
These social issues in the end are effectively compounded
by an economy and by extension a property tax base that has not really grown in
several decades. As Figure 3
illustrates, employment in Thunder Bay has essentially been flat for almost 20
years. If the rest of the province was
in a similar boat that might be somewhat more palatable but going only forward
from the Great Recession, Thunder Bay has seen a decline
in employment
growth not to mention a compositional shift. Indeed, a rising share of that
employment – approximately 30 percent - is now in the broader public sector
given the declines in industrial employment over the last two decades.
For decades the top ten employers in Thunder Bay have been
broader public sector institutions ranging from municipal, provincial, and
federal governments to school boards, the hospital, and the post-secondary
sector. And of course, there is
construction which has been increasingly dominated by public sector projects of
one type or another. While the regional mining sector has been a bright side in
Thunder Bay’s role as a mining services sector it remains that the mining
sector in the region is not as labour intensive as it was in the past. And yet,
Thunder Bay appears at least in some regards to still have some substantial
gleams of prosperity if the number of shiny new trucks being driven around can
be taken as an indicator. But then, the
pandemic has seen the city, like much of the country, awash in government
support payments.
Which then brings us to the final challenge which is really
driven by the first two. The economy in
the city and private sector wealth generation has not been robust. We have a set of social issues which has been
fueling increasing demand for services in health and emergency services – many
which are provided by municipal government. And we have a municipal government
whose finances are stretched given the demands being placed on it and the
resources available. The sources of
municipal financing are threefold -the property tax, government grants and
assorted user fees and other own source revenues including a dividend from the
municipal telecom company. Of these,
only taxes and user fees are directly within the control of municipal government,
and they make Thunder Bay property owners the main funders of increases in
municipal spending.
In the case of Thunder Bay, the property tax is increasingly
borne by the residential taxpayer especially given the decline in industrial
and business assessments over the last two decades. Grants in per capita terms have essentially
been flat notwithstanding the COVID-19 supports which have helped fuel some of
the surpluses of recent years.
Nonetheless, the 2022 budget exercise will be an important one given the
projected gross tax levy increase of 2.44 percent which would raise the tax
levy by almost $5 million and bring the total levy to nearly $209 million. Water infrastructure issues are being dealt
with by a 3 percent increase in water rates.
However, the gross- tax supported budget – when one adds the capital
budget – will be up about 23 percent mainly because of the near doubling of the
capital budget with major capital projects planned such as a new police station
at nearly $60 million. Given the limits
of the tax base and available reserves, this new capital spending is going to
be funded primarily by debt. While
interest rates are still at historic lows, increasing the city’s debt will have
ramifications down the road with increased debt servicing costs.
There is no easy solution to these problems. Crime and social problems cannot be solved on
a municipal budget alone and require provincial and federal support. At the same time, raising municipal taxation
rates more will continue to place the burden of these problems squarely on the
residential taxpayer. The municipal tax
base was designed to provide revenues to service property. It was not designed
to provide a broad range of social and health services to the public. Yet, municipal councillors do not always seem
to be sensitive to this point. In response
to the release of the 2022 budget, one
councillor has already stated that we should add $1 million to an already
rising police budget –already up by $1.8 million - to hire more officers. How simply adding more officers will fix the complex problems of crime and social issues needs to be explained. As another councillor has noted, the costs
for emergency services are exceeding
inflation for the city again reinforcing the issue of sustainability. It is only a matter of time before yet another
helpful councillor with aspirations of grandeur will suggest that tax increases should match the new higher inflation rates nearing 5 percent nationally. Unfortunately, residential ratepayers pay taxes out of current incomes that do not rise lockstep with inflation.
If Thunder Bay wants to spend even more on police as a
solution to its crime and social problems, then it will have to spend a lot less
on other things. In the absence of external resource increases from the provincial or federal government, you cannot spend more
on police services and just as much more on everything else and limit the tax
levy increase to 2.44 percent. There
really is no other way to explain it.
