NORTHERN ECONOMIST 2.0: 2022

Sunday, 4 December 2022

Northern Ontario: Economic Indicator Overview

This is a follow-up post to the post last week in the wake of an economic overview of the challenges and opportunities facing northern Ontario’s economy presented at the Regional Meetings of the Economic Developers Council of Ontario in Thunder Bay. As the year draws to a close and we enter 2023, along with the demographic indicators, it is worth presenting some of the highlights for the regional economy in terms of economic indicators. This post, a quick overview of some of the key economic trends that have been emerging in northern Ontario over the last while and they provide a framework for viewing the future.

First, Figure 1 looks at the evolution of employment in northern Ontario since 2006 and presents it alongside the similar trend for Ontario as a whole (note the dual scale). Ontario as a whole has seen its employment grow from 6.53 million jobs in 2006 to 7.37 million jobs by 2021 – an increase of 13 percent. Naturally, there have been bumps along the way – namely the 2008-09 Great Recession and of course the 2020 drop in employment as a result of the COVID-19 pandemic. However, 2021 saw a recovery from the pandemic drop and as we close out 2022, Ontario has seen employment growth continue. The north is a somewhat different story. Simply comparing the two end points of 2006 and 2021, total employment has declined about 5 percent in the Northeast and about 6 percent in the Northwest. In the wake of the forest sector crisis of the early 2000s, there has been a permanent downsizing of employment in the region – that is, while there has been recovery and there is a stability in employment over the long term, not all of the jobs shed then have been recovered. Moreover, in terms of the pandemic rebound, the northwest in 2021 rebounded better than did the Northeast as illustrated in Figure 2.

The last two decades have seen a period of unprecedented economic change in the north which has seen jobs both created and destroyed and also accompanied by a labor force and population that has been aging at a faster rate than the rest of the province. Altogether, the economy has been stable and has shown signs of growth in several sectors. Employment over the long term has been growing in agriculture, profession, scientific and technical services, education and health and social services. With respect to the two largest cities, employment has actually grown somewhat in Sudbury and Thunder Bay but has shrunk outside of these two centers for the overall slight decline in the region. Moreover, as a result of the rapid aging of the population, the labor force has shrunk faster than employment resulting in unemployment rates as low or often lower than the provincial average.

There is growth in total output in northern Ontario particularly in the major centers of Thunder Bay and Sudbury as illustrated in the two final figures. Real GDP in 2022 will finally have reached pre-pandemic levels in both cities. Post-pandemic recovery in terms of real GDP growth in 2021 was actually better in Thunder Bay relative to either Sudbury or Ontario as a whole. For 2022, the year is expected to end out seeing growth in real GDP in Thunder Bay and Sudbury that pretty much matches Ontario as a whole. The robustness of the mining sector and growing Indigenous economic development, along with opportunities in tourism, agriculture and health and education services appear to be the source of growth and are the drivers in addressing the twin challenges in 2023 of fostering both economic and population growth in the north.

Sunday, 27 November 2022

Northern Ontario: Demographic Indicator Overview

Last week, I gave an economic overview of the challenges and opportunities facing northern Ontario’s economy at the Regional Meetings of the Economic Developers Council of Ontario in Thunder Bay. I covered a lot of ground, and it is worth presenting some of the highlights for the regional economy in terms of current indicators. This post, a quick overview of some of the key demographic trends that have been emerging in northern Ontario over the last while.

Figure 1 provides Census results from 2006 to 2021 and they show that despite the perceptions, northern Ontario’s population is starting to grow once again. While the period 2006 to 2016 saw a slight decline, the 2021 Census shows that population is up in both the Northeast and Northwest of the region. Between 2016 and 2021, northern Ontario’s total population grew from 780,140 to 789,519 – an increase of 1.2 percent (See figure 2) with the Northeast growing much faster that the Northwest. On the other hand, from 2011 to 2016, the Northwest grew substantially while the Northeast actually shrank.

Two other trends worth noting. First, while the conventional wisdom is that the major urban centres in Ontario’s north are all major attractors of population within the region, it turns out that between 2016 and 2021, Thunder Bay, Sudbury and North Bay grew while Timmins and Sault Ste. Marie shrank somewhat (See Figure 3). Second, the population that self-identified as Indigenous in the Census has been growing. According to the Census (See Figure 4) the Indigenous population in the Northeast rose from about 61,000 to 67,000 (about a 10 percent increase while that in the Northwest grew from about 53,000 to 55,000 – about a four percent increase. If one adds up the two regions, in 2021 about 122,345 people in that year identified as Indigenous in the north or about 15 percent of northern Ontario’s population. About 24 percent of the Northwest’s population self-identified as Indigenous while 12 percent of those in the Northeast did so. However, it should be noted that these figures may be an under count of the Indigenous population.

The trends are positive in that the region’s population is growing but the point to consider is that it is growing slower than Ontario as a whole. While Ontario’s population was up nearly 5 percent from 2016, the North is only up about 1 percent. This means northern Ontario’s share of Ontario’s population (which peaked in the early 1950s at nearly 12 percent) will continue to decline, all other things given. While 2021 saw the region’s share at 5.6 percent, according to Ontario government population projections, that share could decline to 4 percent by 2046. It is relative rather than absolute decline in population that is the real concern given that a declining share is also associated with declining long-term representation and influence within the province and the country.

Tuesday, 15 November 2022

The Provinces and Federal Health Transfers

The federal and provincial health ministers meeting in Vancouver last week ended somewhat abruptly without an outcome regarding an increase in transfers. The provinces have been asking for increases to the Canada Health Transfer that would raise the federal share of provincial health spending from 22 percent to 35 percent. Given that for 2022-23 the Canada Health Transfer to the provinces is expected to be 45.2 billion dollars, such an increase would amount to an additional cash transfer of well over 25 billion dollars.

The provinces maintain that they need the money to deal with an increasingly strained and stressed system beset by labour shortages and the aftermath of the pandemic. The federal government is leery of simply handing over the money without conditions because of the concern that more money without structural reforms to the health system or some conditions is simply business as usual. After all, the enhanced transfers of the 2004 Health Accord with its 6 percent annual increase escalator that lasted until 2017 was supposed to buy fundamental reforms and transformative change and yet the same problems persist pandemic notwithstanding.

The solutions here are problematic. The federal government could simply hand over more money given that health is a provincial responsibility and wash their hands of the matter. However, given their concerns that the provinces may not necessarily spend the money on health given they are almost as busy as the federal government in handing over rebates and assistance to deal with inflation, they are unlikely to do so. They could proceed unilaterally and create a grant with conditions that provinces could accept if they wished or otherwise deal with the matter on their own – probably by increasing their own source revenues (i.e., raise their own taxes) . Or they could simply do nothing and wait for the provinces to come around. After all, health is a provincial responsibility and the blame for a lack of family physicians or crowded ERs ultimately lands at the feet of provincial governments.

Of course, in dealing with the issue it is perhaps useful to look at some indicators to see what the dimensions of the problem might be. The accompanying figure plots the average annual growth rates from 2008 to 2022 for an assortment of health spending, fiscal and economic indicators. This period includes both the pandemic as well as the 2008-09 Great Recession - both periods that saw surges in federal spending including transfers. This period also coincides with the 2004 Health Accord and its immediate aftermath. The results are intriguing given that they provide some support to both sides in this debate.

The average annual growth rate (all growth rates here are nominal) for total federal transfers was 5.6 percent with the component Canada Health Transfer and Equalization growing at 5.2 and 4.1 percent respectively. Provincial-Territorial government health spending over the same period grew at an annual average of 5 percent – slightly below the rate of growth of the Health Transfer. Needless to say, score one for the federal side. Moreover, total provincial-territorial program spending (including Health) grew at 4.8 percent which means that program spending net of health was also growing slower than health. Score one for the provincial side – the money is not necessarily going to other programs. P-T health spending is growing faster than either nominal GDP or population (though once inflation and population growth are factored in it means that per capita spending growth has been rather anemic).

Nevertheless, total P-T health spending has grown faster than GDP, but provincial-territorial own source revenues have grown slower than GDP while the value of the much-vaunted federal tax points have grown at nearly the rate of GDP. Here, the federal government can claim that there is indeed own source revenue capability on the part of the provinces that remains untapped. On the other hand, the provinces can claim that they are caught in a bind – on the one hand they are trying to bend the cost curve to address sustainability issues (hence the anemic per capita growth rate) while on the other hand the high growth rate of total population plus the aging of the population is adding to total health spending at a rate they are having difficulty coping with.

Is there a solution here? In the absence of a unilateral federal move of transfers with conditions (which is not going to work for everyone) the only solution here is a political one and if the two sides are not talking it is a long way off.

Saturday, 5 November 2022

Does Balloting Method Matter?

The October 24^th municipal election in Thunder Bay featured an assortment of voting options in an effort to make voting more convenient and thereby encourage greater turnout. On that front, the results were not favorable in that despite the increased options for the 2022 election, there was a decline in turnout. Apparently, about 43 percent of the city’s 83,679 eligible voters cast a ballot which was down from nearly 51 percent in 2018. While Thunder Bay voters were more engaged than the provincial average, the results were a disappointment given the effort expended.

What is also of interest is whether or not different voting methods may be associated with the outcomes. A case in point is the Councillor-At-Large Race which saw 140,095 ballots cast. Given that there were about 35,980 voters who cast ballots, and each could vote for up to five choices, this means that a total of 179,900 votes were up for grabs. Given that only 140,095 were cast – 78 percent of those available –a proportion decided to vote for fewer than five candidates. This suggests that some voters were unhappy with the available choices even given the large number of candidates or may have been voting more strategically by voting for their preferred candidate(s) and not supporting anyone else.

More to the point is the difference between the number of paper ballots and internet ballots cast. Of the 140,095 ballots cast, 50,403 (or 35 percent) were paper ballots while 89,692 (65 percent) were internet ballots. This suggests that there was indeed a marked preference for internet voting in this election. Figure 1 shows the results for total ballots cast with the five winners in red – Bentz, Ch’ng, Giertuga, Agarwal and Etreni – followed by Judge, Barrett, and Margarit.

If one looks at only the paper ballot results, the winners would be Bentz, Giertuga, Ch’ng, Judge and Agarwal, followed by Etreni, Barrett and Mauro. If one only uses the internet results, the five winners would be Bentz, Ch’ng, Giertuga, Etreni and Agarwal, with the next three spots taken by Barrett, Judge and Margarit. While the top three spots were unaffected – and went to incumbents – there were differences in who would occupy the next two spots. Paper ballots alone would see Judge and Agarwal on council with Etreni in sixth place while internet balloting alone would see Etreni and Agarwal with Barrett in sixth place.

Can one draw any conclusions from these results? Without detailed data that allows you to correlate voter characteristics (eg. age and income) with ballot method preferences and voting outcomes, it is difficult to really know if these results mean anything at all. However, it is not too much of a stretch to argue that most important conclusion is that candidates need to campaign to attract both types of voters – paper ballot voters and internet voters. Victory is ensured by coming out on top in both types of voting methods. Voters who prefer internet voting are probably more likely to be web and social media savvy and will require a more sustained campaign targeted towards them as well as more traditional door to door type campaigning.

In the end, internet voting makes it easier to vote well in advance of election day meaning much of the campaign is over well before the official voting day. However, if you are an incumbent, name recognition alone seems to guarantee a top place finish. It is only for the new entrants that campaigning vigorously on a variety of platforms seem to matter more.

One other thing. Given the differences across voting platforms that can emerge and the rather erratic flow of results on election night, it is imperative that the release of results be better coordinated in future. One can only imagine the effect on candidates as they watched their rankings seesaw in the blink of an eye on election evening as internet voting tallies flooded in.

Federal Finances and Fiscal Projections

The Federal Fall 2022 Economic and Fiscal Update is now economic history and for 2022-23 it projects budgetary revenues of $446 billion, program expenditures of $438 billion, public debt charges of $35 billion, a deficit (including net actuarial losses) of $36 billion and a net federal debt of $1.283 trillion. By 2027-28, revenues are expected to rise to $542 billion with total expenses including actuarial losses of $537 billion meaning that a budget surplus is anticipated within five years.

While total spending in 2022-23 is actually down from 2021-22 as a result of the COVID-19 unwind, it remains that compared to spending in 2018-19 of $346 billion just prior to the pandemic, "reduced" federal spending in 2022-23 is expected to be one third higher and projected to rise to $487 billion in 2023-24. In other words, over a five-year period, the federal fiscal footprint after the COVID-19 unwind expanded at an average annual growth rate of 8 percent.

Despite the economic uncertainty currently present with respect to inflation, interest rates and the potential of a recession, the federal forecast is remarkably upbeat with both its ‘downside’ and ‘upside’ forecasts for growth, unemployment, and the federal finances remarkably close to one another. This of course means that the deficit forecasts that range from $36 to nearly $50 billion are also in a sense somewhat optimistic and hinge on economic conditions and in particular the impact of any downturn on federal revenues. When it comes to forecasting the fiscal future, the greatest source of uncertainty is apparently not on the expenditure side – which is more in the hands of the federal government – but the revenue side which is in the hands of the economy.

A case in point is illustrated in figure 1 which presents federal estimates for revenue and expenditure for the 2021-22 fiscal year starting with the spring budget pf 2021. What is remarkable moving forward to the final numbers for 2021-22 as released in the public accounts and also presented in the Fall 2022 update is the remarkable stability of the expenditure estimates and the constant revisions on the revenue side. Compared to the initial budget forecast in 2021, expenditures went down slightly from $497.6 billion to $493.3 billion by fall 2022 – less than 1 percent variance. On the other hand, revenues appear to have been significantly underestimated as the economy did better than expected and inflation helped pump up federal revenues from an original estimate of $355 billion to $413 billion – a 16 percent variance. As a result, the deficit estimate also fell from $143 billion to eventually $90 billion. This was not the result of fiscal restraint – expenditures stayed pretty much stable. It was purely from the revenue surge.

Why does this matter? What goes up can also come down. Expenditures over the next five years are projected to rise steadily recession or not and one suspects based on past performance that barring a sudden policy shift those estimates will be close to the mark. Meanwhile, while revenue growth is a function of the economy. The economy rebounded better than expected and as a result revenues did too. However, while revenue was underestimated over the last couple of years, it could easily be overestimated going forward which means the optimistic deficit reduction scenario with a surplus by 2027 is as uncertain as economic forecasting in general.

Despite the public pronouncements that there is now more frugality at the federal level, that is not the case. The federal government is projecting average annual revenue growth from 2023 to 2027 at an average of 4.7 percent while expenditures (after the drop in 2022-23) will rise at 2.6 percent. The federal government is banking on the revenue surge of the last couple years to continue and keep revenues growing faster than spending. A severe recession could upset that optimistic projection.

Tuesday, 25 October 2022

Tallying the Election Results in Thunder Bay

The people have spoken and Thunder Bay – along with all the other municipalities in Ontario – has a new mayor and council. Congratulations to the incoming Mayor and City Council members as well as to all the candidates who put their names forward and ran. Running for office and serving as the public in an elected role is a challenging and important task and vital to the functioning of our system of government.

It was certainly an interesting evening last night not the least because of the exasperating nature of the election results. Despite our “state of the art” modern election system in Thunder Bay that combines online, phone, in-person, and drive through voting and with over one fifth of eligible ballots cast in advance, it took several hours before any meaningful results were delivered. One hopes that this process will be thoroughly reviewed because in order for the public to have confidence in their voting system, the smooth running and operation of the system sends an important signal and that was certainly lacking last evening.

As for the results, Figure 1 presents the winners as well as their percent share of votes cast. With about 35,421 votes cast (at my last tally) Ken Boshcoff emerged the winner as Mayor with 38.2 percent of the ballots cast with Gary Mack in second place with 34.3 percent of the ballots cast. The At-Large winners (with over 140,000 votes given every elector can vote for up to 5) were Mark Bentz (11%), Shelby Ch’ng (9.4%), Trevor Giertuga (8.6%), Rajni Agarwal (7.6%) and Kasey Etreni (7.2%). In terms of the Ward races, Michael Zussino took Red River with 33.4% of the vote, Albert Aiello retook McIntyre with 63.3% of the vote, Kristen Oliver held Westfort with 45.9% of the vote, Dominic Pasqualino won in Northwood with 41.6% of the vote, Brian Hamilton kept McKellar at 53.5% of the vote, Andrew Foulds kept Current River with 74.9% (a ringing endorsement one might add) and Greg Johnsen won Neebing with 36.1 percent of the vote.

Was this a change council? Not really. If you want to see the results of a "change" election you should check out Hamilton's results where three incumbents actually lost their seats and there are ten new faces on their City Council which consists of a Mayor and 15 ward councillors. In Thunder Bay with a council of twelve plus a mayor, seven of the elected councilors are incumbents (Bentz, Ch-ng, Giertuga, Aiello, Oliver, Hamilton and Foulds). If one counts Peng You as an incumbent then there was an incumbent not returned. As for the Mayor, well he has been Mayor before and a familiar face and is effectively an honorary incumbent making for eight incumbents on council. Are the other five a vote for change? At best managed change given that they probably only won because a number of incumbents chose not to run thereby making room for a few new faces. Name recognition is important in politics and in Thunder Bay given its closeted nature even more so, which is why constant calls for people to run because there is a “candidate shortage” was so amusing to observe this summer. Ward contests with more than three candidates essentially guarantee a win for incumbents and At-Large slates with upwards of 25 to 30 candidates for five positions pretty much do the same for those races. Sometimes, quality of candidate should be a more important consideration than quantity.

Will it be smooth sailing for this council? There are a lot of issues coming down the pipeline – not least of which will be policing - and one expects the honeymoon period will be short-lived especially with an anticipated major hike in property taxes being rumoured. The other interesting issue is whether or not we should reform City Council and go to a fully At-Large system of between 8 and 12 councillors plus a mayor. I would say the answer is a definite no. If one looks at the results in Figure 1, the five At-Large winners have each won with barely 10 percent of the votes cast in their favour in the At-Large competition. They can claim to “represent” the interests of the entire city, but it remains that they do not have an overwhelming mandate aside from the fact they got the biggest numbers in a ranking. The mayor’s position did somewhat better at nearly 40 percent. It is the wards where the strongest mandates have emerged. In three of the seven wards, the winners actually got a majority of the votes case, while in an additional two they were over 40 percent. I would say there if you truly wanted democracy, there is probably a better case for an all-ward system than a fully At-Large system.

One other point. Take a look at figures 2 and 3. These are the “projected” winners based on the TBNewswatch online polls that took place the weeks of August 20 to 27 and October 7 to 17. They are a mix of highly accurate projections and wildly off the mark results. In the case of the mayor’s race, the McIntyre, and Current River Wards they were consistent with the actual election results though the percentages vary quite a bit. For the At-Large race, they consistently showed Bentz as a winner but there was quite a bit of variation in the others over time. Pretty similar conclusion from the remaining ward competitions which saw quite a few flip-flops though in the case of some wards like Westfort they probably reflect the closer nature of the race. In the case of McKellar or Neebing it was either a really volatile race or well…something else perhaps given the nature of online polling.

So, to repeat, congratulations to the new mayor and council. And of course, once again the drama begins.

Monday, 24 October 2022

The House-Condo Price Differential: Northern Ontario Exceptionalism Strikes Again!

Population growth in northern Ontario has been weak over the last few decades as a result of youth out-migration as well as little immigration into the region – even though immigration has accounted for over three quarters of Ontario’s population growth in recent years. The result has been an aging population and while Ontario had a population share aged 65 and over of 18 percent in 2021, the province’s North was closer to 22 percent. A more elderly population is usually seen as a source of rising demand for services like health and a cost driver for government. At the municipal level, seniors are also a source of local income stabilization given that they still inject some purchasing power into the local economy and of course continue to pay property taxes.

Yet, in the case of northern Ontario, the earlier waves of youth out-migration may eventually spawn a new wave of out-migration rooted in seniors following their children. People in the 50 to 65 age range may be looking ahead and thinking about where and when they will retire and facing a choice between remaining in the north in retirement or relocating closer to children. Weighing in on decisions to stay or go are the need to downsize accommodation and as the years advance staying in the north is certainly made easier by selling your house and moving into a condo or apartment. What is intriguing in the case of condos in northern Ontario is how much higher priced they are relative to single-detached houses.

Figure 1 plots the median price of a single detached one in 2022 against the median price of an apartment style condo in twelve Ontario urban areas including Thunder Bay and Greater Sudbury. The median single-detached housing price data for all twelve cities is from Canadian Real Estate Association web site while the median condo prices are from the same place with the exception of Thunder Bay and Sudbury which required creating a separate estimate based on what is currently available on Mitula or Realtor.ca. Needless to say, that is not the ideal approach, but it will have to suffice given data limitations. Figure 1 plots the urban areas from highest to lowest single detached median housing price and those prices range from a high of $1.425 million for Oakville to a low of $315,000 for Thunder Bay. What is more interesting is the accompanying median condo prices which show a lot less variation than those for houses.

The range in median prices for single detached houses in these twelve cities is $1.11 million but for condos it ranges from a high of $648,500 in Greater Toronto to a low of $329,900 in Thunder Bay – a still consequential but much smaller range of $318,600. Why is this important? Well take a look at Figure 2. In Oakville, if you decide to sell your $1.425 million-dollar median valued home and buy a median valued condo at $640,000 you generate a nice cash surplus $785,000 dollars that you can use to finance your retirement or assist your children in buying their home. If you are in Thunder Bay, doing the same thing will require you to come up with nearly another $15,000 to complete the purchase of the condo. This is of course based on the median prices and in my observations over the last year taking a look at condos in Thunder Bay, very often the difference was more effectively in the $50,000 to $100,000 range depending on the unit. At nearly $135,000, the gap is even more pronounced in Sudbury though the caution is that this is more likely a function of the much smaller sample size in terms of the Sudbury data currently available. One would expect the gap to be more similar to that for Thunder Bay.

So here is the thing. The population in northern Ontario is aging and, in many cases, there will be some consideration of relocating to where children and grandchildren have gone. Selling your house in Thunder Bay or Sudbury and buying another house in southern Ontario is prohibitive given the vast difference in housing prices. However, the spread for condos is a lot smaller and the fact is you are going to have to cough up quite a bit of extra money to stay put in a condo in Thunder Bay or Sudbury anyway making a move easier to swallow. Given the higher cost of a condo relative to a single detached home in Thunder Bay or Sudbury, one cannot help but wonder if the strategy in condo building to date in these communities is simply designed to part widows and widowers from their money when they sell their houses? Condos in other cities generally have a broader mix of residents based on demographics whereas when one tours a condo in Thunder Bay for example it is not hard to feel that you are visiting a long-term care home rather than a condo. Even more interesting is the high proportion of condos in Thunder Bay that have little indoor or underground parking - not the best incentive if you are trying to minimize the impact of harsh winters in your Golden Years.

While the young are often the focus of policy initiative and consumer marketing, it remains that wealth and income rise with age and the loss of purchasing power of relatively young seniors – those in the 50 to 65 age range – will not help local economies in the north. Northern Ontario will need to up its game in both the design and pricing of future condo developments if it wants to forestall the next potential wave of out-migration.

Saturday, 22 October 2022

The Economic Agenda for the Next City Council

By late Monday evening, we will have in place the Thunder Bay City Council for the next four years and they will need to grapple with an assortment of issues not least of which will be trying to promote the City’s economic development. As was noted in a report released last week, Thunder Bay’s economy has rebounded from the pandemic but still faces strong headwinds. As the accompanying figure shows, while the employment declines of the COVID-19 pandemic were the steepest in over a decade, the recovery appears to have settled us at employment totals that are pretty much close to the long-term trend of flat long-term performance.

Indeed, Thunder Bay’s rebound in both employment and income has lagged that of the rest of the province. Moreover, given that the economy as a whole is facing higher interest rates and the probability of a recession, the New Year may not be exceptionally buoyant. Economic growth and expansion of the city’s tax base is crucial if Thunder Bay is to avoid large tax increases as it seeks to deal with an assortment of social issues - not least of which is policing - that may indeed prove costly to the city’s budget.

As a result, it is surprising that there was relatively little discussion of the economy in this election campaign but perhaps that is because the local economy is still rather flush with stimulus money from assorted government initiatives while the City of Thunder Bay enjoyed substantial government grant revenues and pandemic savings. This will not last forever especially given that the economy may be moving into recession. While much of what happens economically is due to external forces and beyond the direct purview of the City of Thunder Bay, there are steps City Council can take to prepare the city to take advantage of opportunity when it presents itself to help foster economic development and strengthen the local economy.

First, City Council needs to ensure the City of Thunder Bay develops a reputation for efficient and effective delivery of public services and infrastructure projects based on outcomes rather than wishful thinking. While a problem before the pandemic, at present projects are taking even longer to complete than necessary and are very disruptive to local businesses and residents. For any businesses considering coming to Thunder Bay, nimbleness on the part of City projects and services is a positive feature.

Second, City Council will need to be more competitive on the tax front and that will require providing its existing basket of services with fewer employees in order to hold the line on taxes. This may indeed prove to be the most serious immediate challenge the new council faces given that inflation is high, and wage and cost pressures are immense. Nevertheless, the temptation to simply pass these costs onto local business and residential ratepayers should be resisted. As part of the process of becoming more competitive, City Council also needs to cut red tape and facilitate quicker approval for building and business projects.

Third, the social challenges facing Thunder Bay are an economic as well as a social issue given that they create an environment that does not put the City’s best face forward when trying to attract new economic activity. City Council with the help of Federal, Provincial, and Indigenous governments needs to effectively tackle issues that are currently not conducive to attracting business to the City and these issues include poverty, homelessness, and crime. Despite some of the rhetoric that has been going on in this election campaign, there is no easy solution to these problems, but the first step is to recognize that the problem requires a team effort by all levels of government.

Fourth, there are some bright spots in the City’s economy that go beyond the stabilization provided by a broader public sector that employs over 30 percent of workers in Thunder Bay mainly in health and education. City economic development marketing strategies should focus on sectors with the most growth potential and these include tourism, mining, and transportation. The recent success of cruise ship visits to the city while not a panacea is nevertheless an optimistic development. Mining support and supply is also a source of future opportunities and with the trend towards "own-shoring" more economic activity domestically, our transportation sector – in particular the Port – stands to benefit from increased activity. As a start, this fall is expected to see a bumper crop of wheat on the Prairies and given the disruption in global grain markets, Thunder Bay’s Port should see increased activity.

And finally, looking ahead towards the future, another looming economic iceberg is the potential for a new out migration wave which may not be the young but the senior population. People in the 50 to 65 age range are currently thinking about where and when they will retire and looking forward many may indeed decide that Thunder Bay is not the place to live out their golden years. There are many in this age range whose children have moved away to southern Ontario or further afield, and they thus face the choice of remaining here in retirement or relocating closer to children. While much is made of the fact that housing costs a lot in other cities, it is likely going to become more affordable as prices decline over the next 6 to 12 months.

Wealth and income rise with age and the loss of the purchasing power of people with substantial assets will not help the local economy. Weighing in on decisions to stay or go are the need to downsize accommodation but there is a lack of affordable and quality apartment and condo housing in Thunder Bay. Cheap and poor design is indeed an issue given Thunder Bay’s winter climate as there is a surprising lack of indoor parking in many existing condos in Thunder Bay. Then, there are the types of services that become more important as one ages especially if you choose to remain in your own home and here there is relatively poor performance on things like municipal snow removal.

Massive municipal windrows in your driveway after a storm aside, the oft-heard mantra that you can retire and stay in your home and get affordable services as you age is aspirational in Thunder Bay given that residential services take second place to government contracts and large business projects for many providers resulting in relatively high-cost services. No one likes a small residential contract when there are bountiful government and institutional contracts available. This has only grown worse in the post pandemic labour shortage/inflationary world – for example, the average quote for getting the exterior of your house painted has literally tripled over the last ten years. This is well above and beyond where inflation has been over the last decade even with the pandemic.

As expensive as some think life in other cities in the rest of Canada is compared to Thunder Bay, there is still a lot more competition elsewhere that keeps prices and quotes for services in check as well as a better stock of well-designed housing options for all demographic groups. True, City Council cannot be expected to single-handedly address Thunder Bay’s business culture and less competitive monopoly environment. After all, Thunder Bay has always been a sort of monopoly company town with large employers such as pulp mills or railways and their economic spinoffs serving as milch cows for local business - not to mention municipal taxes. We are now a government town, but City Council can stop adding fuel to the fire by insisting on better value for money when it comes to the services it purchases.

Thursday, 20 October 2022

Ontario Housing Prices Coming Down

The pandemic era in Canada saw a thirty percent increase in housing prices that were already high as a result of a decade of low interest rates and rising demand due to population growth. However, a combination of rising interest rates led by the Bank of Canada in an effort to curb inflation, the inevitable subsequent slowdown in the economy, as well as inflation reducing the household resources available for home purchases has meant that home prices in Canada have finally reached their peak and are on the way down. The latest Teranet-National Bank Housing Price Index Release shows that the National Composite House Price Index fell 3.1% from August to September, the largest monthly decline on record since the index began in 1999 and exceeded the previous month’s record decline of 2.4%. Needless to say, Ontario did not escape this trend but despite the drop, prices are still higher than they were a year ago.

Figure 1 shows that year over year (September to September), prices were up in 15 out of 16 major Ontario cities with the exception being Peterborough. The largest percentage increases year over year have been in Greater Sudbury, Kingston and Kitchener-Cambridge-Waterloo. Thunder Bay's increase over the last twelve months was just under 4 percent. However, prices are down from their peak in all of these cities as illustrated in Figure 2. Most of these cities saw their prices peak in May of 2022 with the exceptions being Belleville, Kitchener-Cambridge-Waterloo and London (peak in April 2022), Ottawa-Gatineau (peak in June 2022) and Thunder Bay (peak in July 2022).

The largest declines since peak price have been in Windsor (16.2 percent), Oshawa (16.4 percent) and Peterborough (23.2 percent). Meanwhile, the smallest declines since peak price were in Thunder Bay (5.7 percent), Greater Sudbury (6.1 percent) and Ottawa-Gatineau (8 percent). Northern Ontario cities like Thunder Bay and sudbiury are not immune from national or provincial trends but they have historically not been as subject to the same fluctuations as other cities. In Thunder Bay for example , the housing price boom while substantial relative to its historic prices was nevertheless more muted than the GTA. The downturn will likely be similar. It is probably no coincidence that to date the price drop in Thunder Bay, Sudbury and Ottawa-Gatineau has been the least of these 16 major cities as all three of these cities have an economic base of broader public sector employment at 30 percent of jobs or more (in the case of Ottawa- Gatineau) which provides a substantial economic stabilizer when the national average in closer to 20 percent.

Given that interest rates are expected to rise substantially next week as inflation really shows no signs of abating in Statistics Canada's latest release, one should see the price decline continue into the fall.

Friday, 14 October 2022

The Next Council: The Challenges for Thunder Bay

Shortly, there will be a municipal election in Thunder Bay with a new council selected. It is likely there will be a major change in composition with quite a few new faces and this will usher in a period of change though perhaps not as much change as one might expect. In the end, The City of Thunder Bay is a corporation and what an election does is essentially select its board of directors who serve as an executive laying out direction with execution and implementation being the responsibility of the City Administration. Sometimes, the more things change, the more they stay the same.

The City Manager reports to City Council and is responsible for putting into effect the directives of council within the framework of what is allowed by the Province of Ontario. More importantly, the City Manager and Administration possess the information set from which the councillors then make their decision. As well, given their role as full time employees rather than part-time representatives, they have the time to deal with the detail of issues. Inevitably, some councillors will find the level of information and detail overwhelming. The overwhelming complexity of issues in the past has often resulted in meetings where councillors on the advice of administration quickly make decisions on millions of dollars of spending and complicated bylaws with long-term impact while then spending hours debating relatively minor matters involving a few thousand dollars.

There are some departing members of the outgoing council that it will be sad to see go given that among them are the remnants of what passes for a fiscal conservative in Thunder Bay political life these days. Based on a perusal of the candidate slate currently up for election, this is likely to be one of the more activist councils that Thunder Bay has seen in some time and their first test will be the 2023 budget. A relatively new council will be heavily dependent on the advice of administration and also eager to deliver on whatever promises they have made and agendas they campaigned on, and the result will likely be a heftier tax increase than has occurred over the last few years.

The Mayor’s position is essentially one of first among equals despite whatever strong mayor powers are eventually afforded by the provincial government to Thunder Bay. The outgoing Mayor was good for Thunder Bay given he was articulate, well informed and lent a certain dignity and gravitas to the position – though some times while in the midst of yet another marathon Zoom meeting he seemed increasingly exasperated and resembled an artist being forced to work on a much smaller canvas. Such a sentiment is understandable, but the Mayor might have been happier by drawing inspiration from others in Thunder Bay and northern Ontario in a range of positions and occupations who have made a career of working on a smaller canvas.

In the end, the challenges for the next council are many. There is a housing and homelessness crisis in Thunder Bay that parallels that in other cities given the climb in rents and home prices during the course of the pandemic. There is crime – with 12 murders already in 2022, Thunder Bay is well on the road to regaining its title as Canada’s murder city in per capita terms. And of course who can forget infrastructure whether it is roads and sewers or recreational infrastructure given that the Turf facility has reared its head as an issue in the election with some candidates expressing support for the concept but not at the original high cost.

Surprisingly, little mention has been made of the other chaotic infrastructure problem Thunder Bay faced during the pandemic which was the plague of leaky pipes in homes throughout the city in the wake of the sodium hydroxide water supply lead mitigation experiment. Needless to say, the public silence from the outgoing Mayor and council on this issue - no doubt on the legal advice from City Administration and its lawyers given potential costs and legal liabilities - has left a bitter taste for many. So much for a friendly community oriented city with your elected representatives always ready to lend an ear.

And the biggest issue? Well elections are in the end obviously no place for serious long term policy discussions but the fact remains that Thunder Bay’s regional role as a centre for a growing and under counted Indigenous population is the big one. Increasingly Thunder Bay and its municipal ratepayers are paying for regional services on a city tax base. The latest example here is in the case of the Thunder Bay Police Service and the recommended changes that among other things ultimately mean the Police Service has to take a regional lens to its operations.

A move to a more regional approach in policing in the end is a continuation of a trend over the last twenty-five years that can be best described as informal and piecemeal northwestern Ontario regional government by default - a regional hospital service, a district social services board, a district emergency service organization, and regional public utilities such as Synergy North and TBayTel. Indigenous organizations have also established presence in Thunder Bay and Sioux lookout providing regional services to their members. Yet, there was never really any type of democratic regional mandate for this evolution. True, one can always blame the province or Ottawa given that much of this is under provincial or federal jurisdiction but our local municipal leaders to date have ignored the long term picture painted by this evolution. After all, it is a complicated and overwhelming set of circumstances.

Of course the trend to more regional services is also a function of the claim that Thunder Bay has under counted its population and more services need to be provided to service this under counted population. But how can you provide more services if you do not know how many people there are? After all, on the one hand there are claims made by some municipal candidates we are losing people “daily” to other cities but at the same time there are apparently tens of thousands more people here who need services. Which is it? Unfortunately, social surveys based on self-reporting and life stories however compelling and reflective of reality do not a rigorous estimate make.

At minimum you would think we could put an estimate together ourselves based on local and regional electricity use from Synergy, cell phone and phone subscriptions from TBayTel, patient counts (given they have addresses or OHIP cards) from medical facilities in the region, and school enrollments from all the public boards. These should be correlated with population growth and enable an estimate with upper and lower bounds keyed to census benchmarks. In the absence of this, one ultimately has to accept the Census results which do say that according to the 2021 census, the number of Indigenous residents of the Thunder Bay Census Metropolitan Area grew by about 12 per cent between 2016 and 2021, to a total of 17,000 people.

And so, what next? Well, one suspects that after a honey moon period of sunny optimism, it will be business as usual for the next council accompanied with a fairly hefty tax increase. All the candidates acknowledge a lot of issues ranging from roads to crime to homelessness to mental health to opioid addiction. They don’t agree with increasing what taxpayers pay when it comes to revisiting the Turf facility and want to explore alternatives like donations and fundraising but in the end they will solve problems by “taking action” and “working tirelessly” which usually means a tax increase as a starting point under the banner of investing in ourselves and then avoiding constituents when they complain too much.

Nevertheless, hope springs eternal. Maybe this council will be different.

Saturday, 8 October 2022

Thunder Bay's Mayoral Race: A Momentum Shift?

TBNewswatch has now done two online polls of the day asking respondents to indicate their preference for mayor. The August 20^th poll was at the start of the race just after nominations closed and they showed Ken Boshcoff out as the clear frontrunner with a majority of the votes cast (51.9 percent). In second place then was Peng You at 20.4 percent followed by Gary Mack at 17.3 percent. Going forward to October 8^th, as of approximately 12 noon there had been a total of 1,552 ballots cast and the results show that Ken Boshcoff still appears headed to take the mayor’s chair with about 40 percent of the vote. In second place is now Gary Mack with about 25 percent of the vote followed by Peng You at 24 percent. Clint Harris and Robert Szczepanski come in next at 6.6 and 4.5 percent respectively. These results are summarized in Figure 1 and the results for the October 8^th poll may change slightly as they were not yet final but after over 20 hours of online responding one suspects they will not change a great deal.

In terms of what has transpired, the clear majority of respondents in support of Ken Boshcoff at the dawn of the race has eroded somewhat as the campaign as progressed but he is still poised to take the mayor’s chair given the ground that has to be covered by the next two closest candidates – Mack and You. Moreover, the fact is that they appear pretty evenly balanced in terms of support. This is only an online poll with all of its attendant flaws and the only poll that counts is of course on election day but the two strongest candidates aside from Ken Boshcoff appear to have evenly split their support. However, there is an additional dynamic and that is illustrated in Figure 2.

In terms of the change percentage point share in candidate shares, the momentum since August 20^th appears to be in the Mack camp as his share has grown by 7.6 percentage points. The You support has nevertheless grown by 4 percent while Szczepanski has increased by 1.5 percent. This growth appears to have been accompanied by a shift away from both Harris and Boshcoff with the later seeing the greatest percentage point decline.

There are still nearly two weeks to go and it will be interesting to see if the mayoral race in Thunder Bay becomes a more competitive horse race with a photo finish.