It is municipal budget season in Ontario and Canada and this year’s proposed budget increases appear to be quite large. Toronto, for example, has proposed a 10.5 percent tax increase while Hamilton initially was looking at a 14 percent increase. Vancouver is going up 7.5 percent while Montreal seems set to go up 5 percent which while seemingly modest given the comparisons described here is nevertheless Montreal’s largest increase in 13 years. And then there is Thunder Bay which for 2024 is proposing a 6.1 percent increase in the total tax levy which “after growth” will be 5.5 percent.
While one might argue that Thunder Bay's increase seems modest compared to these other metropolises, much like the case of Montreal, the more apt comparisons are with the past rather than other cities. Even in the case of Ontario municipalities, there are differences in municipal structure with Thunder Bay as a single tier municipality not always directly comparable to other cities – the famous apples versus oranges argument city administrators usually bring up at budget time. Ultimately, one needs to look at how Thunder Bay’s tax levy and proposed levy increase stacks up against past ones.
Figure 1 plots a two-axis chart of the total tax levy as well as the dollar change in the levy from year to year going from 1990 to the proposed 2024 figures. In 1990, the tax levy was 63.4 million dollars while today the proposed amount for 2024 is 231.7 million dollars. And of course, this is just the tax levy and not the total budget which is funded by both tax levies and government grants and comes in including operating and capital at a combined total of approximately 538 million dollars. The trend has been upwards with an increase every year with the exception of 1995 which appears to have seen a drop in the levy of 1.3 million dollars. The proposed increase for 2024 is 13.3 million which is well above the average annual increase for the 1991 to 2024 period of 4.95 million dollars.
How does this year’s percentage increase in the tax levy stack up to past ones? Figure 2 plots each percent increase in the total tax levy from 1991 to 2024 ranking them from highest to lowest and at 6.1 percent, the proposed 2024 levy increase is the 5th highest in over thirty years (but second highest in strict absolute dollar terms). The increases range from a high of 21.8 percent in 1998 to a low of -1.7 percent in 1995. All other things given this year’s proposed increase is at the higher end of the range in percentage terms.
Of course, it is often argued that the reason taxes go up apart from new needs or mandated responsibility increases from the province is a general rise in costs driven by inflation. Inflation certainly has been in the headlines the last year, so it is worth checking out the correlation between the CPI inflation rate for Thunder Bay and the percent change in the tax levy. Oddly enough, when a linear trend is fitted to the scatter plot of tax levy increases versus the inflation rate, the relationship appears to be slightly negative – that is, higher inflation rates were correlated with lower tax increases.
However, one could argue that these results are driven by 1998 with its 21 percent levy increase (If you recall the late 1990s was an era of municipal restructuring with changes in how taxes were allocated between residential and business and also local education and of course social service downloading). However, if you omit that year as an outlier, what you get is essentially a flat curve. That is, the rate of inflation does not seem to drive the rate increases. They are being driven by other factors and since we don’t know what we don’t know, those factors are best left up to city administrators who are in the know about what they may or may not know. Nevertheless, do not expect a straightforward answer as the factors over and above inflation are indeed complicated.
Many people find the budgeting process of the City of Thunder Bay (and indeed municipal governments in general) rather arcane and overly complicated. Indeed, even those of us with a public finance background find municipal budgets particularly confusing and exasperating as they are indeed laid out in a manner that does not inspire clarity. They look nothing like a federal or provincial budget which a least provide a one- or two-page table easily summarizing revenues and expenditures. Now one may argue that this is not good for local democracy if ratepayers do not understand municipal finances because they are not readily transparent.
This is where the ratepayer errs. This is actually not about democracy. It is about the needs of the corporation and corporations are perpetually lived entities with limited liability and interested in their own financial preservation. They respond more often to the money rather than to voter pressure. The phrase “You Can’t Fight City Hall” does not exist for no reason. Remember, like other municipalities, our city government is The Corporation of the City of Thunder Bay. Despite popular sentiment and belief, municipalities in Canada are not independent tiers of government but creatures of the provinces. Local service provision has essentially been contracted out by provincial governments to municipal corporations. The democratic accountability for municipal government ultimately lies in provincial elections rather than local ones.
City councils are essentially boards of directors, and they serve to demonstrate responsibility for corporate direction but little else in terms of day-to-day finance and operations. True, ratepayers engage with the corporation by selecting the board of directors in elections and participating in numerous surveys and public consultations but then any corporation worth its salt always is doing customer satisfaction surveys. The real business and complex operations geared around the financial operations of the corporation is conducted by its officers and employees and generally behind closed doors.
The members of the board - our councilors – are essentially
a large focus group attempting to promote public relations engagement in a theatrical
setting for the people the corporation ultimately derives its revenue from and
provides services to. That usually explains why so much of council meeting’s
time is usually taken up by discussion of minor manners that galvanize emotions
(time to change street names again anyone?) and complicated large multi-million-dollar
decisions seem to occur quickly on the advice of administration. There are exceptions when fate delivers exceptionally persistent and informed councilors - witness the turf facility debate to date - but corporate administrations play the long game and eventually wear out the opposition.
Even the current review of the size and structure of Thunder Bay City Council is largely designed to create a sense of public engagement with the
process rather than any actual decision making.
Remember, Thunder Bay was created by an act of the provincial government. Thunder Bay can certainly try and change its
system of municipal representation and structure, but the province will have
the ultimate say and the corporation will implement that. Remember Toronto in 2018? The number of wards (and councilors) was
reduced nearly 50 percent in the middle of a municipal election but not as
a result of a grass roots consultation but by the provincial government because they wanted to and they could.
The point of all this? The City of Thunder Bay needs a 6.1 percent in the total tax levy to fund its operations and tinkering around the edges aside, will get most of that increase. And will we get a revamped municipal ward and councilor structure? Certainly. But only if the province goes along with it.