NORTHERN ECONOMIST 2.0: 2025

Thursday, 10 July 2025

Long-Term Municipal Debt in the Northern Ontario Big Five

Well, I have been reacquainting myself with municipal debt in Ontario over the last little while culminating in this short piece for the Fraser Institute and a discussion with Jonathan Pinto’s Up North focusing on northern Ontario and Sudbury in particular. There is also this interesting item regarding Farquier-Strickland which suggests that some smaller and more rural Ontario municipal governments are under quite a bit of stress and that large debt loads can have an impact on the long term financial sustainability of municipal finances. In any event, municipalities going bankrupt in Ontario is something out of the 1930s and most of the current regulations governing municipal finances were a response to the financial turmoil of the Great Depression.

It turns out that during the Great Depression: “By 1935, 20 percent of Ontario municipal debt was in default (Hillhouse 1936). During the early 1930s, more than 40 Ontario municipalities and school boards defaulted on their obligations.” [Cote and Fenn, 2014]. It is this historical context that haunts some of us as municipalities take on debt even though current debt burdens are well within the debt service requirements of provincial regulation in Ontario and for the most part (Farquier-Strickland excepted I suppose) Ontario municipalities have built up substantial reserves.

Nevertheless, it is worth monitoring municipal debt levels and the accompanying figure presents the total long-term debt of the big five northern Ontario municipalities from 2000 to 2023 with data obtained from the multi-year reports of the Ontario government’s municipal Financial Information Review. In 2000, the total debt burden of these five municipalities was relatively closely clustered with Greater Sudbury at $13.3 million, Thunder Bay at $45 million. The Sault and North Bay at $26 million respectively and Timmins close to zero. Things have progressed since then, though for the longest time it was Thunder Bay that was the long-term municipal debt outlier zooming ahead of the others such that by 2008 it peaked at $230 million before coming down somewhat. Nevertheless, until 2019 it still had the largest total debt of any of the northern Ontario big five.

Starting in 2019, Greater Sudbury began to ramp up its municipal debt– after a more modest ramping up from 2014 to 2019 – and from 2019 to 2020 went from $70 million to $262 million. By 2023 it had reached $325 million and is apparently poised by 2027 to reach $600 million. As of 2023, the northern Ontario big five collectively had nearly $700 million in Ontario debt. With Sudbury’s ramping up to $600 million along with other anticipated expenditures in these other major northern Ontario cities, the total should surpass $1 billion by 2027. Debt service costs on this debt in the case of Sudbury will likely double from the current 3-4 percent of total own source revenue but remain well within the provincial guideline of no more than 25 percent. Still, all other things given, more money for debt service means less money for current programs. It is a trade-off that needs to be considered.

Thursday, 3 July 2025

Thunder Bay Is Not Growing Where It Should

Thunder Bay has embarked on a plan to build and diversify the municipal tax base and attract more residents. This plan for growth is seen as an imperative given that Thunder Bay’s economy while not shrinking in absolute terms is nonetheless growing less slowly than Ontario and Canada. For example, over the 2010 to 2024 period, Thunder Bay’s average annual real GDP growth was 1.8 percent compared to Canada’s 2 percent or Ontario’s 2.1 percent. Employment has also shown this differential given that between 2006 and 2024; Thunder Bay added 9 percent more jobs to its economy while Ontario and Canada both added about 27 percent more jobs.

So, the focus is on growth and a large part of that growth is on growing our population. Population growth is of course correlated with economic growth as more people usually means more economic activity and therefore a larger economy which in turn should spillover into growth of taxable assessment. This is a key concern for the City of Thunder Bay given that it is the anemic growth in taxable assessment that have helped shift an ever-larger tax burden onto the residential tax base given the decline in the industrial tax base of forest product mills and grain elevators over the last tree decades.

Of course, simply growing population in Thunder Bay is not the panacea that one might think when it comes to increasing taxable assessment. The reality is that population in the Thunder Bay area is increasing and has been for some time. However, the population of the City of Thunder Bay has not been increasing relative to its surrounding areas. If more people live around Thunder Bay but they are not owning homes and businesses within the confines of the City of Thunder Bay, then the impact on the city’s taxable assessment is going to be rather muted at best. As the accompanying figure shows, there is a difference between population growth in the City of Thunder Bay and the Thunder Bay Census Metropolitan area. Population statistics for the CMA are from Statistics Canada counts while the City of Thunder Bay’s population is taken from the Ontario Ministry of Municipal Affairs Financial Information Returns.

The results are plotted for the period 2001 to 2024 and are quite interesting. According to the official numbers compiled by the Ontario government, the City’s Thunder Bay’s population in 2001 was surprisingly just over 115,000 while the CMA population was about 126,000. During the first decade of the 21^st century – the period of the forest sector crisis – the CMA population declined by 1.2 percent while the city proper itself declined by 5 percent. Since 2010, there has been growth in the CMA population going from 125,000 to 133,000 for an increase of 6 percent. The city population itself has gone from 109,140 in 2010 to 108,843 in 2023 – a slight decline. However, since 2016 – which is when population began to grow more robustly in the CMA, the city population has indeed grown by about 1 percent.

The point is that Thunder Bay is growing but not necessarily where the taxable assessment needs to be to broaden and diversify the municipal tax base. True, if the CMA population goes up, more businesses are likely to open in the city thereby expanding the business tax base, but a lot of growth is nevertheless occurring outside of the city boundaries. What is more interesting according to these numbers is the following. Between 2001 and 2023, the Ontario Ministry of Municipal Affairs numbers put Thunder Bay’s population going from 115,000 to about 109,000 – a decrease of about 5 percent. Municipal taxes per household have gone up from $1,947 dollars in 2001 to $4,070 in 2023 – an increase of over 100 percent - while water and sewer charges have gone from $379 in 2001 to $1,195 in 2023 – an increase of over 200 percent. Meanwhile, total municipal employment over the same period went from 2,344 (FT, PT and Seasonal) to 3,122 – an increase of 33 percent.

Is it any surprise that population outside of the city boundaries has grown while the city proper has either declined or remained stagnant? When choosing where to live in the Thunder Bay area, there has clearly been a substantial number of people voting with their feet. The surrounding townships offer a lower municipal tax burden while providing access to whatever Thunder Bay proper has to offer. If the City of Thunder Bay itself is to grow its population and economy, it will need to address the fundamentals that have fostered this shift outside the city.

Tuesday, 24 June 2025

Is Thunder Bay in Decline?

Last night’s Thunder Bay city council meeting was another eventful evening with discussions of tax ratios, highway trucking routes and the ultimate location for the city’s tiny homes endeavour given the demise of the Kam River location. However, the most interesting aspect of last night’s debates was the exchange between a councillor and the city manager in which the question was asked if Thunder Bay was in decline? Thunder Bay has come a long way in terms of its internal debates as a few decades ago asking such a question would have been met with a bristly closing of ranks among the city’s political leaders with boosterish assertions that all was well in Thunder Bay despite short term challenges. Times have apparently changed reflecting a maturation of economic discourse in the city though one does get the impression that in some regards it is too little too late given a more vigorous growth agenda should have been in place decades ago.

Nevertheless, the question was asked and answered by the city manager. While the exact response cannot be replicated from memory, in essence it was that no, Thunder Bay was not in decline. However, its economy and population were growing more slowly than provincial and national rates and that Thunder Bay needed to do more to boost growth and hence Thunder Bay had to undertake measures to boost economic growth. This was tied to the discussion of lowering the tax ratios on commercial, large industrial, and multi-residential properties, effectively increasing the proportion of taxes paid by remaining property classes – namely single detached residences which incidentally have gone from footing half the bill to over 70 percent of the bill over the last few decades. Ostensibly this move would serve to attract businesses to Thunder Bay and boost growth and lower the tax burden on existing ratepayers. Re-balancing the tax ratios is a long standing issue in Thunder Bay and rooted in provincially driven policies.

There is of course some confusion as to what exactly this would cost the average homeowner in Thunder Bay. According to one report in the local media: “A home assessed at $100,000 would see a tax increase of $66.58. The median residential single-family detached home in the city, with an assessment value of $219,000, would see a $145.80 increase on its tax bill.” Another media report stated that “For a house assessed at $219,000, the median home value in Thunder Bay, that shift would mean an extra $7.83 on the tax bill, according to Kathleen Cannon, director of revenue.” Needless to say, taxes paid are going up though the amount of the increase is not being clearly communicated. Most people would indeed be leery of a tax shift that promises lower taxes in the future given that the tax levy in Thunder Bay has been going up for decades even if the rate of increase has declined over time.

How much money are we talking about here in terms of additional tax shifting onto residential homeowners from commercial, industrial and multi-residential assessments? Well, according to the 2021 Census, there were 26,790 single-detached homes in Thunder Bay and 2,040 semi-detached homes. If we go with the median estimate of $145.80 as the increase in the tax bill, then this would entail a shift of $4.2 million dollars out of a $240 million tax levy onto residential ratepayers. On the other hand, if it is $7.83, then this would entail a shift of $225,739. Given the amount of debate that this has been taking up, one suspects that it must be the former rather than the latter. One would think that if you are going to reduce the total business/industrial tax bill, the $4.2 million dollar amount would be of more significant impact on job creation and growth than a few hundred thousand dollars.

However, the purpose of such a move to boost growth brings us back to the question of whether Thunder Bay is in decline, thereby justifying potential growth enhancing measures. And, by decline one of course must assume that it applies to economic decline rather than social or moral decline. Definitions are of course important and decline can be defined as “a gradual and continuous loss of strength, numbers, quality, or value.” Thus, an economic decline should exhibit a reduction in key economic variables such as GDP growth, population or employment.

Figure 1 takes real GDP data largely from Statistics Canada and supplemented where necessary by Conference Board numbers and provides the annual rate of real GDP growth for Thunder Bay, Canada and Ontario for the period 2010 to 2024. There are years where Thunder Bay has exceeded national or provincial growth rates in real GDP ands years when it has fallen below. Overall, since 2010, Thunder Bay has experienced faster real GDP growth than Canada 40 percent of the time and Ontario 50 percent of the time. However, since 2019, Thunder Bay has never grown faster than either Canada or Ontario. As a result, over the 2010 to 2024 period, Thunder Bay’s average annual real GDP growth was 1.8 percent compared to Canada’s 2 percent or Ontario’s 2.1 percent. Thunder Bay’s economic output is growing but it is growing at a slower rate than Canada or Ontario.

Figure 2 presents the population increase from 2001 to 2024 based on Statistics Canada data again for Canada, Ontario and the Thunder Bay CMA. Between 2001 and 2024, Thunder Bay’s CMA grew from 121,986 to 133,0676 for an addition of just over 11,000 people representing a percent increase of 9.1 percent. While this is indeed growth, during the same period, Canada added nearly 10 million people for an increase of 33 percent while Ontario added nearly 5 million people for an increase of 42 percent. Again, Thunder Bay’s population is growing but not as quickly as either the country or the province.

Finally, Figure 3 looks at employment but like population, given the differences in size, total employment is best analyzed not in terms of absolute numbers but as an index. In 2006, Thunder Bay had 59,800 employed while Canada was at 16.4 million and Ontario at 6.5 million. To look at growth comparatively, 2006 is set equal to 100 for each jurisdiction. By 2024, Thunder Bay had added just over 5,000 more jobs putting the index from 100 to 108.7 – an almost nine percent increase in employment. By way of comparison, employment in Canada rose 27 percent over the same period while Ontario rose slightly under 27 percent. As the trend lines illustrate, employment rose in Thunder Bay – albeit with more fluctuations – but also at a lower rate.

So, is Thunder Bay in decline? Strictly speaking, it is not. Thunder Bay is growing but it is growing more slowly than the rest of the province and the rest of the country in terms of output, population and employment. It is growing in absolute terms but getting smaller in relative terms when it comes to population, employment and output. If Thunder Bay had grown at the same rate as the rest of the province over the last two decades in terms of population and employment, it would have a CMA population of over 170,000 people and employment at nearly 76,000 jobs. It is not decline but relative decline. It is not as big a problem as absolute decline but a problem nonetheless.