The economic narrative in northern Ontario has evolved in
recent years. From lamentations of
stagnation and decline, the north is now talking about growth and development
with visible construction booms in many of its major centers. While the growth rates of population and the
economy are not on par with what has occurred recently in southern Ontario,
they are nevertheless a change from what was.
And this growth has also translated into growth in taxable assessment even
despite assessment values being at 2016 levels. The municipal tax base has been
growing.
It has been a decade of change for the five major northern
Ontario cities, and an examination of growth over the 2015 to 2025 period using
an assortment of sources (BMA Municipal Studies, Financial Information Return
and Statistics Canada) allows us to piece together the dimensions of the
changes. Figure 1 plots population
growth in the five cities with the most growth in Greater Sudbury at 11
percent, followed by North Bay at 10 percent, then Thunder Bay at 8 percent and
the Sault and Timmins at nearly 5 percent each.
However, it should be noted that Ontario as a whole over the same period
grew by 18 percent so northern Ontario’s population as a share of the province most
certainly still declined over this period.
Figure 2 plots the growth in average household income growth
over the 2015 to 2025 period. For
northern Ontario cities, growth rates during this period ranged from a high of
33 percent for Greater Sudbury to a low of 25 percent for North Bay. Thunder Bay came in at 29 percent, the Sault and
Timmins at 26 percent. Note that for Ontario’s 35 largest cities, the average household
income growth during this period was somewhat better at 34 percent.
Population and economic growth must inevitably result in a
growing municipal tax base and Figure 3 looks at the growth in the per capita
taxable unweighted assessment in these cities.
It is done in per capita terms (provided in the BMA Reports) because total
assessments do not adjust for population and per person comparisons allow for
this. Unweighted rather than weighted assessment
is used as actual current value assessment of properties are a better raw
economic measure of the total assessment base.
The growth in per capita unweighted tax assessment over the
2015 to 2025 period ranged from a low of 11 percent in Greater Sudbury to a
high of 30 percent in Thunder Bay with Sault Ste Marie at 27 percent, Timmins
at 19 percent and North Bay at 11 percent.
Per capita assessment value in Ontario’s 35 major cities grew an average
of 21 percent over the same period which means that Thunder Bay and the Sault actually
grew their per capita municipal tax bases faster.
This is a remarkable achievement and in the case of Thunder
Bay raises the question of the target property tax base growth target in its Smart
Growth Action Plan. The property tax base growth target is set at 3 percent
in the plan. However, over the 2015 to
2025 period, per capita taxable assessment grew 30 percent (which averages to 3
percent annually) but given that population grew 8 percent during this period,
it means total unweighted assessment grew 38 percent or 3.8 percent
annually. In other words, the plan was a
success before it was even started.
Also of interest is how increases in the per capita tax levy
compare to increases in the per capita tax assessment base. In theory, a growing property tax base should
afford the opportunity for relatively lower growth in future property tax rates. Figure 4 plots for each city the growth rate
of per capita taxable assessments alongside the per capita tax levy (Net
municipal levy per capita from BMA Reports) and the evidence suggests all five
cities are in a municipal property tax regime whereby per capita property
taxes are rising faster than the per capita assessment base thereby outstripping the growth in assessments.
Greater Sudbury seems to have the largest gap with its per
capita tax levy growing 51 percent whereas the per capita assessment grew 11
percent – more than four times the resource base per capita. Next is North Bay where the gap is 28 percentage
points. For the Sault, the gap is 18 percentage
points while for Timmins it is 13 points.
Meanwhile, the smallest gap is Thunder Bay which had its per capita
assessment grow 30 percent and the per capita tax levy grow 35 percent.
Where does this bring us?
Since 2015, the major cities of northern Ontario have grown
substantially in terms of income, population and taxable assessment. This growth has yielded additional taxable resources
to municipal government in terms of expanded assessment bases. However, despite an expanding tax base, the property
taxes paid per capita have grown faster than the growth in the tax base. Taxes growing faster than the resource base suggest
a rising tax burden relative to the ability to pay. Despite economic growth and rising taxable assessment
bases, major municipalities in northern Ontario are raising taxes faster than
the resource base.
One could blame this on the need to compensate for lower growth
in provincial grant funding. One could
blame it on rising costs of service delivery in the post pandemic era. Or it
could be blamed on municipalities expanding spending oblivious to the rising
burden being placed on ratepayers. When
it comes to municipal finances in Ontario’s north, there may not necessarily be
a revenue problem but an expenditure problem.
Going into an election year, it is a situation that could use some
explanation.
