The news that the City of Thunder Bay has an “unexpected”
operating surplus for 2025 has been greeted with a mixture of commentary including
some remarks that it should be spent on crumbing roads or perhaps a tax
break. Apparently much of the additional
revenue came from the liquidation of an investment portfolio and as is
standard policy, will be added to the reserves. None of this is really a surprise because if
one looks back on past budget years, often, there is an operating surplus or
what is referred to as positive variance.
Figure 1 plots City of Thunder Bay operating surpluses from
2012 to 2025 and two-thirds of the time the city has had an operating
surplus. Indeed, the accumulated operating surpluses since 2012 sum to about 17 million dollars. However, this is not the end of the story
because this is only the operating surplus.
The City of Thunder Bay has both a capital and an operating budget and
over the 2009 to 2024 period (2025 for Thunder Bay is not available yet on FIR),
the total surplus (the difference between total revenues and total
expenditures) was only in deficit twice as illustrated in Figure 2. Indeed, the accumulated total surplus since
2009 has been 376.1 million dollars.
This is not a Thunder Bay thing. Across Canada, municipalities
are not separate tiers of government but essentially wards or creatures of the
province. Provinces keep a tight rein over municipalities and their finances
ensuring that they generally run surpluses and that those surpluses go into
reserves. As Figure 3 illustrates,
periods of deficit in the national local government sector have been few with
only the four years from 2000 to 2003 showing a deficit. So, Thunder Bay is not exceptional in
generating repeated surpluses – it is something that is the norm. The greater concern would be municipalities running
perpetual deficits but that is something generally indulged in by the federal and
provincial governments. By comparison, municipalities are paragons of fiscal rectitude.
