Why Ontario Must Plank the Covid-19 Curve to Avoid Italy's Fate

I'm not an epidemiologist by any stretch of the imagination but economists have data analysis skills that are relevant here. Here are some pretty stark charts of the current Covid-19 crisis in Ontario. Covid-19 in Ontario actually dates from a first confirmed case on January 25th with a first death on March 17th.  The figure below plots confirmed cases and the daily change in cases and show a more rapidly escalating curve for total confirmed cases starting around March 11th.  The change in the number of cases picks up quite dramatically after about March 27th - not that long ago.  From one case on January 25th, Ontario has ramped up gradually with an acceleration over the last week and as of April 2nd, has 2,965 cases.  At the time of posting, Ontario had added 573 cases today - the biggest daily increase yet.



If the rates of change are not arrested - that is, the orange line in the above figure first flattens and then declines - one is headed towards a catastrophe.  Take the example of Italy.  Believe it or not, on January 25th, Ontario had one confirmed Covid-19 case while Italy had zero.  Italy acquires two cases on January 31st. From two cases on January31st, the Italian pandemic exploded and as of April 1, stands at 110,574 confirmed cases.

Italy is of course much larger than Ontario in terms of population with about 60 million people compared to Ontario's 14 million so a comparison of cases per million population is useful.  As illustrated below, Ontario to date has had a more gradual spread.  While Italy is currently at just over 1800 cases per million population, Ontario is at 205 cases.  Despite almost identical starting points, Ontario appears to date to have been spared the more rapid increase that occurred in Italy with a key divergence point between the two countries being the first week of March.  However, we are at a crucial point given that in Ontario as in Canada as a whole, the tepid rates of increase prior to mid-March lulled us into a false sense of security.  Tens of thousands in Ontario and Canada embarked on their March breaks and have since returned.  As well, snowbirds and other international travelers have come home.  Travel is the key factor in the initial ignition of Covid-19 and its contribution in the post March break period can only be halted by rigid adherence to physical distancing.


If Ontario's infection rates per million and resulting total confirmed cases had behaved like those of Italy, at this point we would - based on Italy's case numbers per million - be at over 26,000 Covid-19 cases in Ontario and with a much larger death toll.  As the figure below illustrates when comparing Ontario's actual Covid-19 numbers with a simulated amount using Italian infection spread rates in terms of cases per million, the difference is stark. At Italian rates of spread and infection, Ontario would have reached 400 total cases by March 4 and would now be at just over 26,000. 



Such a counterfactual exercise is extremely revealing as to how bad this could have been to date - and how bad it could still get.  We cannot afford to be complacent or not take this seriously.  Ontario - and Canada - still have the ability to halt this pandemic in its tracks but it requires discipline and adherence to social and physical distancing rules on all our parts before it is too late.

Why Thunder Bay Needs a Municipal Organizational Review

Thunder Bay Mayor Bill Mauro has called for an organizational review of how the City conducts its operations and has directed the City Manager to prepare a report that will deal with the scope of the proposed review.  This is in the wake of a 2019 Budget that saw the new council come in with a total tax levy of 2.29 percent which is below the annual average increase of the previous council’s four-year term of 3.6 percent.  However, there is room for improvement and an organizational review is a good way to try and put the city on a more sustainable tax levy path.

The BMA 2018 Municipal Study (see below) provides some quick comparisons in its Executive Summary that show why Thunder Bay needs a longer-term strategy to keep future increases closer to 2 percent. A property tax comparison shows that for the most part, property taxes in Thunder Bay are higher than either the provincial average or the average for northern Ontario. A basic detached bungalow has property taxes that are 10 percent higher than the provincial average and 19 percent higher than the average for northern Ontario.  For a two-storey home, Thunder Bay is 30 percent higher than the provincial average and 22 percent higher than the northern Ontario average. It should be noted that house values in Thunder Bay are substantially below the current provincial average - which incidentally in January 2019 was $554,936 while in Thunder Bay for February 2019 it was closer to $256,000. [Had to calculate this myself as the Thunder Bay site reports the median but not the average. Take 13.8 million dollars and divide by 54 sales]. A homeowner in Thunder Bay pays anywhere from 10 to 30 percent more in property taxes than the provincial average for a home that is about half the value. How's that for the Thunder Bay competitive advantage when it comes to attracting new business?

 

Our property taxes on apartment buildings are also higher than the average for the province or the North as are those for neighborhood shopping malls, office buildings, hotels, vacant industrial land and standard industrial land.  The only categories where we are  lower are motels – where we are 11 percent below the provincial average and 13 percent below the northern average – and large industrial land – where we are 3 percent below the provincial average but 8 percent above the North.

This raises questions of long term sustainability of these taxes given the slow economic and population growth in the City as well as the affordability when it comes to households paying these taxes.  While taxes are levied on the value of property, they are paid out of current income and here Thunder Bay also does not perform as well.  The slide below continues the comparison but this time on property taxes as a percent share of household income and water/sewer charges plus taxes as a  percent share of household income.  

 

For both these measures, we are higher than the provincial and northern averages though one may argue that the percent difference is small.  Average household income in Thunder Bay was $87,359 (the provincial average for municipalities in the BMA study was $102,194) with property taxes (at 3.9 percent on income) representing $3,407 dollars.  At the provincial percent share, taxes would be $3,319 - $88 dollars less - and at the northern Ontario percent share it would be $3,145 - $262 dollars less.  If our property taxes were as affordable as the Northern Ontario average - each household would pay $262 dollars a year less.

Why do we have higher taxes? That is the type of question a good organizational review would help answer.  When you start looking at the cost comparisons for services like general government, ambulances, general assistance, assistance to the aged, parks, sports and recreation, library, cultural services, police, and fire, Thunder Bay is usually at the higher end of the cost rankings for comparison Ontario municipalities.  While we can make arguments that the higher costs are a function of the geographic spread of the city, its regional role or its aging demographics, it remains that our costs are higher even when compared to other northern Ontario cities with similar features such as Greater Sudbury or Sault Ste. Marie.  

At the same time, the evidence suggests that we are increasingly providing a regional role in terms of health and education services and servicing a population larger than the official statistics might indicate.  Every year, thousands of university and college students move to Thunder Bay to acquire their education boosting our population from September to April.  Then there are the outlying First Nation communities who come to the city to also get health and education services many of whom also stay for extended periods to access these services.  However, how much more additional municipal service provision results from these demands that have to be met by the municipal property tax base is not a question with ready answers due to a lack of data - or at least publicly available data.  There is only so much a simple country economist can analyze if the data is not available. 

So, an organizational review is a good thing if it takes a look at how things are currently being done as well as what the actual demands for municipal services in Thunder Bay are.  If we have a municipal tax base for a City of 110,000 but are servicing a more regional population of 130,000 then we need to find some solutions.  An organizational review is not about cutting service but how to meet our current and growing needs and doing it in a manner that does not fiscally punish residential households and businesses in Thunder Bay.  Its about how to do more with less.  Simply throwing up your hands and saying taxes are higher here because things cost more is not really an option.  Things cost more for a reason and the organizational review should find out why.