Well, it is going to be another fully packed agenda at the meeting of Thunder Bay City Council on Monday October 5th. There is the usual plethora of reports and decisions to go through most notable of which are yet another vote on the proposed Thunder Bay sign and a report on Thunder Bay’s Centennial Botanical Conservatory recommending substantial re-investment in the facility. Of course, this is contrary to what was recommended in the program and service review which recommended closing it.
For those of us of a certain vintage, we are
able to remember that the Botanical conservatory project was a Canadian
centennial year project in 1967. It has
provided an oasis of greenery during harsh winters here but over the years was
allowed to deteriorate to the point where it seemed the facility was on the
chopping block. Thunder Bay in general likes shiny new things and once acquired, tends to neglect them.
However, it appears it will be saved after all and the estimated costs for updating facilities at the Conservatory prepared by Gord Wickham, Vice President of Colliers International Projects Leaders sums to about $951,000 and not the estimated $2.8 million to $3.2 million originally stated. Of course, given that the new turf facility will sum to over $50 million by the time it is done, just under a million dollars is a modest amount to invest for a city with a tax levy pushing $200 million annually and growing by about $6 million a year.
The art of good municipal public finance is
making decisions that represent good use of taxpayer dollars and reinvesting in
the Conservatory would be a good 50th anniversary project for the
City given it also rebuilds something that was built in commemoration of the
100th anniversary of Confederation.
Two birds with one stone so to speak in a city with a lot of targets and
not enough stones. More to the point, it
is something that would not exist without public sector investment – unlike a
turf facility for which there are qualified private investors who would have built on their own but now do not wish to compete with the city.
Of course, not on the agenda is the recent Fraser Institute report on municipal spending and finances in Canada authored by yours truly but also worth a read by the councilors as it represents a nice primer on the forces driving municipal spending. Local Leviathans: The Rise of Municipal Government Spending in Canada, 1990-2018 argues that Canada’s municipalities have increased their spending and employment over the last two decades while maintaining that they are fiscally challenged. Between 1991 and 2018, total real local government revenues in Canada grew from $107 billion to $186 billion—an increase of 74% while real per-capita total revenues have grown from $3,831 in 1991 to $5,024 in 2018—an increase of 31%. Total real property-tax revenue in 2018 dollars grew from $42.2 billion in 1991 to reach $71.7 billion by 2018—an increase of 70%. Meanwhile, revenue from government grants grew from $48.7 billion to $80 billion for an increase of 64%, while all other revenues grew 107%—from $16.6 billion to $34.4 billion. Thus, own-source revenues of one type or another saw the most robust growth.
The increase in operating spending is driven by several factors. Growing revenues from property taxes, intergovernmental grants, and the sales of goods and services are positively related to rising per-capita municipal expenditures. Essentially, one can argue that municipal spending rises to fill the revenues available. Moreover, on the cost side, increases in the number of municipal employees coupled with their pay rates is also a positive driver of rising municipal spending.
This suggests that municipalities in Canada for the most part have increased their spending because of a more than adequate ability to generate revenues to fuel that spending. The municipal wage rate and the number of municipal employees both are positive and significant determinants of per-capita municipal spending. As well, the size of the real per-capita municipal operating surplus is positively and significantly related to real per-capita property-tax revenues and real per-capita grant revenues. Indeed, over the long term, municipalities have played an interesting game. They are required by provincial legislation not to run operating deficits and they have not only managed to balance their budgets but generate operating surpluses most years and potentially add to their reserves. Over the period from 2008 to 2018, the operating surplus for municipalities in Canada ranged from a low of 6.1% of revenues in 2014 to a high of 11.9% in 2017.
Given the significance of both municipal wage rates and employment numbers as positive drivers of spending and negative drivers of the operating surplus, it stands to reason that municipalities need to make more of an effort to address their spending. Only after such an effort, can it be reasonable for municipalities to request additional support from upper tiers of government or increased taxes from their own ratepayers. Municipal ratepayers and provincial and federal governments alike need to be cautious that the current COVID-19 crisis is not used by municipalities as simply an opportunity to finance a long-term enrichment of their spending.
Food for thought but I suppose many councilors are not that hungry.
