Costing of Ineptitude in Thunder Bay

 

Well the leaky pipe saga continues in Thunder Bay if one is to judge from the continued entries on the Facebook page of the Leaky Pipe club which now has 3600 members.  For those seeking a quick recap, in an effort to mitigate the environmental effects of lead pipes for an estimated 8,000 households in Thunder Bay, the City of Thunder Bay added sodium hydroxide to water which changed the pH level of the water (reduce its acidity) and therefore helped neutralize the lead content.  However, this additive was put into water going to all homes and it was apparently successful in reducing the amounts of lead.  However, after full extension of the procedure in 2018 following the 2016 pilot it appears that the incidence of pinhole leaks in copper piping of private homes and businesses in Thunder Bay has gone up dramatically. In the worst-case scenarios, not only is there corroded copper piping in the home springing leaks but also the service line goes necessitating repair bills in the tens of thousands of dollars.

 

While there are neighborhood concentrations of affected homes, chats with plumbing and restoration company employees – not to mention the odd nameless municipal worker - indicates the problem is actually more widespread than the City will acknowledge with homes across Thunder Bay affected and indeed even affecting relatively newer homes constructed over the last 10-15 years. It appears this chemical is highly correlated with the corrosive damage and the City of Thunder Bay stopped the additive in February of2020  in response but remains tight-lipped even in the face of the obvious continual plight of homeowners who during a pandemic have also been afflicted with the anxiety and trauma of every morning wondering if they are going to be the next “winners” of Thunder Bay’s leaky pipe lottery.   The fact is that probably all of Thunder Bay’s housing stock has been compromised to some extent and the question is only when things are going to happen.

 

In the end, this is all part of Thunder Bay’s complicated ongoing 25-year water infrastructure saga which has seen the move to one source water supply in the wake of the giardia saga on the south side two decades ago, the rapid increase in water rates to fund all the new infrastructure and maintain the old, the flooding of the new East End water sewage treatment plant – and surrounding neighbours - the introduction of sodium hydroxide to reduce lead in pipes on the cheap, and the removal of sodium hydroxide in the wake of numerous reports of pinhole leaks and more flooding   All of this has also generated several major lawsuits – for flooding in 2012 and now pinhole leaks in 2020.  

 

It is a mess and characteristic of municipal decision making in Thunder Bay given that in an effort to do important things cheaply – the best decisions are not made.  In the case of lead mitigation, the best long-term strategy is pipe replacement by the homeowners.  There should have been a proper financial incentive put in place by the City long-ago to get people to do it but that was probably seen as “expensive.”

 

Instead, despite concerns raised, the City of Thunder Bay went with sodium hydroxide.  While the City of Thunder Bay can argue that they made the decision with the best available information at hand, the province made them do it, and other cities have used sodium hydroxide with no such consequences it remains that something in Thunder Bay has gone horribly wrong. Was it something about the chemistry of Thunder Bay’s water?  Was it the application process when the chemical was introduced?  And what about the response of the City to so much distress?  In the end, even if one can accept that they made a decision based on the “science”, the response to so much resulting misery has been appalling.

 

If one wanted to do a simple summary tally of this penny-wise and pound-foolish approach of the ultimate costs of this entire imbroglio, it would be something like as follows:

 

Lead mitigation on the cheap by adding sodium hydroxide to City of Thunder Bay water:  Annual cost of $264,000.

Potential savings to the 8,000 homeowners with lead pipes by not having to replace their pipe at their own expense or at City of Thunder Bay expense: $40 million.

Potential cost to the City of Thunder Bay of lawsuit from homeowners affected by Leaky Pipes: $350 million.

Potential cost to the City of Thunder of lawsuits yet to come from insurance companies seeking to recoup their costs from all the claims in Thunder Bay: Yet to come.

The value of Thunder Bay’s short-sighted behavior, ineptitude and callousness in dealing with the fallout: Priceless.

By the way, in case you are wondering, I finally got to win big with Thunder Bay's newest lottery this week. 

 

 

 

Putting a Dollar Figure On the Cost of COVID-19 in Ontario

It is said that economists know the price of everything but the value of nothing.  Nevertheless, such sentiment like this does not stop economists from looking at costs and as Ontario’s COVID-19 pandemic declines and enters a lull, it is worth assessing what the cost of the pandemic to date has been.  As the accompanying figure illustrates, after just over 200 days since the first case in Ontario, we appear to be on a downward trend in terms of new daily cases.  Indeed, the daily growth rate is currently at 1/10 of one percent but relapses are likely.  As of August 14^th, we are at a total of 40,459 cases with 2,788 deaths - with over 80 percent of them early on in the province’s long-term care homes.

 

Everyone is pretty much aware of the economic and fiscal impact of COVID-19 on the country given the estimates of the annualized drop in Canadian GDP this year ranging from 6 to 8 percent, the 13 percent unemployment rate and the $343 billion dollar federal deficit.  Ontario this week released its first quarter finances and the picture was grim with a projected deficit for 2020-21 of $38.5 billion and a drop in real GDP of 6.6 percent this year. 

The provincial government’s revenue is actually only projected to be $5.7 billion lower from the March update at $150.6 billion (though it was at $156.7 billion in 2019-20) but program expenses, COVID-19 assistance and contingency funds are up dramatically – reaching a total of $186.7 billion to deal with the pandemic.  From total spending of $161.1 billion in 2018-19 with a deficit of $7.4 billion, to total spending of $165.7 billion in 2019-20 and a deficit of $9.2 billion, there has been a large provincial fiscal cost.  Ontario’s nominal GDP was expected to be $909 billion in 2020-21 but is now expected to be $844 billion.

Here is an interesting way to look at the cost to date of this pandemic in Ontario.  For the period 2019-20 to 2020-21, GDP is projected to be lower by $65 billion dollars while government spending will be up.  Total spending is up $30 billion - from $156.7 billion to $186.7 billion.  So, one measure of the direct fiscal and economic cost in Ontario of the pandemic to date given the anticipated loss in GDP and the projected spending increase is to combine the two for a total of $95 billion.  If you take Ontario’s population in 2020-21 (14.831 million) and divide, the per capita cost in Ontario this year is expected to be $6,406. 

While that sounds like a lot – and it is - there is another way to look at the numbers.  With total cases at 40,459, the cost per case to date in terms of additional spending and output loss is $2,348,056.  And if you want a quick back of the envelope calculation of the value of a life – yes, economists (and governments) do that too – then given the number of deaths to date at 2,788 – we get a cost of $34,074,605.  A per capita cost of $6,496 dollars, a per case cost of $2.3 million and a per life lost cost of $34.1 million – anyway you look at it, this has been expensive.