Thunder Bay Water Rates Still Climbing

 Municipal ratepayers and property owners are most often concerned about increases in their property taxes.  However, along with property taxes, there are also assorted fees and user charges that municipalities levy separately from property taxes which enable them to in a sense deflect from the increase in  municipal property tax burdens on homeowners given that combined numbers are rarely if ever provided.  Chief among those user fees  in most Ontario municipalities is of course water and sewer/wastewater rates.  The 2021 BMA Municipal Report provides an opportunity to look at recent levels of water and sewer rates as well as their recent growth.  The levels are for an average residential household and a comparison is provided for 2015 and 2021.

As Figure 1 illustrates, the highest water rates in 2015 for 28 major Ontario municipalities are for Sudbury, Windsor and Thunder Bay and they range from $1,278 for Thunder Bay to $1,403 in Sudbury.  At the bottom, are Timmins, Mississauga and Brampton which range from $590 for Brampton to $680 for Timmins. In the case of Thunder Bay, if you are an average bungalow and already paying nearly $4,000 a year in residential property taxes, the water and sewer rate is an additional 30 percent on top of your property taxes.  

 

 

Figure 2 plots the average annual growth rate of water and sewer/wastewater charges in these same cities over the six years from 2015 to 2021 and also ranks them from highest to lowest.  Whereas Thunder Bay is nearly at the top in terms of the level of the fees, it is mid ranked in terms of the growth rate since 2015 at about 3.6 percent annually.  But then, over the period 2005 to 2015, Thunder Bay ramped up its water charges at an average of 9.5 percent annually - thereby bringing it up to the top of the level of charges in Figure 1.  The current fastest growing eater charges are in Sudbury, Mississauga and Brampton while growth is currently the lowest in Niagara Falls, North Bay and Timmins - the latter two which have apparently seen a reduction in water rates.  Mississauga and Brampton are of course currently at the bottom of the ranking in terms of levels and their infrastrucure is likely undergoing a catch up process given the rapid growth in both these cities.

 

 

In Thunder Bay, one does not expect water rates to decline anytime soon given the numerous water related issues that have plagued the city over the last decade ranging from massive flooding of the new water treatment plant about a decade ago combined with widespread flooding across the city as well to the current leaky pipe debacle affecting thousands of homes.  In the end, both of these fiascos have generated lawsuits on the part of affected parties which if successful will generate costs for years to come.

Thunder Bay Gas Prices: Higher Than You Think

 

The current spike in gasoline prices has brought prices at the pump to the highest they have ever been.  In just over a week, the price per litre in Ontario has jumped nearly 25 cents and is hovering in the $1.80 a litre range in many places.  In Thunder Bay, the price briefly touched the $2 a litre mark at several gas stations but has since settled to about $1.95 a litre.  This spike is an exuberant uptick that is part of a long upward trend in prices which in recent years has been reinforced by new carbon taxes.

 

The accompanying figure plots the monthly price of regular unleaded gasoline at self-service filling stations for Thunder Bay, Toronto, and Ottawa over the period 1990 to 2022.  The data up to January 2022 is from Statistics Canada while the last two months are calculated from a gasoline price website.  All three series track together quite closely.  Prices were flat in the just below 60 cent a litre range for most of the 1990s and then underwent a significant ascent to Spring of 2008 when they came down.  Since then and until the start of the pandemic prices have gone up and down together in all three cities bouncing between 80 cents a litre and just over $1.40 but were most often at $1 or more a litre.  The pandemic saw another drop in gas prices back to the 80-cent level and then recovered back to the $1.40 range.  The current spike is quite evident for all three cities at the far right of the chart.

 

 

 

While the graph shows Thunder Bay’s gasoline prices nicely tracking the other two cities, the scale of the diagram masks the fact that the differential between Thunder Bay gasoline prices and that of the other two cities has grown over time.  During the 1990s, the average price per litre in Thunder Bay was about 4 cents higher than Toronto and 3 cents higher than Ottawa.  During the 2000s and the 2010s, the price in Thunder Bay average 5-6 cents more than Toronto and about 7 cents a litre more than Ottawa.  For the pandemic period of 2020 to 2022, Thunder Bay’s price per litre has averaged 11 cents more than Toronto and 12 cents more than Ottawa.

 

Notwithstanding the demand and supply shocks of the international energy market, the price of gasoline in Thunder Bay has gradually grown faster than that of the other two major Ontario cities in the Statistics Canada gasoline price data set.  Moreover, that differential has spiked since the start of the pandemic.  Why?  While no doubt local gasoline purveyors will argue that it has to do with rising costs and supply chain issues, the reality is that casual observation over the years reveals that over the last decade the number of gasoline retailers in Thunder Bay has shrunk considerably.  While that has been a process underway in many cities, it is particularly noticeable in Thunder Bay now as the relative lack of competition has allowed prices to be higher than they otherwise need to be.

Renting in Northern Ontario-You Are Richer Than You Think

When it comes to housing markets, what gets the most attention is the affordability of single detached homes particularly in large urban centres like Toronto and Vancouver.  However, the high price of housing has boiled over into rental markets and it turns out that more Canadians are now renting than ever before.  Over half of the new households formed since 2011 are apparently renting and the greater demand is being reflected in higher rents.

So, what are rents like in the five major northern Ontario cities? Figures 1 and 2 plot the monthly rent for one and two-bedroom apartments in major northern Ontario cities from 1992 to 2017 using data from Statistics Canada.  In 1992, rent for a one-bedroom was the highest in North Bay at $510 monthly and lowest in Timmins at $451 while for a two-bedroom it was highest in Thunder Bay at $620 and lowest in Timmins at $565.  By 2017, monthly rent for a one-bedroom was highest in Sudbury at $848 followed by Thunder Bay at $779. For a two-bedroom in 2017 Sudbury was the highest at $1058 followed again by Thunder Bay at $957.

 

 

Over the period 1992 to 2017, the annual average growth rate in rents for a one-bedroom was 2.4 percent in Sudbury, 1.9 percent in Thunder Bay, 1.6 percent in North Bay, 1.8 percent in the Sault and 2.2 percent in Timmins.  Over the same period, for two-bedroom apartments, the average growth rate was 2.4 percent in Sudbury, 1.8 percent in Thunder Bay, 1.9 percent in North Bay, 1.9 percent in the Sault and 2.1 percent in Timmins. Indeed, these increases are pretty close to the inflation rate as measured by the CPI.

The results are informative – rents have gone up in all northern Ontario cities - but the pace of increase picked up after 2004.  The average annual growth rate for one-bedroom apartments in these five cities was 2 percent from 1992 to 2004 and 3 percent from 2004 to 2017. For Greater Sudbury, rent growth was especially pronounced from 2004 to 2017 with an annual average growth rate of 3.5 percent for both one and two-bedrooms.   Thunder Bay in comparison saw average annual growth of 2.5 percent for one-bedrooms and 2.6 percent for two-bedrooms.   However, this period saw Sudbury with a mining boom whereas Thunder Bay experienced the forest sector crisis.

The higher growth rates in rent since 2004 coincide with the run-up in housing prices over the same period.  Even with rent controls, as new tenants come into a rental unit, there is the opportunity to raise the rent to reflect market conditions and the market is getting tighter. As all first year economics students can tell you, the long-term impact of rent control policies is to reduce the stock of units below what they would have been.  As a result, with rising demand, rents have climbed.

However, rents in Thunder Bay and Sudbury are still quite a bit lower than Toronto based on the numbers here.  In 2017, a one-bedroom in Toronto rents out at $1194 – 41 percent more than Sudbury and 53 percent more than Thunder Bay.  A two-bedroom in Toronto in 2017 rents out at $1403 – 33 percent more than Sudbury and 47 percent more than Thunder Bay.  According to the Winter 2018 Conference Board CMA reports, in 2017, household income per capita in Toronto $47,548 compared to $48,742 in Greater Sudbury and $47,287 in Thunder Bay.  Given that average incomes in Toronto are not really that much higher than either Thunder Bay or Sudbury it stands to reason that after paying your rent you will  have a lot more disposable income left over in Thunder Bay and Sudbury relative to Toronto. This really should be getting greater play in the economic marketing of these two cities.