Thunder Bay 2023 Budget Is Out: Highest Tax Levy Increase Since 2015 Proposed

 The City of Thunder Bay has released its proposed 2023 budget and it looks like the biggest tax increase in recent years.  The proposed budget is increasing the tax levy by  6.18 percent (just under 6 percent after tax base growth) which will raise the total tax levy by nearly 13 million dollars and bring the total tax levy to over 220 million dollars.  As the accompanying figure shows, this will be the largest tax increase since at least 2015 and probably since 2006.  In terms of tax levy increases for the 1991 to 2023 period,  since 1991, Thunder Bay tax levy increases have ranged from a high of almost 22 percent in 1998 to a low of -1.7 percent in 1995.  If enacted, this proposed levy increase will be the fifth highest since 1991.  The current Mayor campaigned on keeping the tax increase low and reduce bureaucracy but this proposed budget comes apparently with an additional 50 full time equivalent employees.  With inflation running at over 6 percent, the proposed budget comes pretty close to the inflation rate which is not unexpected as signals to this effect have been ongoing for months.   However, one suspects the Mayor will at least make an effort at vocal displeasure at this increase given that it is the fifth highest increase since 1991, the highest increase in nearly twenty years and he was the mayor from 1997 to 2003 which means he was also in office as the Mayor during the highest levy increase in the 1991 to 2023 period.  A legacy associated with some of the highest tax increases in Thunder Bay's municipal fiscal history is not something the mayor probably is interested in.  The reaction of the rest of council and the public will be key.  These are of course very preliminary numbers and reaction on my part and the full budget has yet to be posted on the city web site at the time of writing but will take a look at the details in coming days.

Thunder Bay's Tax Levy Debate

It would appear that the municipal election campaign is starting to heat up with the outgoing Mayor taking issue with the Thunder Bay Chamber of Commerce's recent election policy document which among things argues that the City of Thunder Bay's tax levies have increased by an annual average of 3.36 percent over the last decade.  Their graph is for the period 2012 to 2022 which includes projections for the 2018 to 2022 period which is not exactly the last decade. The Mayor maintains that the average tax levy change over the past eight years is only 2.4 percent - after new growth in the tax base was factored in.

This is all really quite entertaining because what matters is the increase in the total tax levy - that is what is being drawn from the tax base and used to fund spending.  The tax levy is essentially an expenditure estimate for taxpayer assisted spending and in the end what matters is the total amount of the revenue taken in and its growth and not whether some of it comes from the existing base and some of it is coming from new assessment growth.  The latter argument is really only being advanced to deflect attention from the overall increases.


So, what are the numbers?  Well, here is my two cents worth.  The accompanying figure plots the annual tax levy increase for the period 2008 to 2018 based on total tax revenue numbers from the Financial Information Returns from the Ministry of Municipal Affairs and Housing (with the exception of the last couple of years which come from City of Thunder Bay budget documents).  If you take the average, it comes out to comes out to 3.3 percent which is pretty close to the Chamber estimate.  If you take the average for only the 2011 to 2018 period, you get an average of 3.4 percent.  The last four years average out to 3.7 percent which is a rate well in excess of the rates of inflation and income growth in this city but the number is skewed by the 5.7 increase in 2015 - the year right after the last election. In the end, the tax levy in Thunder Bay has increased at an average of over 3 percent annually for the last decade and based on the chamber numbers is projected to continue doing so.