Thunder Bay Simply Spends More...A Lot More

 

Budget deliberations will continue this week at Thunder Bay City Council and the conversation to date suggests that there does seem to be some recognition that this year needs to recognize the financial hardship of the current pandemic.  However, easing back on tax increases this year and expecting to get back to normal the year after is really also not the right strategy.  This does seem to be the source of division right now on Council given the difference of opinion on just how serious future financial challenges are.

 

The summer saw talk of a tax levy in the 3-6  percent range as a result of increased costs due to COVID but it appears that the substantial amount of federal and provincial aid has dampened that talk to the point where the proposed increase is now 2 percent for 2021.  However, many in City administration and on council feel that this is temporary, and we will be returning to business as usual with increases well over three percent in subsequent years. 

 

The response at some of the budget presentations last week was that even the proposed two percent now needs to be reduced further.  In response, the call by one councillor to accomplish that by simply taking the money out of City reserves or stabilization fund for this year again reflects the belief that the problems are short term and things will be better next year.  This is a mistake given the long-term structural problems affecting City of Thunder Bay finances.

 

[As an aside, the councilor’s quote that “That stabilization fund is there for crises, like the [2012] flood,” was interesting comment given that the 2012 flood affected several thousand homeowners much like the current leaky pipe pandemic and apparently dipping into the reserves then now seems to be viewed a form of assistance to homeowners. The City has remained tight-lipped on the leaky pipe matter since the start and now especially since it is before the courts as a result of a class action lawsuit.  However, the homeowners affected by the 2012 flood have also filed several large lawsuits so one wonders why the double standard in public commentary? Has some sort of self-imposed statute of limitations on discussions expired?]

 

Thunder Bay’s municipal finances are marked by a long term erosion of its property tax base due to industrial decline and a lack of population growth combined with above average spending and costs due to a higher cost structure acquired during a time when revenues were more abundant.  There is a failure to recognize or deal with the problem.  This higher cost structure is apparent when Thunder Bay is compared to major Ontario municipalities.

 

The following figures present municipal spending for Thunder Bay compared to 26 other major municipalities in Ontario for 2020 using data obtained from the BMA 2020 Municipal Report.  Note that for municipalities with regional government, in the police and fire categories, spending per capita for the regional functions was included on top of their reported municipal spending.  Figure 1 presents the per capita tax levy for all 27 cities as well as the average for them.  Thunder Bay does have the fourth highest tax levy [municipal operating spending] of these 27 major municipalities.  What is more interesting is when the composition of the spending is broken down a bit.

 

 

 

What emerges from Figure 2 to 6 is that Thunder Bay spends the most per capita on general government (administration), police and fire of these municipalities.  Thunder Bay spends $241 per capita on general government compared to the 27-city average of $113 – more than double.  It spends $317 per capita on fire protection compared to the average of $191 and $441 per capita on police protection compared to the average of $311. While in total, Thunder Bay only spends about 10 percent more per capita than the average, compared to the category averages it spends 116 percent more on general government, 66 percent more on fire and 42 percent more on police.

 

 

 

 

 

 When these three expenditure categories are summed up, it turns out that Thunder Bay spends nearly $1,000 per capita on general government, police and fire compared to an average of $612 – that is 63 percent more than the average.  While northern Ontario municipalities because of their larger urban areas and lower population densities have a tendency towards higher costs and spend more, we are head and shoulders above the rest of the North.  Looking at Figure 5, after Thunder Bay at nearly $1,000 comes Sault St. Marie at $752 and North Bay at $736. Sudbury is only at $656.

 

 

 

 

 

 

As a share of the per capita tax levy (Figure 6), spending on general government, police and fire in Thunder Bay at 56 percent is approaching nearly 60 percent!  The average across these cities is closer to 40 percent.  One cannot simply blame arbitration costs for police and fire spending in Thunder Bay because all cities in Ontario are under the same system and salaries do not differ that much across jurisdictions.  Based on what is being spent on administration, police and fire, we are spending an awful lot for government protection services which makes one wonder if in Thunder Bay we are living in some type of municipal public sector version of the Sopranos? The cost structure is a problem and require a concerted long term effort to bring costs and spending more in line with other jurisdictions. 

Thunder Bay Budget 2020: A First Look

The City of Thunder Bay has released its preliminary budget for 2020 and the proposed 2020 capital and operating budgets propose a municipal tax levy of $200.2 million which represents an increase in the levy of 3.17 percent over 2019.  This is by no means the final number and there will be public  meetings and deliberations on January 9th and February 3rd as well as council budget reviews on January 14th, 16th, 22nd and 29th.  As usual much is being made of the net increase being only 2.32 percent after "growth" in the tax base but it remains that an increase in the total levy is what the increase in tax revenue ultimately is.  Taxes will be going up.

As the accompanying figure shows, the trend in the total levy over the last thirty years has been steadily upwards.  And, do not forget that on top of this,  the 2020 increase in the water rate will be 4 percent and that for the wastewater surcharge will be another 4 percent.



A key driver of the proposed 2020 budget is an expansion of nearly $2 million dollars for the Thunder Bay Police Service.  This will be on top of funding being received from the provincial government spread over the next three years of $2.7 million for projects in human trafficking, flood way patrol and mobile crisis response.  There is also some anticipation that more provincial funding is on the way to specifically address gun and gang violence. Thus, there is a major expansion in police spending on the way but a significant chunk of the money is short-term funding from the province.  A key question is once the expansion has been implemented - and the short term funding ends - how sustainable will all that spending be?

In the end, the total increase in tax levy funded new spending will be $6.1 million and in percentage terms the proposed increase of 3.17 percent is well above the combined rate of population growth - effectively zero - and inflation which is at best 2 percent.  The argument has been made by the City Manager that policing costs are rising faster than other categories but that has been the case for some time.  Even if one accepts the $2 million increase in policing without question, there is another $4 million in new spending that needs to be justified and made more transparent. The list of items as it stands are for amounts of $0.4 million here and $0.6 million there which the average ratepayer does not really understand.  One could almost accept some increases if one could see something in the way of a new and needed service. Yet, that does not seem to be the case here.

A key addition that comes to mind and has been rejected in the past is dealing with the snow left at the end of your driveway by the City plows after a major snowfall. Given Thunder Bay's aging population and the effects of climate change bringing larger storms, the additional work required is starting to impose a significant strain on the home owning public.  Yet, to date such pleas have fallen on deaf ears.  As noted by the City:

"No, windrows across driveways will not be cleared by City Crews. Residents are responsible for the maintenance associated with their driveway, including the portion that is on City property. It is that portion of the City property which has been designed to provide snow storage during the winter. The City does not give up the right to store snow in that area of the boulevard when it allows the residents’ driveway to encroach across City property. It is important to note City crews have the important task of plowing snow on all City streets as quickly as possible. Snow removal from driveways is not a program offered by the City. "

Apparently, our driveways over the boulevard to access the street are an "encroachment" on City property so they can do whatever they want with the land - I suppose they could store gravel or manure there too if they wanted.  One is surprised the city does not put a toll gate at the end of everyone's driveway and charge a fee to drive onto their roadway but I digress.  It remains that windrow removal programs are offered by many other cities whose climate is actually milder than our own in the winter though to be fair they often do not clear the residential City sidewalks as done in Thunder Bay.

Some of the programs are targeted towards seniors or disabled residents such as in Milton or Oshawa.  Then there is Richmond Hill which has the cadillac of programs and now removes the windrows on all residential driveways.  The Richmond Hill windrow removal project was implemented in 2019 for all 55,000 households for a total annual cost of $4.4 million dollars. Markham also does windrow removal but for qualified registered applicants who must either be over 60 years of age or if under 60 have a medical note saying they cannot shovel snow.  Even Toronto has some windrow removal depending on your location in the city.  While one does not expect the upper end Richmond Hill program, it remains that when it comes to windrow removal, Thunder Bay is not even trying.

If the City of Thunder Bay is going to raise spending by $6.1 million dollars in 2020, one really needs to see a more concrete demonstration of value for money.  In the absence of new spending that can be tangibly seen as providing some direct benefits to homeowners who are footing more and more of the bill, it becomes difficult to accept we need levy increases in excess of the combined rate of inflation and population growth.  It is even more difficult given that over the last few years, the city inevitably posts surpluses - positive variances - in the millions of dollars that are then put into reserve funds.  Indeed, 2018 was close to a $4 million surplus though it should be noted that 2019 was tracking closer to a few hundred thousand with the associated plea that 2020 would require a larger tax increase. One suspects the  final surplus for 2019 will be larger once the 2020 budget deliberations are over and done with.