Thunder Bay’s Economy: The Year Past and the Year Ahead

 

Well, it is nearly year’s end and for Thunder Bay, time for a retrospective on economic things past as well as a brief look ahead.  Thunder Bay has had a particularly good year given that population is growing, construction is up, and the Port is doing the best it has in years. The really big driver in Thunder Bay this past year would have to be the construction sector given the continuing construction of the new more than one-billion-dollar provincial prison as well as substantial rental accommodation construction.  In the case of the jail, as the Conference Board noted in its November 2024 Metropolitan Report on Thunder Bay’s economy: “Work on the jail really helps.”  Think about it, Thunder Bay’s GDP is just shy of $6 billion.  A project the size of the jail represents a massive distortionary shock to the local economy.

 

There are many workers who are commuting to Thunder Bay for the construction work or commuting through Thunder Bay to work at the mines and this has helped buoy demand for accommodation and services this year.  Indeed, local employment is up as well having grown from about 61,200 workers in 2021 to 63,700 by 2024 and is projected to reach nearly 65,000 in 2025 as current activity continues.  And our CMA population is indeed up also and now expected to be well over 130,000.  However, 65,000 seems to be the upper end of our new “post forest sector crisis employment range.”  Prior to the forest sector crisis in the early 2000s, our employment used to fluctuate between 65,000 and 70,000.  There has been a permanent downsizing of local employment. Even the Conference Board has noted that: “Despite the run-up, employment remains below the 2003 all-time summit of 65,500 workers.”

 

Given the reliance on construction, the real concern is moving into 2026 to 2027 when the provincial jail construction winds up given the massive scale of the project.  The projection for housing starts coming from the Conference Board suggest an annual flow of less than 200 new starts a year for the foreseeable future.  While the Art Gallery and the proposed Turf Facility may take up some of the construction slack as the jail project winds down, neither of those projects are of comparable scale to the jail project.  If there is a silver lining to this, it is that local homeowners might finally be able to get a hold of a local tradesman to do their repairs and renovations.

 

By the end of next year, the full impact of changes to international student visas will also have emerged which will more fully affect the local post-secondary sector as well as local retailers that rely on international student labour.  Should the currently lagging lithium and critical mineral projects finally emerge by this period, then they will likely help take up the economic slack.  Unfortunately, at present with the sales of electric vehicles slowing, it appears that demands for regional lithium development may have stalled for the time being.  As well, the demand for forest sector products remains weak.  Indeed, when it comes to GDP growth, the Conference Board notes that: “Thunder Bay’s real GDP has essentially stagnated against this sombre backdrop. It is on tap to ease by 0.2 per cent in 2024, after rising only 0.1 per cent in 2023. We expect 2.0 per cent growth in 2025. Local GDP growth will ease to 1.2 per cent in 2026 and 0.7 per cent in 2027, then return to 1.2 per cent in 2028”.

 

And then there is of course what the impact of President Trump and the proposed tariffs may be on the local economy.  It is of course unclear what the impact of tariffs might be unless they are also applied to regional natural resource products.  There are industries in our area that ship to the U.S. including wood and paper products, and minerals and a slowdown here may also impact the Port of Thunder Bay.  However, the incoming US President is more of a known quantity this time around and the evidence is that he is quite transactional with much of his behaviour designed to stake out bargaining positions.  Canadians should be prepared to wheel and deal.  It will be a tumultuous year to be sure with President Trump sending out assorted signals about how he feels about Canada.

 

 

Changing Thunder Bay City Council: What Is The Path Forward?

 

I have already opined on the recent report putting forth options for the reform of Thunder Bay City Council, but the matter is so fundamentally important to the future of local democracy in our city as well as the effectiveness of municipal government that it is worth another post.  This especially requires another post given that the current council will soon move to deliberate and decide on which of the two options – if any – it is going to go with. 

 

To start, there are actually three options: The first, is four east-west wards running parallel from north to south numbered 1 to 4 that basically gives each ward a rural area, urban area as well as some industry and waterfront in the geographic and population composition of the ward.  Each ward would have two ward councillors for a total of eight.  As well, there would be two at-large councillors and a mayor.  This proposal is being recommended by city administration.  The second option is a full at large system with ten at-large councillors – no ward councillors - plus the mayor. One suspects that some type of ward structure will be retained with at large councillors “assigned” ward representation duties but how that might actually work is shrouded in fog. And third – while not explicitly referred to but lurking in the background – is simply the status quo option of seven ward councillors, five at large councillors and one mayor.

 

What remains important in the discussion is what the rationale for creating a new structure is.  First and foremost, whether warranted or not, there appears to be a widespread desire for change in city council’s composition driven by dissatisfaction with assorted aspects of municipal government in Thunder Bay.  A desire for change for the sake of change is never in of itself a good reason to change things but even recent albeit unscientific polls on TBnewswatch suggests that most respondents want change.  Past TBnewswatch  polls have suggested a desire for a smaller council with eight councillors plus a mayor garnering the most support.  When given the two proposed options plus the status quo as choice, the most recent poll finds that over 86 percent want change with only 13 percent supporting the status quo.  Moreover, when it comes to the two proposed options – about 46 percent support the 10 councillors plus mayor all at large option, and 40 percent support the four ward two councillor per ward plus two at large and a mayor format. 

 

 

What type of performance improvements to our municipal governance are these proposals supposed to make?  Anecdotally, observation suggests that Thunder Bay City Council meetings appear to be long and drawn out with detailed discussions and gridlock on minor and major matters alike.  Yet, how changing the composition of city council will address issues of dysfunction are not really obvious.  There is also a desire to save money but reducing council by two members saves at best $100,000 in salaries, benefits, and expenses on a tax funded budget of over $200 million.  Indeed, if cost savings are really what you are after, the savings do not come from the reduction in the size of city council but an improvement in the quality of councillors and decision-making on it.  There is nothing in either of the two proposed options that lend any evidence as to how a smaller council will be a better council when it comes to decision making. 

 

In the end the three options can be interpreted as follows: the status quo, a modified status quo which shrinks the council slightly but still includes a mix of ward and at-large councillors, and the ten councillors at large option which I would term the “mayor plus ten assistant mayors” option.  The attractiveness of an all–at large council to some members of the general public springs from the conviction that such councillors have the interests of the entire city at large while ward councillors are parochial nimbyists who block change.  My observations are that ward councillors seem stuck with the grunt work of dealing with specific ward and neighborhood issues while most  at-large councillors pick and choose what ward issues to advocate for based on the political benefits while behaving as pontificating prima donnas at meetings with speeches that chew up far too much time. 

 

In the end, an all–at large council favours those candidates with a lot of prior popular name exposure (it is like high school all over again) and/or the financial resources or special interest backing to mount a city-wide campaign.  The argument that somehow only at large councillors have the ability to see the whole city’s interests is spurious.  The average municipal politician usually puts their political interests first, and everything else is weighed and slotted towards meeting those interests – whether it is in the city’s interests or not.  Having no ward councillors at all is fundamentally at odds with the purpose of municipal government which is to provide municipal services to rate payers who either reside and/or operate businesses in wards.  Moving to an all–at large system reduces accountability to the mundane needs of ratepayers by creating a council of big picture overlords who will pass the buck on specific local issues when it suits them. 

 

Those that want an all–at large system should consider this analogy.  If at large councillors are really better able to see the “bigger municipal picture” than by extension having all MPs and MPPS elected from an at large list would be better at seeing provincial or national interests as opposed to parochial MPs or MPPs who just look after their ridings.  Perhaps, one might consider this a straw man argument and a deflection from the real issue but think about it carefully.  One may feel comfortable about all at large candidates with no wards because Thunder Bay is a relatively small city and ultimately everyone knows someone who knows someone who is friends with a councillor.  Everyone feels that they can have their voice heard.  And yet, without the institution of direct ward or riding representation, there is no guarantee that you will always have a direct opportunity to be heard.

 

So, what is the solution?  Well, my preferred option – which is of course not up for discussion in the current set of offerings - is eight ward councillors plus a mayor option.  The city would be divided not into four but eight wards thereby ensuring that some dedicated rural ward representation would remain.  It is now 50 years after amalgamation and the city has been united long enough that the average ward councillor should be able to see the forest for the trees.  If they cannot, it is more a function of the quality of the councillor rather than the ward system.  Going down to eight councillors plus a mayor would likely save several hundred thousand dollars – again a small sum compared to a budget in the hundreds of millions – but enough to increase resources available to perhaps attract better candidates. This does not necessarily mean raising salaries for councillors but could even involve providing funds so that they can hire some independent research support so they can better inform themselves on issues.

 

Of course, the other argument that has also been made in favour of an all–at large council is that there is a lack of Indigenous representation on the current city council.  Given that the Indigenous population in Thunder Bay is spread out across the city rather than concentrated in one ward, an all–at large system increases the odds that an indigenous candidate and by extension the growing indigenous population can gain a voice on city council.  However, there is no guarantee that having ten at large councillors will ensure an indigenous candidate gaining office.  Indeed, if having at large councillors is the best way to ensure better odds for an indigenous candidate getting elected to Thunder Bay City Council, then the best thing to do is to retain the current system with seven ward and five at-large councillors plus a mayor.  At least it will be the devil we know best.

 

 

Getting Ready for Budget Season: A look at Thunder Bay Municipal Indicators

 

Municipal budget season is well underway in Thunder Bay, but the main public theatrics over the 2025 budget should be transpiring over the next few months.  The most recent indication is that City Council is expected to target a 3.8 percent municipal tax levy increase.  There are budget pressures underway not the least of which is apparently an additional $5.6 million to cover wages and benefits. Putting budgets into context is always more useful if a long term is taken and fortunately the Ontario government does provide resources to track municipal spending.  Here, a useful tool are the multi-year financial reports provided from the Financial Information Returns which provide standardized reporting of a municipality’s financial activities as well as additional statistical information.

 

Figure 1 presents municipal property taxes per household and water and sewer charges per household since 2000.  While many other municipalities appear to have filed their 2023 returns, Thunder Bay appears to be lagging and therefore this long-term snapshot only goes to 2022.  From 2000 to 2022, municipal property taxes in Thunder Bay have nearly doubled going from $1,947 to $3,918.  The growth of water and sewer charges has been more pronounced going from $379 per household in 2000 to $1,158 in 2022 – a tripling of the average per household charge.

 

 

 

Figure 2 plots a dual scale chart with the total municipal workforce (full time, part time and seasonal) on the right size axis and the value of wages, salaries, and benefits per employee on the left axis.  Perhaps one of the reasons Thunder Bay is lagging in putting out its financial information is that it is a bit short staffed given that the total size of the municipal workforce has declined from a peak reached circa 2013 and has been pretty flat since 2016.  On the other hand, since 2000, the size of the municipal workforce has gone from 2,344 employees (there is a data  gap in 2003) to 3,404 in 2022 – an increase of 45 percent.  Over the same period, average wages, salaries and benefits per employee have grown from $46,978 to $83,799 – an increase of 78 percent.

 

 

 

However, these indicators and the increases over time are best placed in context to an assortment of other indicators and this is done in Figure 3 which plots the percent increase in an assortment of indicators from 2000 to 2022.  As one can see, prices in Thunder Bay as measured by CPI inflation have risen by 49 percent.  Own purpose property tax revenues (the total tax levy) has grown 122 percent while total grants revenues have only grown by 55 percent.  Municipal property taxes per household have grown 101 percent while water and sewer charges have grown 205 percent.  

 

 

 

Meanwhile the total taxable assessment has grown by 60 percent which when divided by the number of years works out to an annual average growth of 2.7 percent.  This seems at odds with the fact that published reports have been of average assessment growth over the last ten years of only 0.6 percent annually.  However, one suspects that the 0.6 percent is real growth – after inflation – because the average annual assessment growth of 2.7 percent minus the average annual inflation rate of 2.2 percent from 2000 to 2022 yields real average annual assessment growth of 0.5 percent.  Given that property prices have grown substantially in Thunder Bay over the last decade in particular, the nominal rather than inflation adjusted tax assessment has been growing in tandem

 

More interesting is the fact that between 2000 and 2022, the population of the City of Thunder Bay has actually decreased by 6 percent.  This also seems at odds with recent reports that Thunder Bay is over 130,000 people but it must be remembered that FIR deals with municipal finances and the population of the City of Thunder Bay is that within its city limits while the recent population reports are for the larger Census Metropolitan Area.  Essentially, growth in Thunder Bay has been occurring outside the city limits where they do not have to pay property taxes to the City of Thunder Bay.

 

And finally to round things off, the municipal workforce over the 2000 to 2022 period grew by 45 percent, the total compensation per employee grew 78 percent and the total value of building permits grew 85 percent.  However, after inflation of 49 percent, salaries and benefits per employee only grew in real terms by 29 percent while to end things,  the real total value of permits grew by 36 percent. 

Rising Crime in Canada: Evidence from Thunder Bay

 

Rising crime and perceptions of rising crime in Canadian urban areas have become more concerning as media reports increase and a recent study by the MacDonald-Laurier Institute provides some evidence to back up the feeling that crime is up.  The report looks at the last decade’s worth of police reported crime data for nine major Canadian urban centers: Calgary, Edmonton, Montreal, Ottawa, Peel, Toronto, Vancouver, Winnipeg, and York Region.  Essentially, crime and especially violent crime is up in all of these cities with sexual assaults in particular showing large increases.  Of course, this study omits a lot of cities and so of course the question that arises for inquiring local minds is how Thunder Bay has been doing over the last little while?  Is crime rising in Thunder Bay? Well, it depends on the time span you want to look at as well as the specific type of crime.  But overall, the feeling that crime is rising here is not misplaced.

 

Using police reported crime data from Statistics Canada, here is a quick snapshot of how some crime rates in Thunder Bay (crimes per 100,000 population) have been performing. Figure 1 plots the crime rate for total violent crimes and total property crimes for the period 1998 to 2023.  Over the long haul, the trends do not seem particularly concerning.  The property crime rate in 1998 was 6,285 crimes per 100,000 population and after 2009 it began declining quite steadily followed by a spike in 2019 and then further decline.  Between 1998 and 2023, the property crime rate fell from 6,285 crimes per 100,000 to 3,117 per 100,000 – a 50 percent drop.  

 

 

 

Violent crime between 1998 and 2023 has also dropped but not by as much.  It went from 2,401 violent crimes per 100,000 to 2,195 per 100,000 -a nearly 9 percent decline.  However, the violent crime rate seems to be broken into two phases.  It went from 2,401 in 1998 to a low of 1,414 in 2015 – a decline of 41 percent.  Since 2015, it has grown and by 2023 was, as noted, at 2,195 – an increase of 55 percent.  While violent crime is lower than 1998 that is small consolation given what appears to be a fairly rapid increase in recent years.

 

 

 

Figure 2 presents the percentage change in crime rates over a ten-year period – 2013 to 2023 – for a select number of crime categories.  The results paint a more complicated picture.  The total crime rates (all criminal code violations including traffic) are down 2.5 percent over the last ten years.  This seems to be driven in part by a decline in property crimes as the total property crime rate over the same period is down 13.4 percent.  However, over a ten-year period, the total violent crime rate is up nearly 39 percent.  Homicides are up 120 percent from 2013 (though these are two points in time.  Using a three-year moving average for 2012 and 2022, homicides are only up 87 percent if that makes you feel better).  Total sexual assaults are up 68 percent while total assaults in general are up 31 percent.   Impaired driving is up about 5 percent while robberies are up 39 percent. 

 

So, are perceptions of rising crime justified?  I would think so given that while overall crime rates might be down or flat, the rates for more serious crimes such as homicides, assaults and robbery are up.  There you have it.

The Shape of Councils to Come

 

The Corporation of the City of Thunder Bay’s Council Composition Committee has after a number of months of deliberation and thought settled on two potential options for the reform of Thunder Bay City Council.  This is a topic with a long history and I have done several posts on it over the years the most recent one being in the wake of the decision to form an arm’s length committee to review the composition and structure of council.  The desire to look at the size and composition of council is rooted in the beliefs that there might be cost savings by reducing the size of council given that similar size cities often have fewer councillors or that council’s deliberations might be more efficient or effective if there were fewer councillors.  The current proposals if implemented would not be the first time that City Council has seen changes, but it is the first time in a long while.

 

When Thunder Bay was created in 1970 from amalgamation of the twin cities of Port Arthur and Fort William and the rural municipalities of Neebing and McIntyre, it began with a 12 councillor plus mayor council elected evenly across four wards.  However, interurban rivalry between the Williamites and Arthurites was still intense as was rural dissatisfaction and so in 1976 the four wards were revised to seven.  Then in 1985 there was the further revision that sought to balance north-south neighborhood concerns with the need to take the overall interest of the city into account known as the Larson compromise – after then councillor Rene Larson.  This created the current form of seven ward councillors plus five at large plus the mayor.  After nearly forty years, the proposals seek to change this.

 

There are two proposals.  The first, interestingly enough, seems like a tomorrow is yesterday proposal given that it features four wards.  The proposal puts forth four east-west wards running parallel from north to south numbered 1 to 4 that basically give each ward a rural area, urban area as well as some industry and waterfront in the geographic and population composition of the ward.  Each ward would have two ward councillors for a total of eight. Plus, there would be two at-large councillors and a mayor.  This proposal is apparently also being recommended by city administration and the committee chair and former city councillor Rebecca Johnson feels it is “quite exciting” given that each ward combines all aspects of the community. The other option is a full at large system with ten at-large councillors – no wards - plus the mayor. There will now be public consultations and information sessions that the committee will use to narrow down the options to just one and this will then be submitted to council for approval and then will hopefully be in place for the October 2026 election.

 

 

 

So, what to make of all this.  Well, in terms of cost savings, going from a current council of 13 members to one of 11 under either option is simply a cosmetic cost saving.  While theatre is important in politics, pointless cost saving theatre is a waste of time.  What is more important is whether the new format is an improvement on representation and decision making in terms of having balanced representation of all city interests as well as a more streamlined decision-making process.  Having fewer members on council is again more of a cosmetic streamlining as a council of 11 is as likely to have long winded grand-standers as a council of 13.  The savings on time and committee streamlining is marginal at best.  As for the idea that having wards cutting east west and spanning rural, urban, industrial and waterfront areas, that is actually more interesting and certainly an intriguing change.  Of course, one has to ask if any perceived dysfunctions of council currently are due to having somewhat more homogeneous rather than diverse wards under the present system or simply a function of personalities and issues.

 

One item that seems odd is why a vestige of the hybrid ward/at-large system is still being retained in the recommended proposal?  An all at-large system in a sense would ultimately lead to a lack of democratic representation as the ability to mount a city-wide campaign \would increasingly relegate council positions to higher income individuals or those with support from key interest groups.  However, the purpose of city government is to provide services to ratepayers. Having geographic wards with councillors attached to those wards as focal points and accountable to voters in their ward is superior to at-large councillors who under the pretense of representing the “whole” city – which by the way is the mayor’s job – can essentially dodge neighborhood issues they are not as interested in.  Why have a council with eight ward councillors and two at large plus a mayor?  Why not simply go to eight ward councillors plus a mayor thereby saving another two councillor salaries – as miniscule as those savings are in a $200 million dollar a year operating budget.

 

In the end, the preferred option – like all the council options and changes of the past – is likely going to be a political compromise.  The current council essentially must approve the final option and going from 13 to 11 means some dear colleagues must inevitably be bade farewell come October 2026.  Council voting to reduce its size and create redundancy for some of its members may be a challenge. The fact that the number of ward councillors goes from seven to eight will probably secure the votes of the majority of current seven ward councillors.  While that is a majority, it would leave a bitter taste if all five at-large councillors vote against the new regime so having a couple of at-large councillors in the new arrangement should placate enough of them, even if it makes them an endangered species. 

 

However, what is more interesting will be the public reaction to the recommended proposal especially in the rural wards.  The Neebing and McIntyre wards essentially have two dedicated rural voices on council.  What the proposed four ward structure does is essentially divide the rural areas into four bits and place them in a minority position within each of the largely urban wards.  While the Larson Compromise of 1985 in the end addressed north-south rivalry issues and the need for “Thunder Bay views”, it also dealt with the interests of the two rural municipalities that were once independent.  Essentially what the compromise did was allow for specific ward representation including specific rural interests as well as provide the overarching at-large councillors.  While Thunder Bay has largely come together in the case of the old Port Arthur/Fort William split, the rural-urban differences with respect to taxation and service levels is probably still an issue now.

 

The political mix at the moment is that five of the current seven ward councillors are most likely to support the recommended model.  I would be surprised if the Neebing and McIntyre councillors supported the new model.  As five councillors is not a majority, this leaves the balance of the decision to the five at-large councillors to decide if the proposal becomes reality.  It should make for some interesting Monday night political theatre this winter.

Thunder Bay House Prices in the Lead

 Teranet and the National Bank of Canada have released their latest Composite Price Index covering the April 2024 to May 2024 period covering the country's 11 largest CMAs and the index rose "by 0.5% from April to May, after remaining stable the previous month. In May, seven of the 11 CMAs included in the index recorded growth: Halifax (+1.5%), Hamilton (+1.1%), Calgary (+1.0%), Vancouver (+1.0%), Victoria (+0.8%), Toronto (+0.5%) and Quebec City (+0.4%). Conversely, decreases were recorded in Edmonton (-0.7%), Winnipeg (-0.6%) and Ottawa-Gatineau (-0.2%), while prices remained stable in Montreal during the month. On the other hand, increases were observed in fifteen of the 20 CMAs not included in the composite index for which data are available in May. The strongest monthly gains were seen in Saint John (+8.8%) and Lethbridge (+2.1%). Conversely, the biggest declines were in Guelph (-3.0% after a 5.8% rise the previous month) and Sudbury (-2.9%)."

The interesting result here is for Thunder Bay.  Monthly prices between April and May 2024 rose by 2.5 percent but what is more remarkable is the year over year increase for Thunder Bay which puts it at the highest amongst the 14 Ontario CMAs in the Teranet data.   As the accompanying figure shows, Thunder Bay registered a May 2023 to May 2024 increase of 10.42 percent, followed by Brantford at 8.99 percent and then Windsor at 7.82 percent.  Near the bottom are St. Catharines-Niagara, London and Guelph at 1.6 to 0.9 percent annual increases.  The strong showing in Thunder Bay is a function of a number of factors including recent growth in population.  However, population has been growing across Ontario so one wonders if part of the increase is also a function of the fact that Thunder Bay house prices are amongst the most affordable not only in Ontario but Canada as a whole attracting buyers from away.

 

 

All in all, good news for current owners of property in Thunder Bay.  Perhaps a bit more problematic for those in Thunder Bay who wish to get into the market.

Canada's Growing Population: Urban Perspective

 Statistics Canada has released its population estimates for sub-provincial areas as of July 1, 2023 and they show rapid growth in population in Canada as well as all of its Census Metropolitan Areas (CMAs).  As noted by statistics Canada: "On July 1, 2023, the combined population of Canada's 41 census metropolitan areas (CMAs) reached 29,814,146 people. The population growth experienced in CMAs (+3.5%) from July 1, 2022, to July 1, 2023, outpaced that of Canada as a whole (+2.9%). In comparison, census agglomerations (CAs) saw a population growth rate of 2.0%, while areas outside CMAs and CAs grew at a combined rate of 1.1%. These differences are a sign that Canada continues to get more urbanized, as the proportion of Canadians living in a CMA reached almost three in four (74.4%) on July 1, 2023. However, it should be noted that the population growth rate for areas outside CMAs and CAs was at its highest in over 20 years and that 2022/2023 was the third consecutive year in which these regions grew faster than 1.0%."

Naturally, those of us in Northern Ontario have been wondering how much our population has grown and the results show that Thunder Bay and Sudbury have also experienced growth.  In 2023, Greater Sudbury reached an estimated population of  185,230 - up from 180,271 the year previous for an increase of 2.8 percent. Indeed, Sudbury is pretty close to meetings its projected population of 188,510 by 20151 several decades ahead of schedule.  Meanwhile, Thunder Bay - which has been marked by a debate over missing tens of thousands of people in its population tallies - is also up and its CMA appears to have topped 130,000 for the first time coming in at 130,752 for an increase of 1.4 percent over the year previous.  Half of Thunder Bay's population growth since 2001 appears to have occurred in just one year which is remarkable.  Thunder Bay's population has been growing and the estimates do show a much larger number than the official 2021 Census tally but the estimates have always been larger than the census tally.  In 2021 for example, the census tally for the Thunder Bay CMA was 123,258 while the July 1st population estimate by Statistics Canada was 128,040.

As much as Thunder Bay has grown over the last year - adding nearly 2,000 people in one year according to the estimates - its population growth rate for 2022 to 2023 was nevertheless still the lowest of all Canadian CMAs as illustrated in the accompanying figure.  The estimates suggest that the official census headcount based on individuals filling out the census does  underestimate actual population but one is looking at something in the range of about 5,000 people - maybe 10,000 if one wants to be generous about it.  That is still a substantial difference this is due to transient elements of the population less likely to fill out census documents including students as well as Indigenous peoples.  However, it is likely not the tens of thousands that some have argued in the past. One estimate that there are 15 percent more people than the official census count would put our population at over 140,000. 

 

So, Thunder Bay is growing and that is good.  But, it is not growing as much as we think in terms of population and indeed relative to everyone else, it seems to have the slowest growth rate.

What New “Affordable” Housing Looks Like in Thunder Bay

 As the federal government ramps up the billions to address the housing crisis in Canada including $6 billion to construct housing infrastructure. $1.5 billion to protect existing apartment buildings and a $15 billion apartment loan program, one would expect to see progress on the affordable housing front.  In the end, the issue is not really a shortage of housing to either buy or rent but affordable housing.  A glance at assorted real estate site in any city shows a large number of listings either for sale or for rent.  However, when one looks at the price, it is the cost of renting or buying that stands out, not a dearth of listings.

An illustration can be made for Thunder Bay which is seeing a large number of new rental building under construction.  A glance at Rent Panda reveals that some recent building projects are renting for some pretty hefty prices.  Take for example the two north side rentals in Thunder Bay shown below  – 80 Junot which is essentially adjacent to the Picton Street area and across from an EMS station – and 312 Crossbow – which is in a prime north side neighbourhood.  Location aside, both of these new build rental units are two bedrooms and two baths and rent for $2450 and $2400 a month respectively – utilities not included.  Two people earning minimum wage together could expect to earn at best close to $60,000 a year.  The rent alone will take up nearly half of their gross income, never mind the utilities.

Perhaps, south side rents are less?  Well the accompanying slide shows that a new build two bedroom one bath on Mary Street near Neebing Avenue is going for $2,300 a month though it includes water as a utility but likely not hydro.  I guess we could argue that these are all new builds and maybe we should settle for something older.  Well, a three bedroom one bath house on East Christina Street on the south side is renting for $2400 a month.  

The point here is that there is housing available for rent and some of it is new and quite nice but at $2300 and upwards a month and often excluding utilities, it is not affordable housing given the average incomes in Thunder Bay.  Median household income in Thunder Bay is just shy of $80,000 a year which means that half of households earn less than this.  At these rental prices, these below median income households will see close to half of their household income go to rent and utilities.  This is not affordable housing.  This is not geared to income or social housing.  This is where the shortage lies not only in Thunder Bay but across the country.

Will Thunder Bay Meet Its Housing Targets?

 

The Mayor’s State of the City Address last evening highlighted  housing construction in Thunder Bay particularly touting that Thunder Bay within Ontario had met its target so far and ranking tenth amongst Ontario centers (See here for a ranking).  The Mayor reiterated once again that in response to coming economic development and demand, Thunder Bay needed more housing and has a target of 1,691 new homes over three years.  Naturally, the question that arises is whether or not Thunder Bay can indeed meet this target. Much depends on the ability of the local construction sector to actually build that many homes in three years as well as whether the demand will materialize.

 

Forecasting the future these days is a pretty perilous exercise but some insight on the ability of Thunder Bay to build what amounts to nearly 600 new homes a year can be garnered from past performance.  Figure 1 plots monthly Statistics Canada total residential permit data by dollar value and number of permits from 2011 to 2023.  The numbers fluctuate seasonally though there is a spike in 2023.  However,  there are similar spikes in earlier periods.  If you want to smooth things out by taking a average - Thunder Bay has averaged monthly over the 2011 to 2023 period approximately 25 residential permits with an average value of 6.5 million dollars.  Converted  annually, that 25 permits a month translates into 300 units - a bit short.

 

Perhaps rather than permits issued, a better indicator of Thunder Bay’s capacity and ability to build nearly 600 units annually is a longer-term total housing starts series.  Figure 2 plots this from January 1990 to January 2024 and includes a polynomial smooth to highlight trends.  The results suggest that Thunder Bay is indeed capable of building 600 units a year as we have done so in the past.  Indeed, the early 1990s resulting in over 1,000 new housing starts annually.  However, the major obstacle is likely to be not building capacity or ability but demand for new units.  As the smoothed series points point, we are on an uptick that can see about 400 new homes being built in the next year.  Reaching 600 is possible based on the recent past given the smoothed numbers going into the pandemic.  However, as noted, the result is going to be driven also by our economic growth.  Thunder Bay has been doing well economically over the last year but will require sustained performance at this level to generate the needed demand for housing.

 

 

 

Municipal Spending Evolution in Thunder Bay

 

As the 2024 municipal budget season wraps up, it is worth looking at where Thunder Bay has been going over the last decade in terms of the composition of its total municipal expenditures (all spending, tax and grant supported, capital and operating).  Using multi-year financial data (2002 to 2022) from the Ontario Ministry of Municipal Affairs Financial Information Review, one can obtain an overview of the trends.  In 2012, total municipal expenditures in Thunder Bay were 505.4 million dollars and in 2022 they were 599.8 million making for an increase of 19 percent.  Compared to some other municipalities, this was actually a rather modest increase as over the same period, Greater-Sudbury saw an increase of 41 percent, Windsor 26 percent, Barrie 29 percent and Kingston 41 percent.  At the same time, over this entire period, Thunder Bay nevertheless still managed to have the largest municipal expenditure to GDP ratio of these cities.  

 

What is more interesting is the evolution in functional composition.  Figure 1 illustrates that in 2012, the City of Thunder Bay spent 5 percent of its budget on general government, 14 percent on protection of persons and property, 12 percent on transportation, 12 percent on the environment, 5 percent on health and emergency services, 13 percent on social and family services, 9 percent on cultural and recreation services, 2 percent on planning and development and 28 percent on "other".  This last category reflects Thunder Bay’s ownership of its municipal telecom utility (TBayTel) as well as differences in the way Thunder Bay approaches social housing given we have a district board – the District of Thunder Bay Social Services Administration Board.

 

 

 

Figure 2 presents the 2022 composition.  General government showed a decline to 4 percent, protection to persons and property rose to 21 percent, transportation remained at 12 percent as did the environment.  Meanwhile, health and emergency services grew to 7 percent, social and family services declined to 7 percent, and both recreation and culture and planning and development remained the same at 9 percent and 2 percent respectively.  Meanwhile, the "other" category's share declined to 26 percent.  

 

 

 

Of course, for the composition to change, it means that these categories have grown at different rates and so Figure 3 presents the percent change in total spending by category over the 2012 to 2022 period.  In accord with general local perceptions, the largest increases in spending have indeed been in protection services and health and emergency services at 76 and 73 percent respectively.  Next is recreation and culture at 25 percent, followed by the environment at 14 percent, planning and development at 13 percent, "other" at 12 percent and transportation at 11 percent.  There were two categories that saw declines in total spending: general government fell by 6 percent (there have indeed been some administrative economies) while social and family services fell by 32 percent.  

 

 

 

Given that social issues have been front and center in Thunder Bay over the last few years, this allocation does provide some insight into how Thunder Bay is dealing with some of its social issues.  Resource allocation appears to have targeted the more direct outcomes and fallout of the assorted social ills afflicting the streets of Thunder Bay.  This is to be expected.  What is somewhat more disturbing is that there has been an expenditure drop in family and social services which one might expect would be a longer-term spending approach to addressing some of the causes of social issues.  Whereas, in 2012, 64.4 million was being spent on family and social services, this has declined to 44 million by 2022.  

 

It is interesting to note that of the five cities mentioned at the start of this post, between 2012 and 2022, Thunder Bay saw the largest percent increases in dollars spent on protection to persons and property as well as health and emergency services.  With respect to spending on family and social services, only Barrie saw a decline while Greater-Sudbury, Windsor and Kingston all saw increases.  Windsor, Barrie, Greater-Sudbury, and Kingston also all  increases in social housing spending (though Greater-Sudbury's was quite small). However,  in the case of Thunder Bay it is difficult to tell from these numbers if we are indeed spending more in social housing in the "other" category.  Ultimately, such differences across urban centers will provide an interesting laboratory experiment on how municipalities are dealing with issues like poverty, addiction and crime.

Measuring Municipal Public Sector Size

 

Public sector size and its impact on the economy is a long-standing research question in public finance.  In the case of Canada with its federal system of government, measures of public sector size often focus on either total public sector size or break it down into measures of federal and/or provincial public sector size.  These measures commonly take government spending or government revenues as a share of GDP to estimate the size of the public sector footprint.  Less common are attempts to related municipal public sector size to the size of their local economies.

 

Data is always an issue when trying to get an empirical handle on measuring things like public sector size.  Fortunately, in the case of Ontario municipalities, it is possible to get annual data on total municipal government expenditures and revenues from the Ontario Ministry of Municipal Affairs Annual Financial Information Returns which are filed by municipal governments.  Also fortunate is that Statistics Canada now provides some estimates of GDP for major census metropolitan areas going back to 2009.  While the data is a bit onerous to compile and put together, the preliminary results for Thunder Bay and three other Ontario municipalities are interesting.

 

Figure 1 plots total municipal expenditure as a share of CMA GDP from 2009 to 2022 for Thunder Bay, Greater Sudbury, Windsor, and Barrie.  These are relatively smaller Ontario urban centres well outside the GTA/Niagara region with two in northern Ontario.  Greater Sudbury is always an automatic comparison for Thunder Bay on many levels given that it is the largest city in northern Ontario with Thunder Bay second.  Also, note that for 2021 and 2022, GDP was estimated using the annual average growth rate of GDP for the 2010 to 2020 period.

 

 

 

The results reveal that total municipal expenditures in these four cities as a share of GDP reveal that Thunder Bay has a larger municipal footprint than the other three.  Over the entire period 2009 to 2022, Thunder Bay’s municipal expenditure to GDP ratio averages 9 percent while Sudbury is at 6 percent, and Windsor and Barrie each at 5 percent and 4.7 percent respectively.  In terms of trends over time, since 2011, Barrie has been trending slowly downwards, Windsor is stable, Sudbury has been growing while Thunder Bay managed a small decline that was reversed during the pandemic.  Indeed, the two end points of this chart are both associated with economic trauma in that the start is marked by the aftermath of the Great Recession and Financial Crisis and the end by the COVID-19 pandemic.

 

Nevertheless, the results suggest that based on this albeit limited sample, the two northern Ontario municipalities have larger municipal public sectors than ones in southern Ontario. Even within the north, Thunder Bay is certainly in a league of its own when it comes to the size of its municipal footprint.  Some of these differences across the cities can of course be ascribed to the generally more robust southern Ontario economic environment and better economic growth performance which naturally spills over into GDP.  At the same time, Thunder Bay is different, and the question as always is why?

 

One might argue that the municipal public sector in Thunder Bay is larger than these other cities because it has a weaker economy.  Given that so much municipal spending is mandated or guided by the province, Thunder Bay does not spend more per se but does relative to the size of its economy.  This is the “province makes us do it defence”.  On the other hand, one could argue that more spending is also a choice and Thunder Bay and the Lakehead cities that preceded it have always because of their isolation engaged in more municipal spending to provide services they feel ought to be available.  In this regards, part of the difference between Thunder Bay and other cities lies in municipal utilities given that the City of Thunder Bay essentially owns TBayTel- its own municipal telecom utility.

 

In some sense, neither explanation is terribly flattering in explaining why Thunder Bay’s municipal public sector can be nearly twice as large as that in some other southern Ontario cities.  We have a weak economy which despite all efforts continues to be weak and our municipal government plays the role of an economic stabilizer.  Or, ownership of TBayTel aside, we may simply like to spend more than other cities and are quite comfortable with the City of Thunder Bay being as large an economic driver as it is.  One suspects both these explanations are potentially inconvenient truths no one in Thunder Bay really wants to hear.

Ranking Thunder Bay's Tax Levy and More...

 

It is municipal budget season in  Ontario and Canada and this year’s proposed budget increases appear to be quite large.  Toronto, for example, has proposed a 10.5 percent tax increase while Hamilton initially was looking at a 14 percent increase. Vancouver is going up 7.5 percent while Montreal seems set to go up 5 percent which while seemingly modest given the comparisons described here is nevertheless Montreal’s largest increase in 13 years. And then there is Thunder Bay which for 2024 is proposing a 6.1 percent increase in the total tax levy which “after growth” will be 5.5 percent. 

 

While one might argue that Thunder Bay's increase seems modest compared to these other metropolises, much like the case of Montreal, the more apt comparisons are with the past rather than other cities.  Even in the case of Ontario municipalities, there are differences in municipal structure with Thunder Bay as a single tier municipality not always directly comparable to other cities – the famous apples versus oranges argument city administrators usually bring up at budget time.  Ultimately, one needs to look at how Thunder Bay’s tax levy and proposed levy increase stacks up against past ones.

 

Figure 1 plots a two-axis chart of the total tax levy as well as the dollar change in the levy from year to year going from 1990 to the proposed 2024 figures.  In 1990, the tax levy was 63.4 million dollars while today the proposed amount for 2024 is 231.7 million dollars.  And of course, this is just the tax levy and not the total budget which is funded by both tax levies and government grants and comes in including operating and capital at a combined total of approximately 538 million dollars.  The trend has been upwards with an increase every year with the exception of 1995 which appears to have seen a drop in the levy of 1.3 million dollars.  The proposed increase for 2024 is 13.3 million which is well above the average annual increase for the 1991 to 2024 period of 4.95 million dollars.

 

 

 

How does this year’s percentage increase in the tax levy stack up to past ones? Figure 2 plots each percent increase in the total tax levy from 1991 to 2024 ranking them from highest to lowest and at 6.1 percent, the proposed 2024 levy increase is the 5^th highest in over thirty years (but second highest in strict absolute dollar terms). The increases range from a high of 21.8 percent in 1998 to a low of -1.7 percent in 1995.  All other things given this year’s proposed increase is at the higher end of the range in percentage terms.

 

 

 

Of course, it is often argued that the reason taxes go up apart from new needs or mandated responsibility increases from the province is a general rise in costs driven by inflation. Inflation certainly has been in the headlines the last year, so it is worth checking out the correlation between the CPI inflation rate for Thunder Bay and the percent change in the tax levy.  Oddly enough, when a linear trend is fitted to the scatter plot of tax levy increases versus the inflation rate, the relationship appears to be slightly negative – that is, higher inflation rates were correlated with lower tax increases. 

 

However, one could argue that these results are driven by 1998 with its 21 percent levy increase (If you recall the late 1990s was an era of municipal restructuring with changes in how taxes were allocated between residential and business and also local education and of course social service downloading).  However, if you omit that year as an outlier, what you get is essentially a flat curve.  That is, the rate of inflation does not seem to drive the rate increases.  They are being driven by other factors and since we don’t know what we don’t know, those factors are best left up to city administrators who are in the know about what they may or may not know.  Nevertheless, do not expect a straightforward answer as the factors over and above inflation are indeed complicated.

 

 

 

Many people find the budgeting process of the City of Thunder Bay (and indeed municipal governments in general) rather arcane and overly complicated.  Indeed, even those of us with a public finance background find municipal budgets particularly confusing and exasperating as they are indeed laid out in a manner that does not inspire clarity.  They look nothing like a federal or provincial budget which a least provide a one- or two-page table easily summarizing revenues and expenditures.  Now one may argue that this is not good for local democracy if ratepayers do not understand municipal finances because they are not readily transparent. 

 

This is where the ratepayer errs.  This is actually not about democracy.  It is about the needs of the corporation and corporations are perpetually lived entities with limited liability and interested in their own financial preservation.  They respond more often to the money rather than to voter pressure.  The phrase “You Can’t Fight City Hall” does not exist for no reason.  Remember, like other municipalities, our city government is The Corporation of the City of Thunder Bay.  Despite popular sentiment and belief, municipalities in Canada are not independent tiers of government but creatures of the provinces.  Local service provision has essentially been contracted out by provincial governments to municipal corporations.  The democratic accountability for municipal government ultimately lies in provincial elections rather than local ones. 

 

City councils are essentially boards of directors, and they serve to demonstrate responsibility for corporate direction but little else in terms of day-to-day finance and operations.  True, ratepayers engage with the corporation by selecting the board of directors in elections and participating in numerous surveys and public consultations but then any corporation worth its salt always is doing customer satisfaction surveys.  The real business and complex operations geared around the financial operations of the corporation is conducted by its officers and employees and generally behind closed doors. 

 

The members of the board - our councilors – are essentially a large focus group attempting to promote public relations engagement in a theatrical setting for the people the corporation ultimately derives its revenue from and provides services to. That usually explains why so much of council meeting’s time is usually taken up by discussion of minor manners that galvanize emotions (time to change street names again anyone?) and complicated large multi-million-dollar decisions seem to occur quickly on the advice of administration. There are exceptions when fate delivers exceptionally persistent and informed councilors - witness the turf facility debate to date - but corporate administrations play the long game and eventually wear out the opposition.

 

Even the current review of the size and structure of Thunder Bay City Council is largely designed to create a sense of public engagement with the process rather than any actual decision making.  Remember, Thunder Bay was created by an act of the provincial government.  Thunder Bay can certainly try and change its system of municipal representation and structure, but the province will have the ultimate say and the corporation will implement that.  Remember Toronto in 2018?  The number of wards  (and councilors) was reduced nearly 50 percent in the middle of a municipal election but not as a result of a grass roots consultation but by the provincial government because they wanted to and they could.

 

The point of all this?  The City of Thunder Bay needs a 6.1 percent in the total tax levy to fund its operations and tinkering around the edges aside, will get most of that increase.  And will we get a revamped municipal ward and councilor structure? Certainly. But only if the province goes along with it.