Moreover, it should be
noted that this is not an overall operating surplus but a “tax-supported”
surplus meaning that there is a surplus on the tax supported side of municipal expenditures. This is an important distinction because while
it is a “tax reported” surplus, the variance is being reported as a percentage
of the total net operating budget (2.3% of $240.1 million) and the total gross
operating budget (1.6% of $358.7 million).
Given that municipal tax revenues in 2017 were $183.987 million, the
variance can also be reported as a percent share of that which comes out to 3 .04
percent – a much larger number. Indeed,
I would argue that this is the correct variance number.
Northern Economist 2.0
Friday 25 May 2018
Large Municipal Operating Surpluses Do Not Always Mean You Are Good at Budgeting
The City of Thunder
Bay’s final 2017 budget surplus is apparently
now double what was originally projected. Whereas a $2.8 million year-end
surplus had been forecast in January, it has now apparently grown to $5.6
million dollars. Note that when the budget
was approved last year, there would not have been a projected surplus as
at the municipal level projected revenues need to match projected expenditures.
Thursday 24 May 2018
Wealth Inequality in the North Atlantic Anglosphere
I have been working on historical wealth and wealth inequality for most of my career and have put together a lot of my thinking and long-term analysis together in one spot - a new book published by Palgrave MacMillan in their Pivot series. The ebook edition was released several days ago and is available on the Palgrave site. The hard cover version should be available at the end of June or early July. If you want a short overview of the book, I put together a post for the Palgrave Exploring Economic History Blog that provides a nice summary of the book and some of its main ideas. An excerpt from the blog:
"Before 1750, wealth inequality was higher in the United Kingdom than the United States, but American inequality grew rapidly to match the United Kingdom by mid-nineteenth century. The preindustrial period was marked by lower wealth inequality in both the United States and the United Kingdom. The subsequent era of industrialization is marked in all three Anglosphere countries by rising wealth inequality. Wealth inequality declined in the twentieth century with redistribution away from the top one and ten percent. The decline in wealth inequality halted in the 1970s but with a rebound in American wealth inequality.
For the United Kingdom, the top 1 percent wealth share rose from an average of 25 percent in the pre-1850 period to 64 percent for the 1850 to 1900 period. More remarkably, the average share of wealth held by the top ten percent of the wealth distribution in the second half of the nineteenth century was just over 90 percent in the United Kingdom, approximately 72 percent in the United States and about 56 percent in Canada. By the early 21st century, Canada and the United Kingdom have their top ten percent with approximately 50 percent of wealth and the United States over 70 percent. Meanwhile the top one percent own just under 20 percent in Canada and the United Kingdom while in the United States the share is closer to 35 percent.
The twentieth century mitigation of wealth inequality correlates with several factors: rates of economic growth closer to the rate of return on capital, increased unionization rates, rising public spending on health and education, larger public sectors, increased home ownership rates, the onset of substantial estate taxation, more progressive income tax systems and in the case of the United Kingdom a housing policy that resulted in the disposition and dispersion of much public housing into private hands. A reduction in the strength of unions as measured by unionization rates as well as the end of estate taxation and less progressive income tax systems is associated with more economic inequality since the 1970s especially combined with lower economic growth rates relative to the return to capital."
You can also get quite a few bits of the book on Google Books if you want a free preview. The book surveys the evolution of wealth inequality as measured by the Gini Coefficient and the wealth shares of the top 1% and top 10% for Canada, the United States and the United Kingdom. A quick sample of one of the figures below on the wealth share of the top 1 percent in the United States from 1774 to 2012.
"Before 1750, wealth inequality was higher in the United Kingdom than the United States, but American inequality grew rapidly to match the United Kingdom by mid-nineteenth century. The preindustrial period was marked by lower wealth inequality in both the United States and the United Kingdom. The subsequent era of industrialization is marked in all three Anglosphere countries by rising wealth inequality. Wealth inequality declined in the twentieth century with redistribution away from the top one and ten percent. The decline in wealth inequality halted in the 1970s but with a rebound in American wealth inequality.
For the United Kingdom, the top 1 percent wealth share rose from an average of 25 percent in the pre-1850 period to 64 percent for the 1850 to 1900 period. More remarkably, the average share of wealth held by the top ten percent of the wealth distribution in the second half of the nineteenth century was just over 90 percent in the United Kingdom, approximately 72 percent in the United States and about 56 percent in Canada. By the early 21st century, Canada and the United Kingdom have their top ten percent with approximately 50 percent of wealth and the United States over 70 percent. Meanwhile the top one percent own just under 20 percent in Canada and the United Kingdom while in the United States the share is closer to 35 percent.
The twentieth century mitigation of wealth inequality correlates with several factors: rates of economic growth closer to the rate of return on capital, increased unionization rates, rising public spending on health and education, larger public sectors, increased home ownership rates, the onset of substantial estate taxation, more progressive income tax systems and in the case of the United Kingdom a housing policy that resulted in the disposition and dispersion of much public housing into private hands. A reduction in the strength of unions as measured by unionization rates as well as the end of estate taxation and less progressive income tax systems is associated with more economic inequality since the 1970s especially combined with lower economic growth rates relative to the return to capital."
You can also get quite a few bits of the book on Google Books if you want a free preview. The book surveys the evolution of wealth inequality as measured by the Gini Coefficient and the wealth shares of the top 1% and top 10% for Canada, the United States and the United Kingdom. A quick sample of one of the figures below on the wealth share of the top 1 percent in the United States from 1774 to 2012.
Anyway, it has been great working with Palgrave MacMillan and its staff in putting this project together and seeing it through. Am glad to see the book out.
Labels:
anglosphere,
canada,
inequality,
palgrave,
UK,
USA,
wealth
Friday 18 May 2018
Ontario's Political Future: Yours to Discover
Ontario’s election may very well be decided over the next few days as Ontarians pause to take in the long weekend and use it to step back and ruminate over the political future of the province. One of the most recent polls reveals that the PCs are poised to form a majority government with 40 percent support. However, what is also interesting is that over the last little while this poll shows that Liberal support has plummeted to 22 percent while NDP support has soared to 35 percent. All this suggests that there is still a certain amount of volatility amongst the voters as we head into the home stretch of campaigning into the June 7th election.
So, what do
Ontarians want? On the one hand, the
recent policy initiatives of the Ontario Liberals are popular across a large
swath of Ontarians especially in the larger urban centers. Investments in transit and infrastructure,
the raising of the minimum wage, rent control, more health spending and a
general activist government approach to social and economic policy seem to be
what many Ontarians want. Indeed, these
policies are much like those the NDP is advocating and if one combines the
Liberal and NDP totals it is obvious that 55 percent of Ontarians seem to want
some type of centre-left approach to government and the economy.
It seems
that many Ontarians want Liberal-NDP type policies but seem tired of having them
implemented by the Liberals and particularly by Premier Wynne. Kathleen Wynne is undoubtedly the most capable of the
three leaders in terms of her handling of issues and her analysis and
discussion of policy issues. Yet, she is
also quite driven and intensely focused with a sort of self-absorbed messianic
zeal that can be interpreted as exclusionary to alternate opinions. The
Liberals have been governing since 2003 and Ontarians who like centre-left policies
and would like to see a change in government are likely to shift to the NDP –
hence the Andrea Horwath-NDP surge.
As for the
PCs, their policy platform has been less clear and it is difficult to see if
they really are driven by conservative values and policies or are now simply a
change party driven by the personality of their leader. Doug Ford has a much larger appeal than urban
elites in the Toronto-Ottawa corridor would have expected and his support is
also diverse. However, to date the
policies and changes the PCs might bring to government have not been as clearly
articulated as those of the other two leaders.
Much of the campaign is really a populist drive for change with a
rhetoric directed at the “little guy” to contrast with perceptions of the
Liberals as elitist.
Put another
way, you know what you are going to get if the Liberals form the government –
more of the same. If the NDP form the
government, it will be essentially the same policies but more so and with a new
leader. In terms of fiscal management,
there will be a very elastic budget constraint for years to come from either
the Liberals or the NDP. Yet it should
also be noted that, to date none of the three leaders seem particularly concerned
about the state of the province’s finances and one does not see the province’s
debt abiding anytime under either Wynne, Horwath or Ford.
If the PCs
form the government, it is not so clear what you are getting in terms of policy
approaches to social and economic policy as well as fiscal management. One might assume that as PCs, there will be
an emphasis on deregulation or more efficient government but this is not
clearly apparent to me. There have been a number of promised tax cut announcements but this is not the same as a coherent tax reform strategy. Yet, making it
clearer might also coalesce support more strongly around one of the two
centre-left options. At this point, the
PCs appeal cuts across a wide socio-economic range and perhaps their strategy
is to promise change but not get too specific and split the left.
So, what is
an Ontarian to do this long weekend as they think about the province’s
future? It should be to think long and
hard about the direction of the province in terms what is the coherent big
picture vision of the economy and the province’s finances these three main
party leaders are offering. To date, the
campaign has focused on disjointed announcements of spending and programs
designed to target key ridings or voter demographics. The money to pay for all of this is not a concern. Ontarians of course deserve much more than
this but are unlikely to get it. All
three leaders seem to believe that elections campaigns are not the time to
articulate coherent economic and fiscal visions.
Sunday 13 May 2018
When Will the Trans-Canada Be Completely Four-Laned Across Northern Ontario?
Ontario's provincial election campaign is in full swing and Thunder Bay Liberal party candidates and cabinet ministers announced the Liberal party's northern platform on May 11th. A key highlight of the plan was to completely four-lane the Trans-Canada Highway throughout the province from the Manitoba border to the Quebec border. As we all know, after years of lobbying going back to the 1980s and early 1990s, four-laning of northern Ontario highways finally commenced and has been underway for a number of years in two key areas - Thunder Bay to Nipigon as well as from Sudbury to Parry Sound. So, my question is - if we want to completely four-lane the Trans-Canada Highway, how long will it take to fully four-lane the Trans-Canada in northern Ontario?
So here is a quick back of the envelope estimate. Let us assume only the "southern" route will be completely four-laned. This is a 1,628 km stretch (based on Google maps) going from Kenora to Parry sound via Thunder Bay-Nipigon-Marathon-the Sault-Sudbury and Parry Sound. The stretch from Thunder Bay to Nipigon is about 109 km long with the commitment to four-laning announced in 2009. As of spring 2018, 30.2 km has been completed and another 19.5 km are underway. Based on the 30.2 km completed to date and a nine year completion date, we are looking at 3.3 km a year. If we want to be charitable and include the 19.5 km underway, then we are looking at about 50 km over 9 years or approximately 5.5 km per year as the highway completion rate.
The stretch from Sudbury to Parry Sound - part of the old Highway 69 - is 173 km long (again using Google maps). The provincial government announced the four-laning of Highway 69 in 2001 and to date 70 km from Parry Sound south to Port Severn have been completed and about 70 km from Parry Sound north to Sudbury is either complete or underway with the aim to be done by 2021. This still leaves quite a bit of highway to be started and apparently the remainder is in the engineering and property acquisition phase. So, based on the total of 140 km completed (including Port Severn to Parry Sound) since 2001 with completion scheduled for 2021, this means 140 km over 20 years or 7 km per year. The pace of northern Ontario highway four-laning is a little faster south of Sudbury.
So, take the total distance of 1,628 km and subtract what is underway or completed and you have about 1,438 km left to go. Let's make it a nice 1,400 km left as there already is some four-laned highway near the Sault and Kenora also. If we average the Thunder Bay-Nipigon and Highway 69 four-laning speeds, we get 6.25 km per year as the pace of highway four-laning in northern Ontario. At this pace, it will take 224 years to completely four-lane the remainder of the southern route from Kenora to Parry Sound bringing us to the year 2242. This as many of you should know is about 20 years before the events of Star Trek the original series which is supposed to take place between the years 2265 and 2269.
Needless to say, its going to be a long road, getting from there to here. Saying you are going to need faith of the heart to get there is probably an understatement.
So here is a quick back of the envelope estimate. Let us assume only the "southern" route will be completely four-laned. This is a 1,628 km stretch (based on Google maps) going from Kenora to Parry sound via Thunder Bay-Nipigon-Marathon-the Sault-Sudbury and Parry Sound. The stretch from Thunder Bay to Nipigon is about 109 km long with the commitment to four-laning announced in 2009. As of spring 2018, 30.2 km has been completed and another 19.5 km are underway. Based on the 30.2 km completed to date and a nine year completion date, we are looking at 3.3 km a year. If we want to be charitable and include the 19.5 km underway, then we are looking at about 50 km over 9 years or approximately 5.5 km per year as the highway completion rate.
The stretch from Sudbury to Parry Sound - part of the old Highway 69 - is 173 km long (again using Google maps). The provincial government announced the four-laning of Highway 69 in 2001 and to date 70 km from Parry Sound south to Port Severn have been completed and about 70 km from Parry Sound north to Sudbury is either complete or underway with the aim to be done by 2021. This still leaves quite a bit of highway to be started and apparently the remainder is in the engineering and property acquisition phase. So, based on the total of 140 km completed (including Port Severn to Parry Sound) since 2001 with completion scheduled for 2021, this means 140 km over 20 years or 7 km per year. The pace of northern Ontario highway four-laning is a little faster south of Sudbury.
So, take the total distance of 1,628 km and subtract what is underway or completed and you have about 1,438 km left to go. Let's make it a nice 1,400 km left as there already is some four-laned highway near the Sault and Kenora also. If we average the Thunder Bay-Nipigon and Highway 69 four-laning speeds, we get 6.25 km per year as the pace of highway four-laning in northern Ontario. At this pace, it will take 224 years to completely four-lane the remainder of the southern route from Kenora to Parry Sound bringing us to the year 2242. This as many of you should know is about 20 years before the events of Star Trek the original series which is supposed to take place between the years 2265 and 2269.
Needless to say, its going to be a long road, getting from there to here. Saying you are going to need faith of the heart to get there is probably an understatement.
Wednesday 9 May 2018
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.
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