NORTHERN ECONOMIST 2.0

Sunday 21 October 2018

Pictures of a Presentation

I did my Lakehead University In Conversation presentation in the Fireside Room at the Brodie Library yesterday. My talk was titled "Going from Chicago to Duluth of the North: Thunder Bay’s Economy in the Past, Present, and Future," and was quite well attended with about 30-35 members of the community present including old friends, new friends and even several candidates for municipal office. Lakehead's In Conversation series is a very important venue for sharing university research and expertise with the broader community and an important form of engagement. A couple of pictures below including some shots of your Northern Economist in action. Thanks to Peter Boyle for passing on some of the shots.

And of course, a photo with Peng You.

I will be posting the slides sometime later this week here on my LU Department web page.

Wednesday 17 October 2018

Thunder Bay's Economic Evolution: A Brief History

From its origins as a fur trade company headquartered at Fort William, to the development of the grain and forest sectors, Thunder Bay’s economy has seen ebbs and flows over the course its history. Key to its modern economic development was the federal government decision to route the Canadian Pacific Railway through the Lakehead and the arrival of the transcontinental railway in the 1880s. Indeed, without this explicit government intervention it is unlikely Thunder Bay would have developed into a city as large as it is today. Government action in assorted forms has been one of the pillars of Thunder Bay’s economy.

Transportation is another pillar of Thunder Bay’s economy. During the first decade of the twentieth century, there was a massive boom rooted in infrastructure building for the transport needs of the western Canadian grain economy that saw the twin Lakehead cities of Port Arthur and Fort William become the largest grain port in the world. At its peak, over 30 grain terminals lined the waterfront. Indeed, growth was so rapid that many believed the Lakehead would become the Chicago of the North. Population quadrupled between 1901 and 1911 and the real per capita value of new construction was never higher than during this period.

Yet, as the twentieth century wore on, there was growing realization that as well as Thunder Bay was doing, it was not going to be the Chicago of the North. The remainder of the twentieth century saw continued but slower growth and Thunder Bay’s ultimate evolution was more akin to Duluth Minnesota – the American Lakehead – rather than Chicago. Thunder Bay’s economic growth slowed in the wake of World War I and the Great Depression and resumed during the resource boom of the 1950s and 1960s. Indeed, natural resource extraction and processing whether forestry or mining have always been another pillar of Thunder Bay’s economy.

Port Arthur and Fort William amalgamated to form Thunder Bay in 1970 ending the urban competition that in retrospect appears correlated with better economic performance given the economic slowdown that ensured. After 1970, labor saving technological change, aging capital stock, a shift in world grain markets and increasing international competition also eroded the competitiveness of Thunder Bay’s grain transport and forestry sectors culminating in the forest sector crisis, which saw substantial job losses in Thunder Bay and the surrounding region. These job losses were aggravated by high energy costs with respect to electricity which were especially damaging to the energy intensive pulp and paper sector. Total employment in Thunder Bay has never recovered from the peaks reached in the first years of the twenty first century.

In the wake of the forest sector crisis, recent years have seen a stabilization of the Thunder Bay economy and a shift in its composition towards employment in research, regional health and social services, and higher education. This base continues to support a growing range of retail and service activities particularly in hospitality and accommodation oriented around a growing tourism scene that has drawn some international attention. Nevertheless, economic growth has been slower compared to the rest of Canada and Ontario. While the unemployment rate in Thunder Bay is low, it is because the labor force has shrunk faster than employment as a result of an aging population and youth out-migration. Population in Thunder Bay peaked in the 1990s and has declined slightly since. While the First Nation’s population has been expanding, its future economic engagement hinges on the long-term success of initiatives to expand human capital via education and training.

As for the future, tomorrow is yesterday as Thunder Bay’s economic future will still rely on its traditional three pillars – government, transportation and natural resources. These pillars will of course make use of new knowledge and technology and will require innovative entrepreneurial vision to recognize and implement new opportunities. Thunder Bay’s transportation infrastructure and its pivotal location on the east west transport corridor, the role of regional government services and the ongoing potential of the mining sector combined with information technology and the knowledge economy will be the economic forces propelling its future.

A version of this article was originally composed for Lake Superior News appearing there October 16^th in advance of the October 20^th Lakehead University In Conversation Talk at Brodie Library titled Going from Chicago to Duluth of the North: Thunder Bay’s Economy in the Past, Present, and Future.

Friday 12 October 2018

Municipal Spending Ranges by Key Categories in Northern Ontario Cities

Given the ongoing municipal election campaigns in Ontario, I have been focusing a fair amount of my blogging activity on municipal public finance issues. In a recent post, I looked at the Net Municipal Levy Per Capita (NMLPC ) for the five major northern Ontario cities for the years 2007 and 2017. In 2007, the NMLPC was highest in Thunder Bay at $1,216 and lowest in Sudbury at $1,041. By 2017, spending was highest in Timmins at $1,651 (with Thunder Bay second at $1,641) and lowest in Sault Ste. Marie at $1,434. If one compares the growth rates in the per capita levy, they were actually highest in Timmins at an average of 4.6 percent annually and lowest in Thunder Bay at 3.5 percent annually. I also compared the growth of the NMLPC to household income growth and showed that per capita municipal spending has been rising faster than average household income raising the question of sustainability.

In this post, I want to drill down a bit in the total expenditure numbers and compare spending for these five major northern Ontario cities in a number of key municipal expenditure categories. The data is from the 2017 BMA Consulting Municipal Report and was available for key expenditure categories in terms of the levy for the category per $100,000 of municipal tax assessment. In order to standardize comparison, I have reproduced the net levy graph (Fig 1) but per $100,000 of assessment rather than per capita as in the last post. To this I have added graphs comparing general government (Fig 2), fire (Fig 3), police (Fig 4), paved roadway spending (Fig 5) and winter control (Fig 6). Keep in mind that this is data for only one year and there are differences in population size and geographic spread across these five cities as well as any unique local circumstances that may affect spending.

Nevertheless, the results are illuminating in that there is no one size fits all pattern of spending across these five communities when it comes to these key municipal expenditure categories. The net levy per $100,000 of assessment ranges from a high of $2,136 in Timmins to a low of $1,482 in Sudbury. Thunder Bay spends the most on general government (i.e. administration) at $257 per $100,000 of assessment and Timmins the least at $65. North Bay spends the most on fire services at $283 per $100,000 of assessment and Sudbury the least at $160. In terms of policing, Thunder Bay spends the most at $503 per $100,000 of assessment and Sudbury the least at $320.

When it comes to paved roadway expenditure, Sudbury spends the most at $258 per $100,000 of assessment and Sault Ste Marie the least at $101. Finally, all five of these cities experience harsh winters and the need to plow roads and when you look at winter control spending, Timmins spends the most at $237 per $100,00 of assessment and Thunder Bay the least at $48 per $100,000 of assessment. This last category however is the most likely to be the subject of large fluctuations from year to year given local weather conditions. My guess is the winter of 2017 was pretty bad in Timmins.

Overall, there are large differences in spending across these categories across these five cities. The spending in these categories on average across these five cities in 2017 accounted for about two-thirds of the net levy – a significant proportion. It would be interesting to know what the incidence of fires is in North Bay and Thunder Bay given the size of the expenditure in these communities compared to the others. Given high homicide rates in Thunder Bay, it is understandable perhaps why it spends the most of police of these five cities. Yet, given that the average proportion spent on governance in these five cities is about 8 percent of the net levy, one wonders why Thunder Bay spends 14 percent and the Sault is at 11 percent compared to say 3 percent in Timmins or 9 percent in Sudbury.

Ratepayers in each community should be asking themselves how their community compares to the others and what may be driving the differences. Is the best value for money being provided?

Tuesday 9 October 2018

Trying to Understand Thunder Bay's 2018 Municipal Election Campaign

It is perhaps a sign of advancing age that I am finding it increasingly difficult to understand what Thunder Bay’s municipal election campaign is actually about. I found the 2014 municipal election to simply be a wasted election as despite issues like municipal fiscal sustainability, the Kam River Bridge, and the sale of public assets, the entire election was simply fixated on the events centre. This time around, the long-term fiscal sustainability of municipal finances is still an issue as is the Kam River Bridge to which can be added the city’s social fabric as well as Thunder Bay’s economic development and yet to date it appears to have become – and here I suppose I am dating myself again - a Seinfeld Election. That is, despite what are acknowledged by many to be a host of issues, it appears to be an election about nothing in particular.

Aside from campaign signs dotting the landscape at strategic street corners, I have met only one candidate on my doorstep and only two have left literature. I have yet to become aware of any scheduled public debates. This is during the course of a campaign with a record number of candidates – 11 for the position of Mayor alone with another 26 vying for the At-Large councilor positions – which no doubt complicates the traditional debate framework. Indeed, how can we have a meaningful discussion in which 11 candidates for Mayor can outline how they see the state of the city and offer analysis and solution? Incumbents for the At-Large positions must be silently laughing all the way to the proverbial bank given the difficulty of numerous candidates swimming like so many salmon upstream to stake out a position and gain visibility.

With traditional election campaigns difficult to conduct, this appears to have become Thunder Bay’s truly first complete social media election campaign which complements the debut of internet voting nicely Many of the candidates – but not all - appear to have developed extensive web presences and have Facebook profiles full of photos and videos showing smiling candidates in assorted municipal action poses. There are catchy slogans and mission statements that describe themselves as accountable community activists, serious leadership, concerned with the social fabric, and even showing transformative leadership.

There are candidates claiming to be working for you, others putting Thunder Bay first or working together for a Thunder Bay that works, some posing with old family friends and seniors, and many updated profile photos showing youthful smiling vigour. If they have received endorsements, they are highlighted along with any favorable media coverage. Indeed, if one were to judge Thunder Bay by the Facebook profiles of its municipal candidates one could only conclude that our community is definitely one big happy place full of wonderful smiling people whose major source of gainful employment is posing for pictures.

There are even some alliances being formed between candidates as they campaign together. There is one slate of five councilor At- Large candidates that aims to put people and the planet first under a time for change slogan. Then there is another alliance between one incumbent and one new entry in the At-Large race that is marketing itself as political twins working for you. I suppose this is a political variant of a two for the price of one marketing ploy. Or perhaps, vote for one, get one free.

In the end, all of this seems to me to be mainly style over substance. Needless to say, election campaigns have always been dominated by style over substance with serious policy discussion seen as a dangerous luxury – especially for incumbents. In the end, polite conversation at least in the social circles I move in appear to have narrowed down the issues in this election to three: a need for major change in representation given that many on council are long in the tooth, taxation rates and cost-effective municipal services, and social issues with an emphasis on crime and public safety. If this is not be another wasted election, we need candidates to address how they would reduce crime and improve the social fabric and how they would pay for it given what has been a steadily rising municipal tax burden that has shifted largely to the residential ratepayer. We cannot afford to waste another election.

Thursday 4 October 2018

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.