More Information Is Better: Too Bad Politicians Seem to Have a Double Standard

 

Several days ago, a member of Thunder Bay City council raised the issue of asking the Thunder Bay District Health Unit for a more detailed breakdown of location when it came to the reporting of COVID-19 cases.  In particular, the councilor in question wanted the numbers and cases just for Thunder Bay alone reported separate from its surrounding communities given that with a population of 109,000, there was no real way of ascertaining identities and he felt it would be helpful for residents to know.  While one might be tempted to conclude it was simply a slow evening at City Council, in fact this has become more of an issue in recent days given the spike in cases.

 

The councilor in question has a point.  At present, the TBDHU provides only the broadest of descriptions of where individuals reside and the circumstances around the exposure.  At the same time, the TBDHU has actually been announcing specific locations associated with outbreaks within the region when necessary – a case in point this week as 17 COVID-19 cases were connected to the Adult Teen and Challenge facilities in Thunder Bay. However, a breakdown of location to Thunder Bay, Thunder Bay Surrounding Area, District Communities and First Nation Communities does not appear to be a violation of privacy laws.  Moreover, when travel is mentioned as a source of the infection, it would be helpful to know if it was travel within northern Ontario, travel outside northern Ontario but within the province of Ontario, inter-provincial travel or international travel.

 

While the councilor’s call for more information is laudable, he is in some respects being inconsistent - to say the least.  After all, along with the COVID-19 pandemic underway, Thunder Bay is also experiencing a pandemic of plumbing and water line leaks which may be linked to the introduction of sodium hydroxide into city water in 2016 to mitigate lead.  Despite numerous pleas for assistance and information, the City of Thunder Bay has provided no information as to the extent of the problem, how many homes have been affected, or what neighborhoods are most affected.  Such information might help homeowners know if they are at greater risk of leaks than others and take mitigating steps but instead, we are all being left to social media to acquire information.  If the City of Thunder Bay was managing COVID-19 information in this manner, more people would die.

 

If the Thunder Bay District Health Unit in the face of mounting cases of infection refused to provide any information whatsoever, it would be seen as irresponsible and contributing to the spread of the disease and its mortality and morbidity.  However, in the case of pinhole leaks in Thunder Bay, the City is collecting information and shares nothing.  The councilor who raised the issue of more information from the District Health Unit has a double standard.  What is good for the goose is good for the gander and he should advocate for the people paying the taxes that support his role as a councilor. 

 

 

Municipal Autocracy is Alive and Well in Thunder Bay

 

The Mayor and Council of the City of Thunder Bay grow ever more divorced from the needs and interests of the public they are supposed to serve with their behaviour sometimes reminiscent of 19^th century Russian aristocrats.   They pursue grand public schemes and profess concern for the public but are deaf to plights raised that diverge from their own views of what is best for the city.  In this, they are aided and abetted by their administrators whose chief interest seems to be maximizing revenues and spending – at least in areas where they see fit. 

 

The situation of ratepayers and homeowners in Thunder Bay often seems to be akin to the welfare of  Russian peasants whose fate was the lot of the ‘unfortunates’ to whom ‘God is high above and the Tsar is far away.’  Just ask the homeowners whose pleas about the damages they are incurring to their property from pipes leaking are met with silence.  Indeed, there may be a lot in common in the general attitudes of the Mayor and Council of Thunder Bay and the Czar and his assorted Grand Dukes given that Czar Nicholas II filled in his occupation during the 1897 Russian Census simply as “The Owner of the Russian Land.”  I suppose the leaky pipe protestors last week should consider themselves blessed that the Mayor and Council did not summon mounted police to disperse them.

 

Nowhere is this autocratic arrogance more blatantly demonstrated than in the 2021  “Budget Survey” that Council is now asking input for on its website.  It begins by asking for a line by line ranking of programs in terms of importance to you that include: Roads, Winter Maintenance, Drinking Water, Wastewater (Sewer), Stormwater Management, Garbage and Recycling, Long Term Care Services, Parks, Recreation Programs and Facilities, Child Care, Libraries, Economic Development, Communication and Resident Engagement, Animal Services, and By-Law Enforcement. 

 

This is ceremonial accountability at its best as it allows for input on items so broadly defined that a ranking is meaningless.  Honestly, are we being threatened with an end to clean drinking water or garbage collection or a shut-down of City long-term care facilities, if we refuse to hand over our taxes?  Everyone knows that choices need to be made but there is a difference between explaining  the options and implicit threats of service cuts that smack of bullying ratepayers.

 

However, the most striking question is the one that brings the impact of COVID-19 into the budgetary discussion.  As the section reads:

 

“The financial impact of COVID-19, due to revenue losses and increased costs, has been estimated at over $8 million for 2021 (4.2% of the municipal taxes levy). City Administration will be presenting City Council with options to address these costs. To cover these increased costs, what option(s) would you support?

 

a.         Temporarily reduce/modify services in 2021

b.         Temporarily increase user fees in areas that have increased costs due to COVID-19

c.         Increase taxes in 2021

d.         Draw from the reserve fund that is set aside for emergencies and budget to replenish in future years.”

 

Take careful note of the nuances here.  First, the financial impact of COVID-19 for 2021 is set at $8 million but nowhere is there mention of the nearly $9 million dollars that has been received in pandemic aid to date from higher levels of government that has apparently resulted in a $1 million operating surplus for 2020. 

 

Second, the mention of these costs as 4.2 percent of the municipal tax levy is a hint that what the City probably really wants is a 4.2 percent tax increase.  This is an increase in spending on the 2020 tax levy of $199.4 of an additional $8.4 million and assumes there will be no additional assistance or support from the provincial or federal government in 2021.  Given that they did not have to draw down on emergency reserves for 2020, doing it in 2021 is a legitimate option that should be given greater weight.

 

In light of the twin pandemics of both COVID-19 and leaky pipes that have hit the homeowners and taxpayers of Thunder Bay, The City of Thunder Bay needs to limit its tax levy increase this year to no more than 2 percent as mentioned earlier this year.  Instead of bullying taxpayers by implicit threats to reduce their garbage collection or snow removal if they don’t get their 4.2 percent, they should look at making core services like roads, water, sewer, sanitation a priority while reducing their emphasis on other things or by looking for ways to do them more efficiently.  As to how to do it, it is indeed up to the administrators to provide the options and for the councilors to choose among the options - that is what they are being paid for.

 

And as a final point, they do need to provide affected homeowners some assistance with respect to the leaky pipe pandemic.  Without commenting on the situation or compromising their “legal position” they could in recognition of the economic and mental burden of the pandemic temporarily suspend the hundreds of dollars in fees they charge homeowners to turn off and turn on the water when faced with ruptured pipes.  Continuing to do so means they are treating the misfortune of the leaky pipe situation as simply an opportunistic source of municipal revenue. 

 

 

Ontario Budget 2020 Summary

 

Ontario delivered its 2020 budget and it did not really contain any surprises.  While it is the largest nominal deficit in Ontario history, as a share of GDP the deficit for 2020-21 is about 4.6 percent which is one third that of the federal deficit to GDP ratio.  Moreover, it is actually smaller than the one Ontario had in 2010-11 in the aftermath of the 2008-09 Great Recession when it was still at just over 5 percent. 

 

Expenditures jumped in 2020-21 to $189.5 billion as a result of the pandemic – an increase of 15 percent over the previous year.  It will remain high but not increase further for the next two years under the medium-term scenario going to $185.4 billion in 2021-22 and $188.3 billion in 2022-23 but all of these expenditure figures contain several billion dollars in contingency reserves. 

 

Revenues fell 3 percent in 2020-21 as a result of the pandemic – not as big a hit as might be expected because federal transfer payments as a result of COVID jumped from $25.4 billion to $33.4 billion – an increase of 31 percent.  However, those transfers will decline to $27.1 billion and 27.6 billion over the next two years.  As a result, even with the projected economic recovery and its impact on tax revenue, total revenues are not expected to grow much until 2022-23 when they reach $160.2 billion.

 

The deficit is projected at $38.5 billion in 2020-21, $33.1 billion in 2021-22 and $26.2 billion in 2022-23 while the net debt will grow from $355 billion in 2019-20 to $473 billion by 2022-23.  GDP is expected to grow by about 6 percent a year after this year so the net debt to GDP ratio is projected to only rise to just under 50 percent at 49.6 percent.  

 

 

Why Makings Things Matters in the Age of COVID: A Tale of Three Cities

 

The Covid-19 pandemic has come with a huge cost in terms of employment loss with the retail, food and accommodation, and travel sectors exceptionally hard hit.  The employment impact in Ontario has been substantial also with total employment falling about 13 percent from February 2020 to June of 2020.  The rebound since June has been insufficient to make up all the employment losses and as of September total employment in Ontario was still about 6 percent lower than February 2020.  The impact has also varied across major cities in Ontario with Kitchener-Waterloo, Thunder Bay and Peterborough and Hamilton hit the hardest whereas Guelph, Brantford, Oshawa and London experienced softer blows.

 

The composition of employment seems to be a factor and this post drills down a bit into the employment composition by broad industry sector – goods and services. The goods sector consists of employment in agriculture, resources, utilities and oil and gas, construction and manufacturing. Everything else ranging from wholesale and retail trade and transport, finance and real estate, health and education to food and accommodation and public administration are the services. 

 

 

 

Figure 1 plots the composition of employment across these two industry sectors for three cities in Ontario: Hamilton, Thunder Bay and Guelph. What is quite interesting is despite their industrial, agricultural and resource extraction histories, Hamilton, Guelph, and Thunder Bay, are now all remarkably service intensive - part of the trend everywhere in high income economies. Hamilton’s goods production sector accounts for 21 percent of employment whereas Thunder Bay is the lowest of the three cities at 17 percent.  However, Guelph on the other hand still has a relatively large share of employment in goods production at 27 percent. 

 

 

 

Figures 2 and 3 plot the percentage change in employment for total, goods, and service sector employment for the three cities for two periods: the onset of the pandemic between January 2020 to May 2020 and the period of employment recovery as the first wave was brought under control from May 2020 to September 2020.  The data is non-seasonally adjusted three-month average monthly employment data from Statistics Canada.  

 

 

 

From January to May, all three cities saw a drop in monthly employment, but Guelph was hit half as hard with a drop of about 6 percent compared to more than twice that for both Hamilton and Thunder Bay.  What is also interesting is the employment hit was harder in Guelph for the goods sector with a 25 percent employment drop compared to 17 percent for Thunder Bay and 13 percent for Hamilton.  However, service employment dropped about 13 percent in both Hamilton and Thunder Bay during the first wave of the pandemic, but Guelph’s was essentially stable.

 

As for the recovery period from the first wave from May to September, all three cities saw employment grow: 4 percent for Hamilton, 9 percent for Thunder Bay and 8 percent for Guelph.  The performance across sectors is more interesting.  Employment in Guelph’s goods sector rebounded robustly growing 57 percent compared to only 21 percent in Hamilton and 26 percent in Thunder Bay.  Construction was the major source of the rebound in all three cities but manufacturing reinforced the rebound in Guelph whereas in Thunder Bay manufacturing employment continued to decline even from May to September.  Services did not recover as well as goods production in all three cities with Guelph actually seeing some service sector employment losses from May to September.  For whatever reason, the service sector job losses in Guelph were delayed compared to the other two cities.

 

What explains this?  Good question but one cannot help but wonder if the CERB played a role.  On average, foods sector jobs are higher paying than service sector ones though where the service jobs are is important- for example, retail and food and accommodation versus health and education.  The CERB kicks in during the pandemic and millions took advantage of it over the summer and into the early fall.  The CERB and its income support may have provided more of a disincentive to return. Having a large goods production sector relative to service sector did not insulate against employment loss in the first wave of the pandemic but may have slowed the rebound in the presence of the CERB. 

Saving Money in a Roundabout Way

 

The theme at the November 2^nd Thunder Bay City Council, Meeting will be “saving money in a roundabout way.”  Despite all the hand wringing and gnashing of teeth during the spring and summer over the impact of COVID-19 it turns out that for 2020 the City of Thunder Bay will be seeing a positive variance on their operating budget – that is, a surplus – of about $1 million.  However, this positive outcome is not really the result of any great fiscal sacrifice or structural reforms on the part of our municipal councillors but mainly the result of money from other levels of government coming to the rescue. 

 

While there was indeed some cause for concern as user fee revenues dried up when the pandemic took hold, the City has been bailed out by other levels of government.  First, there was over $9 million dollars in assistance from federal and provincial levels of government of which some will carry over into 2021. Second, the city was quick to issue temporary layoffs to about 800 workers which was not as regrettable as city officials might have you think because with layoffs in early April, most would have ended up on the Federal CERB – more government money. 

 

The positive variance for 2020 means another $1 million will end up going to reserves which again means business as usual as the last five years will have now seen nearly $14 million dollars in accumulated positive variances.  The City of Thunder Bay seems to typically overestimate spending and underestimates revenues and the inevitable resulting surplus is then banked.  Taxpayers are thus not only paying for services but also for an indirect roundabout municipal savings program with tax levy increases since 2015 ranging from 2.3 to 5.7 percent. 

 

There is fiscal prudence and then there is crying wolf. Indeed, between the “accidental surpluses” and the deliberate direction of funds into reserves as part of operating and capital budgets, the City of Thunder Bay has seen its reserve funds grow from approximately $99 million in 2015 to an estimated $137 million in 2019. Returning at least a portion of the “accidental” surplus to ratepayers in the form of lower tax levies is not something the City seems interested in doing given its insatiable need for more legacy projects.  For 2021, ratepayers in Thunder Bay have already been prepared in a roundabout way for a tax levy increase of 3.45 percent as bringing about only a two percent increase would require $5 million in “savings”.   

 

And speaking of savings and roundabouts, the other way to save money that will come up at this week’s meeting is a proposed roundabout at the intersection of Redwood and Edward.  The concept of a traffic roundabout is actually quite good and common in many other cities – particularly in Europe.  It can help smooth traffic flow provided they are properly constructed and properly used given the average Thunder Bay driver’s pathological inability to manage a merge lane.  There is a small roundabout at Marina Park but that is not a real test under traffic flow conditions as it essentially connects road access within the park to parking lots.

 

The initial proposal was for a roundabout at Ford and Victoria but the City’s Engineering Division after a study said the intersection did not warrant one.  A proposal for one at Edward and Redwood seems odd given that the intersection was just fixed and repaved but apparently there is more sewer work planned so now is a time to replace more expensive traffic lights with a roundabout.  While building the roundabout will cost $1 million dollars compared to $850,000 for regular traffic signals, savings will emerge over time in a roundabout way through lower operating costs over 20 years which will be $150,000 annually compared to $275,000 annually for traffic lights. That seems like a lot for annual maintenance for either option given that in other cities the annual maintenance estimates are closer to $10,000 but hey this is Thunder Bay so let us go with it.

 

If you simply sum up the costs over 20 years, the traffic lights will cost $5.6 million over that period but the traffic roundabout $3.85 million generating a total cost difference of $1.75 million at the end of 20 years.   If we assume that the numbers for maintenance over 20 years are instead totals over 20 years then what you actually get is a total cost of $1.15 million for the roundabout and $1.125 million for the traffic lights - making the roundabout only slightly cheaper over 20 years.  So, what really should be done is a cost benefit analysis under differing interest rate/discount rate scenarios.  That is, there needs to be not only an estimate of the costs but a monetary estimate of the benefits in terms of commuting time saved or lives saved and injuries from the expectation of fewer accidents in a roundabout relative to traffic lights. 

 

And you also need to apply a discount factor or interest rate given the weighting of benefits over time – a dollar today is not the same as a dollar tomorrow.  Basically, projects with high-up front benefits and lower-upfront costs tend to be favored in any cost-benefit analysis but we have really no way of determining that in this case because all we have are cost estimates and no publicly available monetary estimate of anticipated benefits.

 

Still, costs are what are going to be used and it looks like savings so the Councillors will go for it whether there really are going to be savings over the next 20 years or not.  It is likely none of them will be on council 20 years from now for a final reckoning.  The Councillors are desperate for some feel good achievements given the beating they have taken over the spending on the turf facility and their cone of silence on the pinhole leak issue.  At the midpoint of their mandate, they are not doing so well politically given a recent TBNewswatch Poll grading their performance that saw 50 percent of respondents give them a collective “F” and another 25 percent a D. Only 1.6 percent gave them an A.  With those kinds of marks, none of them will be going to Thunder Bay’s political graduate school – higher political office.