NORTHERN ECONOMIST 2.0

Friday, 5 March 2021

Thunder Bay COVID Cases Trending Up Rapidly

Today's case count for the Thunder Bay District was 46, coming on top of 61 the day previous. A LOWESS plot of the daily cases clearly show the steepness of the upward trend. The Federal Health Minister this morning on CBC radio noted the situation in Thunder Bay is very serious and potentially exponential. Given that exponential growth is a growth pattern that shows larger increases over time - that is the slope of a profile is getting steeper rather than diminishing - one might opine that we are probably already there. The per capita new case count in Thunder Bay district is now the highest in the province. When the plot is examined over the course of the year, Thunder Bay never really had a "first wave" and indeed its current wave occurs in two phases - a first one starting in November (circa Day 275) that in the end plateaued but never really subsided and a second one that begins to pick up speed the first week in January (circa Day 350) and has never really slowed down. At present there are now 389 active cases and 35 hospitalized of whom 8 are in the ICU. Have a nice weekend.

Wednesday, 3 March 2021

Building a New Vision for Thunder Bay

Pandemics are ultimately associated with great economic and social change as once the pandemic subsides, there is never a full return to the previous world. In Thunder Bay, the changes wrought by the pandemic have emphasized and highlighted many of the city’s problems. Along with continuing high rates of crime, homelessness, racism, mental illness, and the growing effects of a changing climate, the lineups at food banks have been increasing and there even seems to be a return to a wild west frontier mentality with increasing numbers of people being stopped by police for driving under the influence. Thunder Bay has always been a city with a mean frontier edge to it whether it is on the city’s roads, its bars, or its school parks and playgrounds.

The recent surge in COVID-19 cases particularly in lower income homeless residents accentuates the reality that there are really two Thunder Bays – a Thunder Bay of growing poverty as employment and health becomes more precarious given job loss and city businesses hard hit by the pandemic and one of secure largely broader public sector driven employment. The evidence of the social and economic changes that have emerged over time are there for all to see - if they want to.

Figure 1 shows that the decline in homicide rates in Thunder Bay that had been occurring in tandem with the rest of the country came to an end circa 2007 – perhaps not entirely coincidentally at the tail end of the massive economic shakeup of the regional forest sector crisis. They have since been rising and Thunder Bay invariably emerges year after year as the murder capital of the country. Figure 2 shows that over the last decade, overall building permit values – which signal new investment – have trended downwards and residential permit values have been largely stagnant. Figure 3 shows that housing starts have essentially been flat at low levels compared to the pre-1990 period. Figure 4 shows that over the last 20 years, employment has trended downward with the pandemic providing the expected additional downward spike at the end of the series.

Over the longer term of its economic history, as captured by the evolving population size shown in Figure 5, Thunder Bay has essentially been stationary since the 1970s. That is important because population still is an important economic indicator in that population growth tends to respond to economic opportunity and Thunder Bay’s lack of population growth is the one long-term indicator of the state of its economy. Our city’s population peaks in the late 1970s and 1980s and has actually trended slightly downward since. One wonders about the coincidence between the end of growth in the 1970s and the onset of a monopoly municipal government in place of the formerly competitive municipalities of Fort William and Port Arthur.

It is true that the Thunder Bay CMA population is larger at about 125,000 or more and has actually trended slightly upwards in recent years. However, it is the official population of the City of Thunder Bay within its city boundaries and not the CMA population and residents external to Thunder Bay city proper that matter because in the end it is the tax base of the City of Thunder Bay that pays for services in the city via the tax levy. Yet, what is quite remarkable is that despite the lackluster growth in major indicators, there has been substantial growth in the tax levy of the City of Thunder Bay and associated municipal employment as Figures 6 and 7 demonstrate. While the rate of growth of the tax levy has declined over the last five years, it has grown faster than both population and inflation combined.

All this coincides with the growing disquiet many residents feel with respect to the direction the City has been taking. Yet, in the face of mounting evidence of substantial issues there seems to be an increasing sense of detachment from the public by the Mayor, City Councillors and Administrators given recent decisions such as the pursuit of expensive major capital projects like the proposed new Indoor Turf and police facilities, the silence on the epidemic of home plumbing issues linked to City water, and a pathological preoccupation with seemingly superficial issues like tourism signs and sporting events. True, our city councillors are always quick to articulate their concerns about the problems facing Thunder Bay and indeed much of their meetings are taken up by pious words too numerous to count but in the end, they are either unable or unwilling to systematically tackle the future.

A key part of the problem is that our patterns of civic decision making are rooted in a mid-twentieth century vision of where Thunder Bay needs to go. My take on that vision – which I articulated in an earlier post – bears repeating and can be summarized as follows: Thunder Bay is a regional center and strategically located full-service high-tech urban oasis set in a pristine natural wonderland with a wonderful quality of life on crucial east-west trade and transport routes whose full potential is unrealized. Indeed, the entire City’s potential is unrealized and what Thunder Bay needs is continual infrastructure investment to attract people and effective communication of our potential to convey the message of how wonderful we are. While Thunder Bay may have social problems, they are not any worse than other places and have been blown out of proportion by the national media. City residents need to have a positive attitude, stay the course on this strategy, and we need to invest in the public services and infrastructure to make it all happen.

This is in essence what continues to drive civic policy in Thunder Bay even though since amalgamation in 1970 the City has stayed static in population, its industrial mainstays have largely disappeared, and its grain transportation role shrunk to a shadow of its former glory. While there indeed has been some employment diversification into a knowledge economy and the health and education sectors that have helped provide a market and business opportunities for some entrepreneurs, it remains that this has been largely a rear-guard maintenance action that has barely kept pace with the employment losses. Moreover, much of this employment growth has been in broader public sector employment making it increasingly tied to political decision making in Toronto or Ottawa. Our political clout is not as large as we like to think given the higher population growth in southern Ontario.

Key to this local vision is the level of municipal spending, employment and infrastructure investment partly geared towards keeping the economy going via construction projects. This spending is financed by government grants and by tax increases levied increasingly on the residential tax base given the departure of the industrial mainstays who provided the base for the past development of a very generous level of municipal spending and programs. Tax increases are justified by “a build it and they will come philosophy” but it has become apparent that after fifty years we have built a lot and not too many have joined us. When the point on practically zero population growth is mentioned, the response is that we have large numbers of temporary residents whether they be students or visitors from outlying First Nations requiring services. However, we do not seem to have accurate numbers documenting this aside from the ones City Councillors and Administrators like to throw out - numbers like “20,000 or 30,000 more” during meetings without supporting empirical evidence. More to the point, there is the question as to why municipal ratepayers should even be providing these additional services out of a local property tax base? Where are the provincial or federal governments in all of this? Indeed, in the wake of rising cases recently, the pandemic has revealed just how truly stretched our resources are given that Thunder Bay is serving as a regional health and social service support center on a city budget.

We have an expensive vision of local and regional municipal government spending based on an economic base that no longer exists. That vision is justified by a “build it and they will come philosophy” that continues after waiting 50 years for results. Thunder Bay continues to invest and prepare for the next boom and yet that boom never comes or is much more subdued than expected. Even the most recent mining strategy released by the city’s Community Economic Development Commission continues in this tradition by documenting the prospects of 7,000 jobs over the next decade - nearly a decade after the prospects for the Ring of Fire’s mining boom were first pronounced.

When the Mayor and Council are criticized, their rebuttal takes the form of dubious arguments such as the need to invest today for tomorrow and how we need to invest in our quality of life. Who can argue with quality of life or renewal of aging infrastructure? Yet, it turns out that much of this money is being spent on just two things – administration and protection. We have one of the highest per capita tax levies of major cities in the province and spend the highest per capita amount of 27 major Ontario municipalities on administration, police and fire while managing to be one of the lowest spenders on the remainder. The need for a re-balancing of spending priorities is obvious.

Taxes and fees go up but that is justified by our civic leaders as all right because our cost of living and property values are lower thereby resulting in lower taxes relative to bigger cities with more expensive housing meaning they can be raised more because they are a bargain compared to Toronto. This is debatable but not the main point. If the cost of living here was truly lower resulting in a surplus for local residents in excess of what they need, why we might not want to keep money in our own pockets rather than simply hand it over to the local municipal-protection-administrative-construction complex is a question that Thunder Bay politicians do not want to answer.

What is to be done? The mindset and vision that has permeated our local municipal political and economic decision-making culture needs to change. That is more difficult than you can imagine given how entrenched the current vision has become and the short-term municipal political and bureaucratic interests tied to specific projects and expenditures. It is beyond the abilities of any one individual to change an entire municipal tax and spending culture but change needs to start somewhere. It probably also is more than just a municipal culture vision as in the end the outlook of the entire community has been permeated by the current mindset. It is also a new community vision of what Thunder Bay ultimately can or cannot be and do.

Changing Thunder Bay’s municipal tax and spending culture requires four steps. First, there needs to be a recognition that there is indeed a problem and we are a long way away from that given the substance of debate at City Council. Second, once the problem is recognized, there needs to be a meaningful reorientation of priorities. The current expenditure review process is insufficient because it merely presents a smorgasbord of specific tasks and projects to horse trade over given that administrators and councillors look at parts rather than the whole system. The reorientation needs to be at a broader level. Third, in keeping with the reorientation of priorities, it needs to be followed by a major reorganization of services. Fourth, this should then lead to renewal – a renewal of the local municipal and community vision affecting taxes and expenditures and ultimately the quality of life in Thunder Bay.

In the end, the new vision must be one that acknowledges that we need to live within the economic limits of how the Thunder Bay economy has evolved and the fiscal resources available. Within this new limited resource base, there needs to be a shift in priorities away from the current big-ticket items of protection and administration and towards the social and environmental needs of Thunder Bay’s citizens and their growing diversity. It will be a big change and it requires leaders with a municipal and regional vision that goes beyond short-term spending to create short-term employment projects in the hopes that we can buy time until the next boom comes. After 50 years of treading water, it is time to swim in a new direction.

Thursday, 25 February 2021

What Drives Ontario University Deficits?

In the wake of the Laurentian insolvency, there is growing interest in the state of university finance in Ontario – at least amongst universities. For the most part, for the Ontario government Laurentian and its plight might as well be on the moon. They would undoubtedly be much more preoccupied had the insolvency happened to the University of Toronto or Ryerson and then maybe not given at least one pundit has suggested that the current government really knows nothing about universities.

In any event, the final report on what happened at Laurentian that might shed a definitive story of what has happened there is still to come though one media account summarizes it as too many programs, too many instructors, too many managers, too few students and not enough money. And the previously mentioned pundit would add that tenured professors are overpaid while part-timers are underpaid, though relative to who or what is never elaborated upon. That is essentially the level of financial debate regarding universities in Ontario.

So, what can we learn from the information available on the recent state of university finances? Well, an examination of university financial reports for 2020 is one way to start by comparing the deficits (-) or surpluses (+) of 20 Ontario universities. It turns out that in 2020 a surprising number of universities did run a deficit – seven to be precise – but the majority ran surpluses. The range runs from a deficit of -$21.5 million for Ryerson to a surplus of +$441 million for University of Toronto. The interesting thing is how could both the largest and the smallest university deficit both be in downtown Toronto institutions given the similarity of the operating environment but there it is.

Comparing deficits for Ontario universities really needs to be adjusted for the scale of institutions in terms of enrollment given that total enrolment in 2020 (as taken from the AUCC web site) ranged from a low of 1,370 for Algoma University to a high of 93,081 at University of Toronto. Using absolute deficit numbers is not going to tell you much. Figure 1 thus presents the deficit (-)/surplus (+) per student. The largest deficit per student is actually Wilfrid Laurier at -$527 per student in 2020 followed by Ryerson at -$455 and then Nipissing and Laurentian at -$374 and -$339 respectively. Deficits are not a specific northern Ontario problem given the list includes Wilfrid Laurier, Guelph, Ryerson, Windsor and Ontario Tech.

Are there any characteristics that might explain why these institutions had deficits in 2020 while the others had surpluses – the largest at Algoma and University of Toronto respectively, now there is an interesting juxtaposition – at $5364 and $4,738 respectively. The first and the last in terms of total enrollment both have the largest surpluses per enrolled student. Who would have thought? Algoma and U of T as the Alpha and Omega of Ontario universities.

Why not address the elephant in the room. Do deficits or surpluses have anything to do with how generous faculty salaries are? Figure 2 provides a ranking of average faculty salaries (all ranks) for these 20 universities taken from Statistics Canada with the exception of Algoma, which for some reason is not in the salary statistics for universities from Statistics Canada. However, I took an average of the salaries provided in the latest Ontario salary disclosure (which I would imagine actually biases the number upwards a bit).

The results here are also interesting. Unlike the steepness of the deficit/surplus profile, this profile is rather gentle going from a low of $111,000 at OCAD to a high of $176,550. University of Toronto not only manages to generate the largest surpluses in both absolute and per student across all of Ontario universities, but it has managed to do it with the highest average faculty salaries. Laurentian, is decidedly middle of the pack when it comes to faculty salaries along with Wildfrid Laurier and Western. Indeed, if you plot the deficit/surplus against the average faculty salary for these 20 universities, you get Figure 3 which gives the counterintuitive result (especially if you are an Ontario cabinet minister) that higher faculty salaries are correlated with bigger university surpluses.

Of course, Figure 3 is only an association. What you really want to see is if there indeed is a statistically significant relationship between the two variables after controlling for some confounding factors. Figure 4 presents the results of a very simple linear regression of the surplus per student on average faculty salary (avgfacsal), per student tuition revenue (perstudenttuition), whether or not the university has a medical school (medschool) (which can be an expensive proposition), and the ratio of government grant revenue to tuition revenue (granttuitionratio) for the university. Moreover, to account for the scale of institutions it is a weighted regression with the weighting factor being total student enrolment.

The results show that arguing that higher faculty salaries will give you a better financial position is indeed not the right call. On the other hand, the coefficient is also not negative nor significant for that matter. In the general scheme of things, universities are not so dopey as to go around paying more than they should for the help nor are they captives of fiscal terrorist faculty associations when it comes to compensation. Guess what? Having a medical school is not significant to a deficit/surplus position. More interesting, neither is the ratio of grant revenue to tuition revenue. That is to say, government support of universities has stagnated so much that it really was not a statistically significant determinant of a university’s financial health in 2020. That is not to say it could not be or never was but in 2020 it is not.

What is the most significant determinant in this albeit limited set of variables? Tuition revenue per student. The regression coefficient is positive and quite significant. Figures 5 shows that there is indeed a nice positive slope to the relationship between surpluses per student and total tuition revenues per student. And who are those two high-flyers at the far northeast corner of the chart? Why the Alpha and Omega of Ontario universities - you can decide which should be which. Figure 6 shows it is little Algoma U – obviously the little university that could - and big U of Toronto – which is really not a surprise. They appear to have boosted their enrolment as well as got the right mix of students (i.e. higher paying international students) to ensure their financial survival – at least for 2020. Who knows what the future will bring?

Tuesday, 23 February 2021

COVID-19 In Thunder Bay Skyrocketing

Today's announced new COVID-19 case amount in Thunder Bay District stands at 41 bringing the total since the start of the pandemic to 1,418 and the current number of active cases is at 273. The District's Chief Medical Officer has suggested that we could be headed back to lock-down though given that the surge over the last two weeks was obviously incubated during the last lock-down one wonders if it will matter. The problem is apparently largely tied to an outbreak among the homeless population in Thunder Bay though given the crowds packing shopping malls and a local ski resort over the last week in the wake of the lifting of the lock-down, it is likely the surge is going to continue. In addition, while the recent surge is tied to the city's homeless population, it remains that there have now been several good-sized outbreaks in local schools the biggest at McKellar Park.

This is a pretty grim situation. We can draw only limited comfort from the fact that the total outbreak to date has resulted in a total case count per 100,000 population as of February 23rd still substantially below that of the province as a whole - at 971 cases per 100,000 versus 2003 cases per 100,000 for the province as illustrated in Figure 1. However, while the provincial total finally seems to be flattening out a bit, Thunder Bay's appears to have picked up steam as Figure 2 illustrates more clearly.

Figure 2 plots plots the daily change in cases per 100,000 for both Ontario and the Thunder Bay District since the start of the pandemic and here one can more clearly see that since the start of January, we have been definitely bucking the provincial trend. While Ontario actually began trending down starting the first week of January, that is when we began to move in the opposite direction. One wonders aside from the shutting of businesses, how much compliance there really has been with requests to not socialize on the part of the general public in Thunder Bay.

This is exceedingly worrisome because even if the surge to date is a result of close contact with some of the other outbreaks - such as those affecting the jail and correctional center - the fact that it appears to be spreading more broadly amongst both the homeless population as well as in the schools makes it ever more likely it will spread further. The flouting of social distancing and safety protocols this last week at local big box stores and the mall as well as the gathering of hundreds outdoors at a local ski resort have merely provided further opportunities. If cases spike even further over the next two weeks, it will be unlikely that we can rein things in. After all, in terms of the current daily increases in cases per 100,000, we are at the peak that Ontario was at in early January and there is no evidence it is slowing down.

Friday, 19 February 2021

The Messages of Perseverance

Yesterday’s successful landing of NASA’s Mars Rover Perseverance and the broadcast of early pictures was indeed a triumph of human perseverance made all the more uplifting because of the current travails of the coronavirus pandemic. It remains that the long-term future of humanity will increasingly rest above and beyond with the first tentative steps into the solar system of the last 50 years being inevitability followed over the course of the next century by interstellar probes and more. Yet, it is the name of the Rover itself which was drawn to my attention by a close friend who texted me today and said that the first pictures reminded him of the Northwest Company whose motto indeed was Perseverance. This reminded me of perseverance in terms of both national and personal history.

First, the Northwest Company of Montreal was a vast fur trading enterprise that for nearly two decades more than held its own, against the Hudson Bay Company as a result of its perseverance against incredible odds. While the HBC had the advantages of shorter north south supply routes and a charter from the Crown, the Northwest Company’s superior management, organization and entrepreneurship via its profit-sharing system enabled it to construct a web of forts and trading posts along Canada’s east-west river systems the crown jewel of which was the vast sprawling inland headquarters at Fort William (now Thunder Bay) that served as the rendezvous point for company business. Having spent numerous student summers working as a historical interpreter at the modern reconstruction of Fort William, I can attest to its size and grandeur.

The NWC shareholders were field traders and doubled as European explorers with names that resonate in Canadian history such as Simon Fraser, Alexander MacKenzie and David Thompson. It was perseverance indeed that in the face of a vast rugged geography and harsh climate allowed a trans-continental east west business arrangement using birch bark canoes to prosper and that according to Harold Adams Innis was the forerunner of the Canadian federation. As my friend noted in his comparison, it was also about going forth into an endeavor away from the "comforts of their usual surroundings", which the harshness of space definitely is for humans.

Of course, it is not considered politically astute these days to celebrate the business achievements and role of male European fur traders in nation building. And yet, the Northwest Company was ahead of its time in that unlike the hierarchical Hudson’s Bay Company, it was a partnership of sorts between Anglo-Scottish and French-Canadian businessmen, French Canadian labour and Indigenous peoples and their technology – canoes, pemmican, snowshoes. Moreover, the trade was directly with Indigenous peoples who harvested the furs and until the decline of the fur trade were bargainers on par with Northwest Company. Indeed, it was the decline of the fur trade that was the first step in undermining the economic and social welfare of First Nations as an important source of the livelihood they had grown dependent on vanished – an important lesson for all resource extraction economies.

Second, perseverance also marks friendships and how those acquired at the dawn of one’s life persist, persevere and grow over time. I am still in touch with my two best friends from high school – Harold and Rob - and though we all now live in separate cities we still manage to Rendezvous in Thunder Bay so to speak from time to time and update each other on our course and progress. It was Harold’s text that triggered this post. Everyone’s high school years are of course formative, but I cannot help but think back fondly to the numerous activities we participated in and how they ultimately shaped the work and life we all lead.

As teenagers, we even then had a strong interest in public policy. Along with the usual debates and class discussions and projects – we actually ran a QUI Campaign for the Quebec referendum in 1980 at our Thunder Bay high school - we made a point of attending election rallies from all three visiting leaders with the 1979 election being especially memorable. I had the car the evening we went to hear federal NDP leader Ed Broadbent and the most interesting part of the evening was the drive home when for whatever reason another vehicle chased us a bit while they brandished a tire iron out the window (My memory may be faulty here as the tire iron incident may have been after a City Council meeting and I vaguely recall being in a van for that one). Anyway, on the way home the brakes on my dad’s car failed.

As I was driving, along with keeping me calm they also helped slow the car by sticking their feet outside of their doors. It was an evening out of a James Bond film I suppose though given our ages I suppose it was a bit more rural Alex Rider. We persevered and did get home in one piece but in the hindsight that emerges, it was obvious that continuing to drive was the wrong thing to do. I should have let the car come to a halt or steer it into a snow bank given how badly things might have ended. I suppose 16-year-olds do not always make the best decisions. Still, it is the stuff of memories though naturally I somehow curiously neglected to share this story with my children when they were teenagers.

Still, perseverance is important when it comes to life’s experiences and challenges whether it is humanity’s attempts to understand the cosmos or people simply engaged in the ordinary business of life. Perseverance is about getting through life’s challenges and persevering is helped a lot by having persevering friends.