NORTHERN ECONOMIST 2.0

Wednesday, 31 January 2018

2018 Blog Rankings Out!

Focus Economics has put out their list of Top Economics and Finance Blogs for 2018 and I am pleased to report that Worthwhile Canadian Initiative is once again on the list. As our entry reads:

"The Worthwhile Canadian Initiative is a "mainly Canadian economics blog." The blog is currently maintained by four economics professors, namely Stephen Gordon, Frances Woolley, Nick Rowe and the Northern Economist, Livio Di Matteo. Topics covered on the blog generally encompass macroeconomics, but also include politics, immigration, inequality, finance and education."

Great news and congratulations to my fellow bloggers at WCI!

Thursday, 25 January 2018

Economics News Around the North: January 25th Edition

Here are the economic news stories that have caught my interest over the last little while in northern Ontario. The start of the new year has been a bit slow when it comes to economic news in the region but then there is so much else going one politically, economically and otherwise in Ontario, Canada and the world especially as we move into a critical phase with the NAFTA negotiations and the start of election campaigning in Ontario in the run up to the June election.

Here goes....

Architect envisions creative solutions to re imagine existing buildings. TBNewwatch, January 24th.

Well, this looks like a creative way to try and create some type of downtown event centre/conference facility in Thunder Bay. Of course, you can add Victoriaville as well as the empty Sears store at intercity to the list of underutilized space in Thunder Bay. Personally, it would be nice to see the Sears store retooled in a circular two level galleria space of small stores around a public space that could be used to house the farmers market. The only problem would be to find tenants for the small retail spaces given that rents at the ISC are apparently pretty steep.

Record year for airport. The Chronicle Journal, January 25th

The airport's economic role in the city of Thunder Bay and region continues to grow. Passenger volumes in 2017 were 844,627 which represents an increase of 4.6 percent from 2016. Since 1997, this represents an increase of over 60 percent.

In not so positive transportation news, cab fares in Thunder Bay are going up by 15 percent. They were already quite high. And if that is not enough, it looks like the increase in Thunder Bay's tax levy is going to stay at around 3.6 percent as the budget remains pretty much unchanged. Living in Thunder Bay does sometimes seem like a sort of reverse Walmart marketing jingle - pay more, get less.

On the bright side:

Getting more out of wood. The Chronicle Journal, January 23rd.

More federal funding to support initiatives in the bio-economy.

Conference explores growing economy. Sudburystar.com. January 7th, 2018.

On Feb. 6-7, the Greater Sudbury Chamber of Commerce will host its inaugural PEP (Procurement, Employment and Partnerships) conference and trade show presented by SNC Lavalin in partnership with the Canadian council for Aboriginal Business.

And of interest if you are planning to pursue resource development activities in the region North of 50....

Northern communities face threat of climate change. TimminsPress.com, January 24th.

Meanwhile, in the Sault....

New Sault company aims to create jobs, produce gadgets for all ages at soon-to-open shop. SooToday.com, January 23rd.

Of course, Sault Ste. Marie is disappointed that they did not make the 20 city short list for Amazon's second corporate campus and joins other disappointed Canadian cities, but not Toronto which remains under consideration.

In North Bay, they are hoping home construction is going to jump start their economy. Not sure where the housing demand is expected to come from but it is important to be hopeful. Perhaps if Toronto gets the Amazon campus, given the cost of housing, Amazon workers will live in North Bay and commute to Toronto.

North Bay community is up to housing-construction challenge. North Bay Business Journal. Jan 2nd.

So that is what has caught my eye across this vast expanse at least economically. One other bright item of news involves this morning's decision in a Thunder Bay courtroom exonerating the Chief of Police. Great to hear. All the best.

Saturday, 20 January 2018

Crime in Northern Ontario Down

My last post on policing resources in the major northern Ontario cities noted that all five cities saw an increase in policing resources. In 2000, the largest number of police offers adjusted for population was in Thunder Bay at 171.6 (per 100,000 of population), followed by Sault Ste Marie at 156, Timmins at 153.1, North Bay at 147.6 and finally Greater Sudbury at 143.1. By 2016, Thunder Bay was still first at 199.5 officers per 100,000 of population. It was followed by Timmins at 196.2, Sault Ste. Marie at 176.7, Greater Sudbury at 160.7 and then North Bay at 152.6. Growth in per capita policing resources was greatest in Timmins at 28 percent, followed by Thunder Bay which saw a 16 percent increase. Next highest growth was Sault Ste. Marie at 13 percent, followed by Greater Sudbury and North Bay at 12 and 3 percent respectively.

Of course, the logical question that follows next is what was going on in crime rates over the same period of time? It should be noted that policing is much more complex in the early 21^st century dealing not only with traditional crimes but also with new crime areas such as cyber and internet crime. As well, social issues in general have been consuming more police resources as well as new standards of accountability which entail more intensive use of policing resources when dealing with incidents. Homicide investigation is especially resource intensive. Nonetheless, a look at crime rates it is still a useful piece of information.

Traditional measures of the crime rate such as criminal code incidents per 100,000 of population or per police officer measure the volume of crime. One example is the homicide rate and past evidence has found the homicide rate declining in northern Ontario in a manner akin to other Canadian cities with the exception of a recent surge in Thunder Bay. Another measure of crime is the Crime Severity Index. The Crime Severity Index combines both volume as well as takes into consideration the seriousness of crimes by assigning each type of offense a seriousness weight and generally serves as a complement to other measures. The index has been set to 100 for Canada in 2006 and enables comparisons of crime severity both at a point in time and over time.

Figure 1 plots the value of the Crime Severity Index obtained from Statistics Canada for the five major northern Ontario cities for the period 1998 to 2016. The severity of crime differs across these five cities in any given year but all cities have seen a decline over time. The largest declines over time have been in Sudbury and North Bay at 36 and29 percent respectively. Next is Thunder Bay with a 17 percent decline in crime severity between 1998 and 2016, followed by Sault Ste. Marie at 16 percent and then Timmins at 15 percent. The good news is that while there are annual ebbs and flows, crime rates over the long term are down in these major northern Ontario cities.

Sunday, 14 January 2018

Policing Resources and Costs in Northern Ontario: A Brief Municipal Comparison

Municipal budget season is upon us and expenditures on protection – police and fire – are some of the most important areas in which municipal tax dollars are spent. Municipal police services have the responsibility of ensuring the security of residents, businesses and visitors to their communities and the basic activities are crime prevention, enforcement of laws, maintaining public order, assisting the victims of crime as well as emergency services. Over the years, policing has become more complex dealing with new types of criminal activity in the cyber age as well as devoting more resources to social concerns.

One interesting point of comparison for the five major northern Ontario cities is the number of police officers per 100,000 of population and the trend in this number over time. Figure 1 plots Statistics Canada data on police officers per 100,000 for the period 2000 to 2016. In 2000, the largest number of police offers adjusted for population was in Thunder Bay at 171.6, followed by Sault Ste Marie at 156, Timmins at 153.1, North Bay at 147.6 and finally Greater Sudbury at 143.1. By 2016, Thunder Bay was still first at 199.5 officers per 100,000 of population. It was followed by Timmins at 196.2, Sault Ste Marie at 176.7, Greater Sudbury at 160.7 and then North Bay at 152.6.

As Figure 2 illustrates, growth in per capita policing numbers was greatest in Timmins at 28 percent, followed by Thunder Bay which saw a 16 percent increases. Next highest growth was Sault Ste Marie at 13 percent, followed by Greater Sudbury and North Bay at 12 and 3 percent respectively.

Another point of comparison is spending. The BMA Municipal Reports provide some data on the costs of providing policing services. The rankings for costs generally parallel those for police numbers. When the net costs per 100,000 dollars of assessment are compared (including amortization), in 2016 the highest cost was in Timmins at $441 per $100,000 of tax assessment followed by Thunder Bay at $434. Next was Sault Ste Marie at $402, then North Bay at $317 and finally Greater Sudbury at $299. Naturally, this ranking is influenced by the richness of the tax base and all other things given cities with a weaker total tax base can expect costs of policing per $100,000 of assessment to be higher. At the same time, over the last decade, all five cities have seen a reduction in the net costs pf policing per 100,000 dollars of assessment. This could be a function of growth in tax bases as well as other efficiencies and economies.

Friday, 5 January 2018

Thunder Bay Taxes Are Going Up Again!

It is municipal budget season in Thunder Bay and the inevitable process of thrust, parry and spin is well underway. First the thrust: the amount spent by the City of Thunder Bay obtained from the tax levy is going up by 3.6 percent. Moreover, water and sewer rates as well as tipping fees at the landfill will be going up by three percent. In an effort to forestall the inevitable complaints that these increases are too high, the resulting parry and spin on the part of the City appears to be as follows.

The 3.6 percent increase in the tax levy will only be a 2.9 percent increase to existing ratepayers after factoring in assessment growth. According to the budget chair: “This is a budget that stays the course in terms of not reducing services but maintaining investments while living within our means.”

Moreover, much of the increase is going to hire new full-time positions and vehicles for the Superior North EMS. The paramedic service has seen call volumes grow substantially in recent years as a result of the aging population and the opioid crisis. As well, according to the budget chair, in an ideal world “we would stay below the level of inflation,” but there has been a reduction in provincial transfer payments.

The efforts by the City to justify a 3.6 percent increase in the levy – that is in tax financed city expenditure – are pretty standard. Differentiating between existing ratepayers and “new growth” conveniently sidesteps the fact that in the end it is all tax revenue coming from city ratepayers. Arguing that we are “investing” in services and living within our means needs to be considered within the context of whether the services are cost-effective as well as the fact the money is not from some kind of endowment but comes directly from city ratepayers.

As for the paramedic service, it would be nice to see some kind of breakdown in statistics as to exactly what the sources of the increased demand are in terms of case mix and demographic breakdowns. In an interview on CBC Thunder Bay radio this morning, the chief of the Superior North Emergency Medical Services also noted that the city has a large transient population that is a source of increasing demand. This raises the question as to whether city ratepayers rather than the province should be on the hook to fund what is increasing regional demand for emergency health services. However, as noted above, the province is apparently not very interested in raising its grant contribution.

The most entertaining line was the one that ideally, we would see tax increases that stay below the rate of inflation. The last four years have seen increases in tax revenue all above the inflation rate suggesting that this aspiration has yet to be achieved by the current city council. Nevertheless, given that it is an election year one should have goals and dreams to campaign on.

Given that it is an election year, it is also important to take a longer term look at municipal finances – in particular I want to focus on Thunder Bay municipal own-source revenue – that is tax and user fee revenues and then provide some comparisons to basic economic indicators for the city. The data on total municipal tax revenue, residential and non-residential tax revenue, and user fees spans the period 1990 to 2016 and is from assorted past City of Thunder Bay Consolidated Financial Statements as well as from the Financial Information Returns (FIR) maintained for each municipality by the Ministry of Municipal Affairs and Housing. For 2017 and 2018, I use current City of Thunder Bay budget summaries with the total for 2018 a forecast based on the tax levy increase of 3.6 percent. From Statistics Canada, I have the inflation rate - inflation is Ontario’s Consumer Price Index with 2002 as the base year – as well as median total tax filer income and annual employment for Thunder Bay. Population figures for Thunder Bay are from the Census of Canada.

One point with respect to City of Thunder Bay financial data is that the summaries and budget information over the last few years do not seem to provide the tax revenue breakdown between residential and non-residential revenue. I suspect the reason for this has less to do with economy of presentation and more to do with drawing attention away from the fact that the residential share of tax revenue has risen dramatically. While FIR does provide this information, unfortunately it only becomes available with a lag and 2016 is the last available complete set of FIR data. Overall, municipal finance data is rather opaque and difficult to use not just in Thunder Bay but Canada as a whole. Cities could do better when it comes to being accountable to their ratepayers via concise, comprehensive and easy to use statistics.

For the period 1990 to 2016 (but forecast to 2018 for taxation revenue), Figure 1 plots taxation revenue and its two components – residential and non-residential taxation (commercial and industrial). It then also plots user fee revenue (water & sewer and other fees) and then the total of taxation revenue and user fees. In 2016, tax revenues grew 2.2 percent with residential tax revenue growing at 3.8 percent and non-residential tax revenue actually declining 1.1 percent. User fee revenue also declined 2.5 percent (despite rate increases the previous year). As a result, own source revenues in 2016 grew a modest 0.6 percent compared to 5.3 percent the year before. If one looks only at total municipal tax revenue, it grew 5.7 percent in 2015, 2.2 percent in 2016 and based on recent estimates (and not FIR data) grew at 3.3 percent in 2017 and will grow 3.6 percent in 2018.

Figures 2 and 3 provide composition information for taxation revenue and total own source revenue for the period 1990 to 2016. When one considers only tax revenue, from a 50/50 split in 1990 the distribution by 2016 had evolved into a 70/30 split. The residential ratepayer in Thunder Bay now provides the City of Thunder Bay with 70 percent of municipal tax revenue. When the picture is broadened to total own-source revenue, the residential ratepayer in 2016 provided about 46 percent of own-source revenue, the non-residential ratepayer 21 percent and user fees – which incidentally are paid by both residential and non-residential ratepayers -about 34 percent.

Figure 4 plots the average annual growth rates for total taxation revenue as well as residential and non-residential tax revenue and user fees, alongside the growth rates for Thunder Bay’s population, employment and median total tax filer income and Ontario’s inflation rate. The average annual growth rate for taxation revenue has been 4.1 percent but residential tax revenue has grown at 5.6 percent while non-residential taxes have been growing at 2.3 percent. On average, both residential and non-residential taxes revenues have grown faster than either population (-0.2%), employment (-0.1%), inflation (1.9%) and median tax filer income (2.2%). User fee revenue has also grown faster than all of these indicators at an average of 5 percent.

So, the 2018 municipal budget year is shaping up to be somewhat modest in terms of increases at least by historical standards. Total tax revenue is anticipated to only go up 3.6 percent (as opposed to 4.1 percent) while user fee increases of 3 percent look pretty good compared to average increases of 5 percent. But then, 2018 is an election year and I suspect that we will be in for some pretty steep increases in 2019 once the election dust clears. If one goes back to the 2014 election, that budget year saw a 2.2 percent increase in municipal taxation revenue but they made up for it in 2015 with a 5.7 percent increase.

It probably is a smart strategy to moderate tax increases in an election year and then raise them steeply early on in the new mandate so that their memory fades by the time the next election rolls around. It may perhaps be seen as calculating and opportunistic behavior on the part of our municipal politicians but it seems to work. Thunder Bay residents keep re-electing the same people over and over again.