THUNDER BAY — Municipal staff looked to defend the city’s tax rates and affordability as they set the stage for deliberations over the 2023 budget on Tuesday, while city councillors hinted they’ll be looking for options to reduce a large proposed tax levy increase.
The presentation reviewed the city’s economic environment; taxation and affordability levels; the proposed 2023 budget; infrastructure, debt, and reserve funds; and financial projections for the next five years.
Staff underlined what they called extraordinary challenges, with city manager Norm Gale calling the 2023 budget process the most difficult he’d been involved in.
City treasurer Linda Evans told council the tax levy increase had “started north of 10 per cent” based on submissions from city departments, before administration reduced it to a proposed 6.2 per cent hike that would avoid significant service cuts.
It remains the highest levy increase in recent memory, with senior staff unable to identify a larger one in the city’s history.
“It’s extraordinarily unusual. This is not normal,” said Gale. “The mere numbers — where we started, where we are — show that. We’re seeing things no one predicted three years ago.”
Coun. Dominic Pasqualino, for one, said he wanted to reassure residents that level of increase responded to unusually high inflation, and would not become the norm under the newly elected city council.
Projections shared on Tuesday showed staff expect another tax levy increase above five per cent in 2024, however, before tax hikes would return to more normal levels the following year.
Some councillors hinted they’ll push to reduce the proposed 6.2 per cent tax levy hike during the budget process, which will conclude after eight meetings, on Feb. 6.
Coun. Mark Bentz suggested he’d like administration to prepare a list of “service level reductions that are the least impactful to the rate payer” — something Gale said is doable in that timeframe.
“If you wish for recommendations to reduce service levels in the least impactful way and at the same time reduce the [tax] levy, simply direct us to do that… and we will do it,” he responded.
Coun. Albert Aiello voiced support for that approach, asking Tuesday if he could move a motion directing administration to do so.
However, councillors won’t be able to officially propose budget changes until the first detailed review meeting on Jan. 17 (residents can learn more about the budget process and how to submit feedback at the city's website).
Tax-cutting rhetoric is causing concern for Coun. Andrew Foulds, on the other hand.
He said he’s worried that, given pressure on roads and emergency services, spending cuts would fall on services like parks and recreation.
“There has been a narrative out there about ‘holding the line,’” he said. “I can tell you that the number one issue I heard on the campaign trail was things like mental health … For me, that’s about recreation.”
“I did not campaign on a slash-and-burn type of budget. I’m not interested in slashing and burning recreation at all. In fact, I think we need to double down and those are the kinds of things we need to be investing in.”
To meaningfully reduce the tax levy, staff said hard choices would be necessary.
Sudbury’s city council, Gale noted, is looking to hold its tax levy increase at 3.79 per cent, but will need to cut spending by nearly $18 million to do so.
Staff leaned on results of the 2022 BMA study of Ontario municipalities to argue Thunder Bay’s taxation levels are in line with comparable cities.
The owner of an average three-bedroom detached bungalow pays $4,062 in municipal taxes in Thunder Bay, compared to an average of $4,382 across Ontario municipalities with populations over 100,000, according to the study.
Others, like residents of walk-up apartments, pay slightly above the average, as do commercial and industrial tax payers.
Thunder Bay residents pay 3.9 per cent of their household income in municipal taxes on average, down from a high of 4.3 per cent in 2013 — slightly below the average of four per cent for Ontario cities over 100,000 people.
Bentz questioned how comparable Thunder Bay really is to other municipalities, saying the city has the unique benefit of a yearly dividend from its ownership of Tbaytel, adding $18 million to city coffers in 2023.
Working out to over $160 per resident, that should allow the city breathing room to offer lower tax rates, he suggested.
Coun. Shelby Ch’ng expressed concern that emergency services are eating up an ever-increasing portion of city spending, rising to 37 per cent of city spending in 2023 — while staff said around 45 per cent of the tax levy goes toward public safety more broadly.
Gale has acknowledged that trend is unsustainable, but said the city has little room to manoeuvre, with 911 demand spiking and wages — which he said are rising faster in emergency services than elsewhere — bound by union negotiations and arbitration.
"Thunder Bay can't solve this problem,” he said of increasing 911 demand. “This is due to mental health and addictions, psycho-socio-economic issues, substance use that are the real drivers of increasing demand — and in police, yes, crime and disorder is increasing as well.”
Gale said working with the province to reduce demand in the long run is the true solution, pointing to paramedic home visits as one example.
Looking at Thunder Bay’s economic environment, staff listed the city’s top three employers as the regional hospital, the city itself, and St. Joseph’s Care Group, and top local employment industries as trades, health care and social assistance, construction, finance and real estate, and public administration.
The city showed signs of moderately rebounding growth in its tax base in 2022, with $1.2 million in new assessment — about 10 times the anemic growth reported in 2021, but still under one per cent, noted Gale.
The city’s projection for $900,000 in annual growth in 2023 is based on anticipated new construction including a 90-unit hotel, a 52-unit condo, and 160-bed long-term care facility, Gale told council.
