The collapse of Thunder Bay’s industrial tax base
its effects on taxes.
#LSN_Opinion Shane Judgel
THUNDER BAY, ONTARIO - May 12, 2019 (LSN) The collapse of Thunder Bay’s industrial tax base and city council’s failure to reduce the costs of running the city accordingly came home to roost in dramatic fashion last month.
City hall staff told the politicians that city homeowners could expect to see a surprise increase in their tax bills this year of .5 per cent. That’s on top of the 2.30 per cent increase approved at budget time.
The news came in a report from the corporate services department on a proposed new long-term tax strategy. It was presented to councillors at their meeting on April 29th.
The .5 per cent increase on homeowners is to make our city more tax competitive by reducing the premium that business and industry pays to set up shop here. The rates we charge the business sector are some of the highest in Ontario. According to the city’s own Community Economic Development Corporation those high property taxes hurt:
“Analysis from KPMG on Thunder Bay’s Competitive Position identified property taxes as the second most common weakness next to transportation costs for Thunder Bay in the manufacturing sector industries (industrial properties).”
What city hall staff want to do is reduce the premium business pays on its properties compared to the residential rate. But that means shifting the bill to pay for roads, sewers and the like onto home owners.
Doing that would continue a long-time shift in the local tax burden. In the good old days, the industry paid upwards of 60 per cent of the cost of running our city. Nowadays, that’s completed flipped: homeowners pay 63 per cent of the cost.
That’s what happened when we lost three paper mills, Northern Wood Preservers and Great West Timber and when the Municipal Property Assessment Corporation allowed the city’s grain elevators to leave the industrial property class to enter the much-lower taxed commercial property class. This was followed by several successful appeals by local big box property owners to have the valuations on their properties for tax purposes greatly reduced.
Some people have estimated that the city now collects $30 million dollars less each year from the business and industrial sectors. Thunder Bay may be transitioning to a knowledge-based economy, but the revenue base of the municipality remains dependant on bricks and mortar of a disappearing industrial base.
Now you might argue that homeowners in Thunder Bay have been getting an easy ride for decades and it’s time to pony up to pay their fair share. But when you look at how the taxes on our homes compare to other jurisdictions, you discover we have already been paying our fair share as homeowners....and then some. Taxes on a typical bungalow are right about average for cities our size. But the taxes on two-storey and executive homes in Thunder Bay, according to the BMA Management Consulting study of hundreds of Ontario municipalities, are among the highest in the province.
At the April 29th meeting, city councillors choked on the news that homeowners could face an extra .5 per cent on this year’s tax bill. They told their staff to come up with an option that avoided the additional increase on homeowners.
This is where basic economics and its political fallout hits hard. You’ve already agreed to spend x in the budget. You’re not prepared to make any cuts. So you have to come up with x from your tax base. Your staff tells you you’re charging one group too much, it’s hurting our ability to attract new companies. But you fear the backlash from homeowners who just saw close to a 3 per cent levy increase last year on top of a property re-assessment exercise that effectively bumped the taxes of some homeowners even higher.
What will council do? Postpone the adjustment to the commercial and industrial property classes? Put all that off and let the extra .5 per cent slide into homeowners’ pocketbooks? Another report from staff is expected soon.
What it all suggests is that council shouldn’t be waiting for an operational review by outside consultants. They should start using their own judgement and begin some cuts to costs immediately. The paralysis by analysis is costing all of us.