THUNDER BAY — Thunder Bay residents could be in for the largest municipal tax increase in recent history in 2024, after city council approved targets for next year’s budget.
On Monday, council directed administration to target a 6.1 per cent tax levy increase (5.5 per cent after growth) as it prepares the 2024 budget, shaving half a point from the 6.6 per cent target recommended by staff.
The move saw councillors abandon years of aggressive rhetoric on the need to keep tax hikes in the low single digits, with one expressing regret over that approach.
Instead, council seemed to find a new consensus that significant tax and user fee hikes will be necessary to combat challenges like inflation, downloading by the province, a massive infrastructure deficit, and soaring emergency services costs.
Council’s budget direction also endorses increases of at least five per cent for most user fees.
The targets account for a five per cent increase in infrastructure spending — meant to tackle an infrastructure funding shortfall of up to $30 million per year — and assume no significant new spending not already approved by council, and no new service cuts.
Councillors acknowledged the tax increase being contemplated would raise alarm in some quarters.
“When you speak about six per cent, there’s going to be a segment of the population that’s just going to freak right out,” said Coun. Dominic Pasqualino.
Along with some of his colleagues, Pasqualino argued economic growth — particularly attracting new industry — is the only way out of the city’s financial challenges.
“Without growth, we have nothing,” agreed Coun. Albert Aiello. “We have to have growth.”
The city’s tax base has grown by less than one per cent per year since 2016.
Along with higher inflation, Aiello said that meant “realistically” the city would need to bump the tax levy by at least four per cent.
Mayor Ken Boshcoff voted in favour of the 6.1 per cent target, while suggesting he might look to trim that further at budget time in January and February.
“I’m not inclined to go for higher taxes. I will always go for as low an amount as I can,” he said. “I’ll keep on whittling it down.”
Council’s vote to trim half a point from administration’s recommended tax increase will require the city to find roughly $1.1 million in cuts or new revenue.
Council declined to provide direction to staff on where that should be found, despite a request from city manager Norm Gale, leaving specific recommendations up to administration.
Gale warned that could set council up for failure.
“In previous years, council has said, ‘Go and find the money,’ and we have,” he said. “Mostly, our recommendations are not accepted by council.”
Coun. Mark Bentz echoed that message, pointing to council’s failure to find the $1.5 million in service cuts it ordered earlier this year.
Council has approved only about one third of that, after facing pushback over the proposed cuts.
“You saw what those cuts looked like a few weeks ago,” Bentz told council. “They’re going to be just as awful this winter. Are you going to be able to support them? If not, we’re at six per cent.”
Without a firm resolve to make major service cuts, Gale suggested council would struggle to lower the tax levy much further.
“Every time you consider reducing a program or service, you and we hear from people that that’s not what they want,” he said. “We also hear… that people don’t want to see substantial tax increases.”
“How do we drive that tax levy increase down without adversely affecting the programs and services that people desire, in a world of inflation? There’s no easy fix to this. I don’t have a magic wand.”
Bentz suggested the 6.1 per cent tax hike target was appropriate in a period of high inflation, which hit 6.8 per cent in 2022.
The target council approved Monday is well above tax hikes seen over the past 10 years, when the average was 3.2 per cent, or 2.5 per cent after growth.
The average hike under the previous 2018-2022 term of council was even lower, at 2.3 per cent, or 1.96 after growth.
The current council approved a five per cent tax levy hike in 2023.
Coun. Brian Hamilton, who had sometimes pushed for even lower increases, raised possible regrets over that approach on Monday.
“My first term of council, we did some incredible work,” he said. “We had four of the lowest years in probably a decade. But now I don’t necessarily think that was a good thing, and this is why: There were a lot of things we didn’t get done and now we have to play catch-up on.”
Hamilton added he expected outside agencies funded by the city — like police, the health unit, and the CEDC — to minimize funding requests heading into 2024.
“Our outside boards have to be on notice that we’re in a situation where our backs are up against the wall,” he said. “We’re looking at [cutting] soft services, recreation, potentially that has impacts on kids and parents.”
Coun. Shelby Ch’ng said tinkering with the tax levy hike wouldn’t address the root causes of the city’s financial challenges, which she said relate largely to unsustainable increases for emergency services.
She presented the municipal government as essentially powerless to stop that trend, saying it mostly relates to factors outside of council’s control, like negotiated wage increases.
“I’m really cognizant that these numbers are going to be used as weapons against us, as punching bags,” Ch’ng said of the targeted tax hike. “[We’re expected] to perform a miracle of Herculean proportions to solve this issue, when I don’t even know where to go with this.”
Similarly, Coun. Andrew Foulds pointed to costs downloaded by the provincial government, like a new mandated green bin program estimated to cost the city $5 million in 2023.
“There are some things that frankly aren’t our fault and we have very little authority to deal with, things like the organics program, which is going to cost a lot of money,” he said.
“That’s difficult, because as a council, we take the lumps from our citizens for decisions that are made in Ottawa or Toronto in a lot of cases. We take the body blows for them, and that’s tough emotionally. There was a councillor who spoke about not sleeping at night. We all get the angry phone calls and angry emails.”
