No enhancement, minimal decreases to programs and services: city manager

THUNDER BAY — The city’s 2025 operating budget will determine the level of services it provides this year and how much the city will raise in taxes.

In the first round of budget deliberations on Tuesday, city manager John Collin told council there would be no enhancement to service delivery or programs this year, nor would there be any significant decreases if the budget is approved as-is.

 City staff achieved a 3.7 per cent tax levy increase with their operating budget proposal, said Collin, coming in just under the 3.8 per cent target.

According to Collin, that means Thunder Bay would have the third-lowest tax increase in the province for a city with a population over 100,000.

The cities of Vaughan and Windsor are both looking at tax increases of about 3 per cent, he said.

Administration presented council with a list of other cities and their proposed tax increases. Most of the cities highlighted are looking a tax increase at or above 6 per cent, the highest, Waterloo, is looking at a 12 per cent tax increase.

Where Thunder Bay’s tax levy will land, in comparison to other cities, is subject to change as other municipalities have yet to finalize their budgets, said Collin.

“This was done through our research of newspaper articles and various databases that we are subject to. A lot of these are still in discussion. They will change and vary. So, we might see some shifts in this,” said Collin.

Earlier this month, when the budget was first presented to the public, Collin had incorrectly stated that 3.7 was the lowest tax levy increase of any large city in the province.

City treasurer Keri Greaves told council that administration only found out about Windsor’s proposed tax levy increase of 2.99 per cent earlier that day, noting that the sideshow presentation incorrectly showed Windsor with a tax increase near 6 per cent.

Coun. Andrew Foulds asked what a 3.7 per cent increase would mean for the city’s service delivery in comparison with other cities whose tax levy is set to rise by 6 per cent or more.

“Why do the other cities on this (list) have noticeably higher tax rates? We're just not in a position to comment on that. We have not done a detailed analysis of what's in their budgets,"said Collin. "We know that with growth, if growth is not carefully managed, there's increased costs.”

Greaves noted that since the pandemic, levy increases are starting to stabilize to pre-pandemic numbers.

“We might just be ahead of the curve on that trend ... At some point, these municipalities are gonna come back down,” said Greaves.

Collin said the it is important to keep the tax levy increase down because it gives the city “competitive advantage” when courting business.

“We can show that we are being fiscally prudent as we move forward,” said Collin.

Collin said “affordability was one of the key drivers” of the operating budget as the average family household income has not kept up with inflation, but also for commercial property owners who are looking for stability when developing their long-term business plans.

“If we wanted to maintain our competitive edge, or in fact enhance our competitive edge," said Collin, he recommend keeping increases to taxes rates and user fees to no more than 3.8 per cent and personnel costs at an increase of one per cent, excluding WSIB payments.

Personnel services costs make up two-thirds of the operating budget said Collin. To keep increases to one per cent he said the city will only fill vacancies if the positions are provincially and federally funded.

“We had to curb our appetite in a number of ways. We had to sharpen our pencils, but we did it for two reasons, the affordability challenge to our residents and our businesses. And also, we need to grow. In order to grow, we need to show a competitive advantage. We can now start talking about how the city of Thunder Bay has a disciplined approach to its tax rate increases that is focused on CPI,” said Collin.

Moving forward, the city manager plans to continue using a four-year rolling average from the Consumer Price Index (CPI), a measure of inflation, as a benchmark to determine the municipal tax levy.

Using two years of historical data, one current year and one year of predictive outcome from the CPI, he recommends that the city continues to enforce a budget mandate pegged to the rate of inflation. For 2026, Collin recommends the budget mandate be set at 2.6 per cent.

Collin also cautioned council that that number could change due to economic uncertainty. With the provincial election and a looming federal election, as well as, potential increased tariffs from the USA, the future CPI number could change.

Nevertheless, Collin also pointed out that his administration is being proactive in looking ahead toward next year's budget.

“It will be a struggle. Municipal inflation is most definitely higher than the inflation that CPI measures. CPI measures the basket of goods for a household. Our inflation is driven by the cost of specialty vehicles, specialized tooling and equipment, sand and salt for the roads, and wage increases. That is noticeably different than a basket of goods,” said Collin.

For example, Collin noted the inflationary cost of an ambulance has doubled over the last four years.

“That's 25 per cent inflation per year, not 2.5 per cent. We have a lot of work to do, but I think knowing now that that is the target will help discipline administration in their recommendations and will also help discipline council in their deliberations and decisions as we move through 2025 and that will be very powerful,” he added.

Tuesday’s budget meeting was strictly to inform council of the city’s long-term financial planning before diving deep into the operation budget over the next three council sessions.

Over those three council sessions, each of the city’s divisions and departments will present their operating budgets for council to debate and, ultimately, decide to leave as presented or find more cost savings to cut. 

The city will budget deliberations on Jan. 30, Feb. 03, and Feb. 05. with ratification of the 2025 Operating Budget scheduled to occur on February 10.

Administration will present the full report on the 2025 operating budget and Council will be able to ask additional questions to administration by department and division.     

The city has an online survey about the budget, which will remain open to the public until Feb. 4.