City admits its financial management is off the track

Posted September 11, 2013

Just about 10 months ago the city staff was ordered by city council to find efficiencies in operations of $500,000 to keep the property tax increase to 2.96 per cent.

In June, staff announced that only $126,000 in cost cuts had been found of which the majority were increases in revenues. And the real property tax increase turned out to be 3.74 per cent according to the finance department

Now that same staff has been told by its executive managers to cut another $2.4 million due to annual budget overspending and revenue shortfalls. Part of the deficit will by mitigated by tapping into reserves at the end of the year.

Some of the spending excesses occurred in legal services, $300,000 plus another $350,000 coping with winter control of snow and a major ice storm. Then the Planning Department estimated a $300,000 revenue shortfall from declining application processing fees.

One of the most egregious examples of overspending was in Guelph Transit in which $960,000 was spent in overtime. To make matters worse, there was a decline of $320,000 in revenues due to “dropped runs and service issues”. This may be part of the reason that the general manager of Guelph Transit was fired recently although it is not believed to be the primary reason.

Then there is the $170,000 drop in waste management revenues due in part to competition for recyclables and lower revenues from the organic waste management facility. The problem with this department is the lack of credibility because financial details have been shrouded in secrecy.

Throw in the overall budgeted revenue shortfall of $700,000, and one must believe there is a lack of checks and balances in operating the city and its finances.

If ever there was a graphic example of financial mismanagement particularly the budgeting process, executed by city staff, it has to lie in this confession of rank incompetence.

Depressingly, this is only the tip of the iceberg that will crush city finances for years to come. The soaring cost of employees is creating a growing pension benefits liability that will dwarf today’s costs. Every employee added to the staff progresses through the years receiving increases automatically, not for performance but because of years on the job. Throw in 21 days a year of sick leave that can accumulate if unused and paid at retirement, it’s easy to see the looming crisis in employee costs.

In 2012, this city paid 170 employees more than $100,000 a year in salaries and wages, not including total compensation of other benefits.

And this administration has added more than 400 fulltime equivalent employees since 2007.

It now ironic that executive management has now ordered a 90-day pause in staff hiring and halting hiring “no-mandatory” consultants for the remainder of the year. Is it not an oxymoron that a non-mandatory consultant is even hired in the first place?

This is serious business that points to a damaged administration that is incapable of accurate budgeting and accounting or monitoring what is going on regularly.

It is amusing when city Coun. Cam Guthrie, chairman of the audit committee, says that the city is being “really, really well run”. It displays the depth of his knowledge of what is happening right under his nose.

In major projects, costing millions, there is evidently neither business plans nor risk/reward analysis done before committing taxpayer’s dollars.

And this is not the first budget deficit the city has experienced. In fact, in the previous four years the budgets have encountered deficits, every year. The total in that period of time, not counting 2013, is $24,771,000 in budgets overspent by the people who run our city.

There is a light at the end of the tunnel. GrassRoots Guelph, is a citizen’s organization to effect increased citizen participation the next civic election. Also dedicated to bringing transparency and common sense back to city management. Interested and want to contribute? Send your name, address, email address and telephone number to grassrootsguelph2014@gmail.com.

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5 Comments

Filed under Between the Lines

5 responses to “City admits its financial management is off the track

  1. Glen N. Tolhurst

    In the “real world” managers who are incapable of planning a realistic budget and executing an operating plan to meet budget get fired. Period! As simple as that! But not in the fairy tale world of Guelph council and administration where there’s always a convenient reserve stashed away somewhere just waiting to be tapped into. The problem being these reserves are taxpayer funded.

    • Glen N. Tolhurst: And taxpayers refund those depleted reserves so the administration can continue to play snakes and ladders with our finances. At lesst now they are starting to admit their errors in judgment,

  2. Will

    Didn’t Karen and company just give city employees a decent raise recently with no questions asked? The insanity must stop as year after year the city states taxes must rise 6% to maintain services. Yet magically at the last moment they find inefficiences and gloat about a 3% increase.

    • Will: I’m not sure they are capable to discover inefficiencies. But they are good at gloating. Keep the faith, this too will end in 2014 when a council composed of intelligent and experienced people take over.

  3. A Different Paul

    Will:
    An excellent point. The exercise consists of working to a phoney figure to “satisfy” the taxpayers and to get favorable press.
    Then the staff continue to overspend and with the approval of some members of Council they go on a hiring spree. You can guess who the jobs go to. After all if the new hires are treated well by some Councillors, then campaign donations will surely follow??If senior staff fail to play ball they are “encouraged” to leave!! (With a Golden Parachute??)
    And to cover the overspending Reserves are drawn down. Just wait and see how the $2.4 million shortfall is handled

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