Stick handling around the payroll gorilla in the city’s 2014 budget

Posted November 15, 2013

When it comes to planning a budget, particularly the City of Guelph’s 2014-estimated $194,000,000 budget, the staff’s financial stick handling is impressive.

Chief Financial Officer Al Horsman was the designated hitter to explain why the staff arrived at a 3.36 per cent property tax increase for next year. This was because city council had little input in the process.

Coun. Karl Wettstein asked why the tax increase was not more related to the Canadian Price Index averaging 1.97 per cent for the past four years.

Mr. Horsman said such a comparison was unrealistic because the basket of goods the city must pay for is different than that of the average person. Let’s think about that for a moment.

It is true that the city must pay for third party suppliers of services such as lawyers, consultants, board members and contractors. Mr. Horsman added that the city is “hit with costs over which it has no control such as responsibilities downloaded from the province and cost increases in (unspecified) mandated programs.”

Willikers! You start to feel sorry for the city staff having to face all these budgetary issues over which the staff has no control. These costs have led to annual average property tax increases of 3.5 per cent in the past seven years.

But let’s drill down a little deeper. Many of the provincial mandated costs are offset by grants. Most notable is the annual gas tax rebate of more than $2 million. Does the province increase these mandated costs by 3.5 percent every year? Of course not.

Managing the finances of a city is no easy task. What Mr. Horsman left out of his “basket of goods” comparison was the cost of city employees. It is the biggest line item in the budget and consumes some 88 per cent of the property taxes paid to the city.

When a city councillor complains that council is left out of the budget process, look inwardly.

Further, if you don’t control your costs you cannot control your budget.

In 2012, the latest year of official financial statements, there were 1,441.76 full-time equivalent (FTE) employees on the city staff. That’s a 20 per cent increase during a period when the population grew by only 5.8 per cent.

Those so-called “provincially mandated costs” are downloaded to all 440 municipalities in the province, not just Guelph.

So what is Toronto’s secret? The largest city in Canada is predicting a 1.75 per cent property tax increase for 2014.

What has evolved in Guelph is council’s dependence on the staff and the staff has removed budget planning from the elected officials. And that friends, in letting the fox in with the chickens.

Who has more skin in the game? Is it a group of part-time elected officials making on average $30,000 a year?  No, the staff, more specifically the senior staff, has control and they have a lot at stake.

This so-called budget process ignores the exponential growth of staff numbers, salaries and benefits including pension obligations. Why? Because it affects them personally. Control of this process lies principally with the executive team.

Nothing will change until hard decisions are made. These include reducing the numbers of staff under the guidance of an outside management expert. It would entail reorganization of the staff duties and responsibilities. It should also include a two-year freeze on all base salaries and a reduction of benefits, to bring employee costs in line with peer municipalities.

The next council should take steps to privatize some services to reduce costs including Guelph Transit and waste management operations.

The days of $75,000 custodians and crossing guards must end. In 2012, the average Guelph employee’s salary, and benefits including pensions, reached $113,394. The average salary of a city employee was $87,313. The total of employee costs that year was $163,400,750.

The city defends its staff costs by reporting only the base salary number in its financial statements, and not the total compensation costs. While this may be legal it remains deceptive.

And what does the staff recommend to council in the 2014 budget? Hire another 10.5 fulltime equivalent employees.

Remember Oliver! When the little guy asks: “More porridge please?”





Filed under Between the Lines

8 responses to “Stick handling around the payroll gorilla in the city’s 2014 budget

  1. fairpensions09

    Thanks an excellent one Gerry!

    *Bill Tufts Fair Pensions For All * Ste, 824 1063 King St. W Hamilton On. L8S 4S3

    Call: 905-741-1904 Web site: Fair Pensions For All Twitter – @*Fairpension *

  2. Glen N. Tolhurst

    Once again the boffins at city hall are playing the shell game with the outcome preordained as are the roles of the con man & sucker. Does it appear that the councilor mentioned in your note above, has had an epiphany and now has seen the light as to the non-sustainability of the outrageous compound tax increases dumped on voters since 2000? Or is there an election coming?

  3. Todd Bertrand

    Very well stated Gerry. No doubt it falls on deaf ears at city hall but many of us are listening.

  4. rob

    Toronto’s secret is they have revenue sources such as land transfer fee that we do not have. Comparing us to a city that has more revenue tools then us is unfair.

    • Rob: Ford dumped the surcharge on vehicles but regardless the average property tax rate is 1.75 per cent for the past three years. That’s double that of Guelph’s seven year annual property tax increase of 3.5 per cent. The city administration during that period has increased user fees for water use and development plus a number of other areas. So please, don’t paint them as being paragons of municipal management. The underlying problem is mismanagement of the city. It is underscored by the recent internal auditor’s report on employee overtime including the cost doubling from 2012 to this year to $5,067,000. That’s one indication of how costs are out of control.

  5. Jeff

    As usual, your numbers are wrong and you failed to fact check, there may be a gas offset grant for transit, but it doesn’t come close to covering the actual cost or include waste pickup or snow plowing, plus you haven’t taken into account the provincially mandated accessibility laws that come into effect in 2014 and the costs that it results in. There are also no crossing guards or janitors that makes that much. If there are, can you show any record of it?

    Guelph could duplicate Rob Ford’s Toronto, and cut all spending to reduce the current taxes at the expense of our children’s future. Who cares that Toronto’s infrastructure is literally crumbling, as long as I don’t have to pay for it, screw the future generations if I can save a few dollars now?

  6. geo

    This is how you run a city.
    As Detroit finalizes the terms of the largest public bankruptcy in U.S. history this week, its across-the-river Canadian neighbour is boasting a fiscal record the envy of any city its size on the continent: five years without a tax hike, an eight-figure paydown of municipal debt, all while weathering the effects of Ontario manufacturing’s collapse.

    “We’ve broken with political tradition, obviously,” said Eddie Francis, mayor of the city of Windsor, population 210,000.

    On Monday, for the sixth consecutive year, Windsor City Council approved a budget that contained zero tax increases.

    Meanwhile, the city has reduced its debt from a 2002 high of $230-million to $110-million. City reserves have also swelled to $114-million from $42-million.

    Uncharacteristic for a city undergoing deep austerity, Windsor has also embarked on a $1.5-billion infrastructure campaign: bike paths, upgraded libraries, a new aquatics centre and the new WFCU Centre, home of the Windsor Spitfires, all paid for with cash upfront.
    “We used [the economic crisis] as a way to reposition the city, and we paid for it all with cash,” said Mr. Francis, who ran Windsor’s Royal Pita Baking Company before his 2003 election to the mayor’s office at the age of 29.

    Candice Malcolm, the Ontario director of the Canadian Taxpayers Federation, said she could think of no other cities that could come close to Windsor’s record. Calgary has averaged a 4.8% tax increase over the past 10 years. Toronto just proposed a 2.4% residential tax hike and even in nearby Guelph, administrators are mulling an above-inflation hike of 2.37%.

    “To all the other governments that continue to raise taxes and say it’s not possible to do otherwise, here’s a great example of a city that managed to do just that,” said Ms. Malcolm.

    Windsor, of course, is no boomtown. As recently as last spring, the city had Canada’s highest unemployment rate, at 10.1%. A November Statistics Canada report also named Windsor one of Canada’s poorest cities, with 40% of its resident living in low-income neighbourhoods.

    But it was this economic pain, according to Windsor’s chief financial officer Onorio Colucci, that helped to spur public support for what he called “the culture that’s permeated everything.”

    Every year, city departments submit a “menu” of savings ideas, preferably ones that have no impact on services, and then city planners perform the slow process of moving through the menu. “It’s everybody around the table, it’s a five-month process, but it starts with that vision that this is something that needs to be done,” said Mr. Colucci.

    As opposed to the more dramatic budget-slashing measures recently seen in Toronto, where every city department was asked to decimate its budget by 10%, Windsor insists it is more nuanced. “We have enough suggestions to ensure that we might take three or four [menu items] in one department, and maybe none in another,” said Mr. Colucci.

    Some savings have arrived via outsourcing. Parking enforcement and garbage collection is now done by private contractors, paring down 160 city positions in the process.

    The city’s aggressive debt paydown has yielded some dividends, shaving off $11- to $12-million in annual interest payments.

    Mr. Colucci also credited an ongoing suite of little changes, such as a recent move to pare down electricity bills by rigging up Windsor street lights with low-power LED bulbs.

    All the while, said the CFO, the idea has been to avoid what he called “Washington Monuments” — a reference to the highly visible and much-criticized closure of the Washington Monument during the recent U.S. federal government shutdown.

    “No slashing, no burning,” as Mayor Francis said in media comments this week.

    the most visible impact of the spending reduction has been a 101-day strike by city workers in 2009. In the end, the city bowed to modest wage increases, but denied pension benefits to new hires — a key motivator of the strike.

    The city also made liberal use of lump-sum payments rather than permanent salary increases, ensuring that wage increases do not compound over time.

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  7. Adam Wedge

    Great post. Some really good points in there. Thanks for taking the time to write it

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