Monthly Archives: June 2014

Guelph needs a city Auditor General to end the Farbridge multi-million dollar mistakes

Posted June 29, 2014

Ontario’s Ombudsman, Andre Marin, recently addressed a gathering of municipal finance officials in London, Ontario.

He pointed out that 92 per cent of the 444 Ontario municipalities have no oversight of their finances and operations. In fact, only Ottawa, Toronto, Oshawa and Sudbury have Auditor Generals (A/G) overseeing their operations. Sudbury and Oshawa are on the verge of dumping their A/G’s because they delivered negative reports to the councils.

Yep, if you don’t like the message, just shoot the messenger.

The city will reply that Deloitte and Touche, a major independent audit and accounting firm, review city finances annually. Note the word “review”. Deloitte does not do an in-depth audit but employs parameters set by contract with the city.

An Auditor General, they’re not.

In Guelph, the council hired an internal auditor to dig into operations and she came up with a doozie reporting in 2013 city staff overtime costs were $5,067,000. It was twice that in 2012. Her investigations are only the tip of the iceberg that can sink the good ship SS Guelph.

Fortunately for citizens she’s still around. But her job is limited and controlled by senior staff. What is really needed is an Auditor General who has authority to oversee all city finances and operations without political interference.

The Auditor Generals, in the aforementioned cities, are appointed for five years. In the case of Sudbury the A/G appears to be surviving day-to-day. Oshawa renewed its A/G for only two years. This is against the provincial legislation that set up the municipal A/G system, requiring a five-year term of office.

Now along comes the Association of Municipalities of Ontario.  That organization, composed of elected officials from Ontario’s municipalities, is dead against the addition of Auditor Generals poking into their municipal operations.

Why is that? Both the federal government and most provinces have Auditor Generals overseeing their operations and finances. You don’t have to go very far to discover the need of such an independent officer in the City of Guelph.

In fact, last October, the citizen activist group, GrassRoots Guelph, delivered a four-page petition to the Ontario Ministry of Municipal Affairs and Housing that detailed several instances of questionable financial mismanagement and operations.

The petition was signed by 162 taxpayers when the Revised Statutes of Ontario Act only required 50 signatures. Ministry officials later confirmed that the petition figures were accurate. Yet the Minister at the time, Linda Jeffery, rejected an audit of the city’s finances and operations with no explanation.

Shortly after, she left office to run for mayor of Brampton.

The Chief Administrative Officer of Guelph’s public servants called the citizen’s petition “a waste of time.” Minister Jeffery’s letter contained no such reference. So no matter what we complain about in Guelph, the majority of elected officials doesn’t care what citizens think or know about their governance of our city. On top of that, the senior executive directors of the Guelph staff share the same views as their political masters. It is apparaent that much of the staff has been politicized through threat of job loss and other intimidation.

What’s that old expression: “Go along to get along?”

It appears the deck is stacked against the citizens living in Ontario’s municipalities. This AMO entitlement attitude is endemic of the disdain for those who once elected them.

So far in this nomination period every member of council who supported Mayor Farbridge, has declared their candidacy, plus two former Farbridge councillors. As a public service, here are their names: Karen Farbridge; W2 – Ian Findlay; W3 – Maggie Laidlaw and June Hoffland; W4 – Mike Salisbury; W5 – Leanne Piper, Lise Burcher, Cathy Downer; W6 – Todd Dennis and Karl Wettstein.

There is only one-way citizens can protect themselves against these uncaring and arrogant politicians and that’s to defeat them October 27.

GRG is dedicated to informing voters of how their city and treasure have been abused by these councillors. Also, to encourage candidates for council who are motivated to return our city to fiscal responsibility, common sense and restoration of the public trust.

The 2014 election will either result in more of the same from the Farbridge administration or an election of a majority of council who will bring fresh ideas, energy and business to the city. Mostly, they will restore the public trust that has been sneered at by those in the administration. Overseers who feel they are entitled to treat the citizens as pawns in their grandiose schemes to change our city.

Step one is to hire an Auditor General for Guelph to level the playing field.

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How the Farbridge administration plans to sell Guelph Hydro for $150 million

Posted June 28, 2014

Some years ago, there was a bid to consolidate Guelph Hydro with Hamilton and St. Catharines hydro systems. The sale was rejected by council in one of the rare votes in which most of the mayor’s cohorts voted against it.

The rejection came as a result of public reaction to the proposal in which the Mayor refused to reveal details of the business plan but urged acceptance.

That was then and now Mayor Farbridge is at it again.

As chairperson of Guelph Municipal Holdings Inc (GMHI), the mayor is using a study produced by the province in April 2012, to consider consolidating electrical distribution utilities. Guelph Hydro, with a conservative book value of $150 million, is one of several small electric distribution utilities the province sees as being as being a candidate for consolidation.

The provincial study group issued is no directive, no requirement, and no assurance that it will happen.

Despite this fact, our mayor has persuaded her board, populated by her supporters, to endorse consolidation of Guelph Hydro with other unnamed electric utilities.

But there is more. The GMHI board has set up a task force composed of board members and Guelph Hydro, plus staffers from each organization to consider merger and acquisitions scenarios.

This is nothing but a second attempt by the Farbridge administration to get its hands on more cash to fund their agenda of projects that few voters in Guelph supported in 2006 or 2010.

Along with the announcement the GMHI board will add two new companies to its stable.

One is a new real estate development corporation to direct select city assets and operations such as downtown land parcels and parking.

The other is creating Envida Corporation to develop centralized thermal heating and cooling utilities downtown and in the Hanlon Business Park.

The reason for all this is to set up a management structure that is independent and creates a mechanism for the transfer of city assets.

Why is GMHI necessary? This creates a separate entity that will control the sale of Guelph Hydro then use the money to further the vision thing that Mayor Farbridge has espoused for the last eight years.

She has set up a second tier organization that answers only to her and not to the elected council.

It is an egregious attempt to covertly control a huge asset without ever consulting the public or elected officials. And she has done it on the specious suggestion by a provincial study that is only that: A work in progress, with no authority to carry out the removal of Guelph Hydro from the assets of the city.

It is hallmark Farbridge working under cover to get what she wants, the $150 million. It a perfect example of mushroom politics. Keep the citizens in the dark. It is founded on ego, arrogance, secrecy and, more lately, on a sense of entitlement.

She and her council supporters have already spent millions of your money on projects that don’t work, are not necessary and have little relevance to the day-to-day operations of the city.

Think about the 35 per cent increase in your property taxes since 2007. Think about your water bills climbing 77 per cent even though water usage has dropped dramatically. Think about the Urbacon new City Hall lawsuit that could cost the city an estimated $30 million when all the costs are established.

Are you sure you want another four years of this?

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Why does the city staff refuse to regulate student lodging housing in single family areas?

Posted June 25, 2014

Here you are living in a quiet neighbourhood where families gather and share experiences involving their children, work and play. At a house close by, young people start arriving and the party starts with searing sounds of music and profanity-laced yelling. A place in some sites, where beer is openly sold to all and sundry.

This is NOT Mr. Rogers’ neighbourhood.

Let’s back up a bit. At a recent meeting of the city Planning, Building, Engineering and Environmental committee, the staff presented a report regarding the licensing of rental properties. More specifically the report focused on student lodging-houses in single-family zoned areas.

The city staff has been working on this project for the past nine months and there has been considerable public input.

But a strange thing occurred. The staff did not recommend proceeding with the proposed bylaw. Following discussion, the committee voted to have the staff review that decision and report back. Of the members of the committee, only Coun. Cam Guthrie voted against sending it back to staff for review.

Residents living around one student lodging-house have been complaining about the tenants abusing their privacy and peace of mind for months. Normally the neighbours brace for the months of September and October when the new crop of students arrive. But now the uncivil party seems to keep going, despite many students returning to their homes.

Here’s what neighbours face almost on a nightly basis: Loud rock music, drinking, selling beer, fouling the neighbour’s property, yelling, and using profanity and the participants keep it up long after midnight. In some cases, resident’s personal property has been damaged.

The adjacent homes have been asking for help to curb these objectionable activities in the neighbourhood without much assistance from the city bylaw officers or the police. But the authorities say their hands are tied due to the system that prevents direct intervention.

This is a widespread problem in Wards Five and Six. The university has no interest or control over these off-campus student houses. The owners of these homes allow overcrowding and offer no supervision of their student tenants. The student cost is $500 a month and in some of these homes there may be as many as a dozen living in the home.

In the background, is a determined Landlord’s Association lobbying to have staff and council reject the proposed rental bylaw. Many of the Landlord Association owners do not live in Guelph.

Why are they objecting? Because they don’t want any interference that may ruin the cash gravy train.

The affected resident’s say there is no control over the behaviour of the students by the landlords. The landlords counter that the rental charge will not change the uncivil behaviour of their tenants.

At one point, the city said the revenues derived through the rental program would be used to beef up bylaw enforcement and police presence.

The affected residents, and, in other parts of the city where these student-lodging houses are located, are demanding action.

Apparently the staff has not considered the effect on these homeowners and taxpayers who are afflicted by the unruly behaviour of the student occupants who are not permanent residents. The students have no stake in the game and can act anyway they want.

This issue will be a rallying point for citizens in the October 27 civic election.

If not controlled here, it can happen anywhere.

Is your neighbourhood next?

 

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The Urbacon judgment is a portrait of the Farbridge administration’s incompetence

June 23, 2014

The 64-page judgment by Superior Court Judge Donald Mackenzie concerns the Lawsuit initiated by Urbacon Buildings Group Corp. (Urbacon), contractors for the new city hall and courthouse. The action was a wrongful dismissal case in which the City of Guelph fired the contractor before the contract was completed September 19, 2008.

The judgment is not the easiest to follow due to the complexity of the case and the various influencing elements. GrassRoots Guelph is dedicated to parsing the judgment with commentary following official statements so that viewers may reconcile the importance of this decision.

This lengthy and thorough judgment clearly finds that the City of Guelph wrongfully dismissed Urbacon and is liable for damages.

The most interesting part of the judgment is the disposition. In it, the Judge clearly and unequivocally places the blame and a framework of pending costs, on the city for attempting to orchestrate the sudden dismissal of Urbacon for it own benefit.

He says the $44,520,000 contract, exclusive of the GST, was signed July 4, 2006. The Judge stated the contract, drawn up on a form used by the Canadian Construction Association, was “comprehensive as one might expect for an undertaking of the nature and extent of the Project.”

This statement negates the comment by the Mayor, following release of the judgment. She charged the original contract, passed by the Kate Quarrie administration, was “poorly worded”.

The Judge is quoted:

“In the result, the notice of events of default issued by MTA under the direction or orchestration by Guelph is invalid and thereby negates any justification by Guelph of its termination of Urbacon. The failure by Guelph to perform its obligations in good faith under the Contract invalidates any justification for Guelph’s termination of Urbacon on the Contract.”

This paragraph sets the tone for the decisions contained in the judgment.

The reference to the MTA is the architecture firm, Moriyama and Teshima, who, both parties agreed, were the neutral consultants monitoring the progress of the Project.

“The Consultant will visit the Place of the Work at intervals appropriate to the progress of construction to become familiar with the progress and quality of the work and to determine if the Work is proceeding in general conformity with the Contract Documents. 

“The Consultant will be, in the first instance, the interpreter of the requirements of the Contract Documents and shall make findings as to the performance hereunder by both parties to the Contract.  During the progress of the Work, the Consultant will furnish Supplemental Instructions to the Contractor with reasonable promptness or in accordance with a schedule for such instructions agreed to by the Consultant and the Contractor.

“The Consultant will prepare Change Orders and Directives.”

According to testimony given during the 40-day trial over three months, the Judge was critical of the role of the MTA in performing its responsibilities as neutral consultant hired to expedite the Project and being independent.

In the shadowy way the Farbridge administration operates, there appeared on the surface to be no one on council or senior staff overseeing the 29-month project that was supposed to be completed by December 18, 2008. Instead, a middle manager named Murray McRae was the city’s point man. He is no longer employed by the city.

Guelph’s Chief Administrative Officer, Ann Pappert, has stated that the person responsible for the Urbacon firing was former CAO Hans Loewig who, she claimed, had the authority to cancel the contract without consulting the council.

The record shows that Mr. Loewig received a four-year contract as Guelph’s CAO two months following the firing of Urbacon. His new contract made him the highest paid public servant in the City starting at $198,000 per year plus expenses. His contract also included an unusual clause that permitted 12 weeks of unpaid leave plus his regular vacation.

Mr. Loewig resigned a month before the trial began and did not testify.

Pappert’s statement further adds fuel to the fire that public trust in the administration has been permanently shattered. That includes an abdication of moral authority and fiduciary responsibility that has been trashed.

Here is more from the judgment:

In the fall of 2007, Urbacon notified the MTA and city of issues that breached the original contract. These included:

   1.     Some of the design drawings and specifications were vague and incomplete;

  1.   Other design drawings and specifications conflicted with each other;
  2.   The design drawings required substantial changes or improvements; and
  3.    In addition, Urbacon complained that Guelph created many substantial changes in the scope of Work and most importantly,that Guelph and/or the Consultant refused or neglected to give appropriate direction or authority to proceed with any changes in a timely fashion, thus contributing to delays on the Project.

Guelph agreed to pay to Urbacon an additional $534,600.00 representing damages occasioned by the delays in question, and also agreed to extend the substantial completion date for the project by 119 days from the original substantial completion date.

This portion of the judgment clearly details the failure on the part of the city to manage its responsibilities costing an additional $534,600 due to the administration’s lack of action to deal with construction problems. Many of these problems were created by a tsunami of change directives and change orders initiated by the city.

Urbacon, for its part, blamed the flood of change orders and lack of decision-making by the city staff, for the constructions delays. Based on the evidence, the Judge agreed.

The nature of these changes in the original contract has never been revealed. Some observers claim that most were design changes to accommodate specific environmental standards.

The Farbridge administration has spent millions in its two terms of office on environment issues including, waste management, bicycle lanes on major routes, underground thermal heating and cooling systems, upgrading building codes and increasing development fees by some 100 per cent.

It is now obvious it ordered many changes to the original contract to accommodate excessive environmental features. What is now acutely apparent the person or persons responsible for these changes are not known and were not revealed in the trial.

What is this going to cost the citizens of Guelph?

Step one is the Judge has asked both parties to negotiate a settlement of the costs. If that negotiation fails then a separate trial will be held in October to settle the costs.

Here is an estimate of the costs and liability facing the City of Guelph:

* To Urbacon, the cost of damages and breach of contract to the contractor who sued is $19 million. In view of the decision of the Judge, that figure could escalate.

* The costs of the 40-day trial. Estimate $2 million

* The legal costs of both the city and Urbacon, estimate $5 to $8 million depending on whether the city decides to appeal the judgment.

* Costs of city staff preparing documents and reports over a four-year period are Impossible to estimate.

* Cost of two contractors hired to complete construction of the new city hall and the conversion of the old city hall into a provincial offenses court. Cost is unknown and not revealed at trial.

* Dismissal and retirement payments paid to city staff involved in the case. Again, not revealed to the public

* Payments to subcontractors who lost their jobs when Urbacon was fired and were owed payment for work, estimate $5 million.

* Cost of interest based on the disposition of judgment commencing March 31, 2014. Estimating liability to the city of $30 million, the interest cost at 5 per cent is $4,109 per day. That interest from March 31 to June 23, the day council meets in camera to review the judgment is 84 days, equaling $345,205 in accumulated interest. The cost of interest alone could reach $1 million before the issues are all settled possibly next year.

* Miscellaneous costs, estimate $500,000 over six years of litigation.

These costs could reach as much as $30 million by the time the dust settles.

That could result in increasing the cost of the new city hall and provincial offenses court to more than $75 million. This epic episode of mismanagement and dereliction of responsibility by council is one of the reasons that GraasRoots Guelph was formed to return control of the city back to the people.

How is the city going to pay for this? It will be forced to borrow to fulfill its obligations arising from the decision. This also increases the costs of the trial outcome.

How is it possible that our elected council at the time, failed to recognize and understand the fallout of the decision to fire the contractor? To claim that council was not involved and were unaware, is a dereliction of their responsibility to the citizens.

That 2007 to 2010 council consisted of Mayor Farbridge, Bob Bell, Kathleen Ferrelly (retired); Vicky Beard (defeated 2010) Ian Findlay; Maggie Laidlaw, June Hoffland; Mike Salisbury (defeated in 2010, running gain in 2014), Gloria Kovach (retiring 2014); Leanne Piper, Lise Burcher; Christine Billings (retired) and Karl Wettstein.

Disposition

Orders shall issue as follows:

  1. Declaring that the termination of Urbacon under the Contract by Guelph was wrongful and invalid;
  2. Guelph shall pay to Urbacon such damages arising from Guelph’s wrongful and invalid termination of Urbacon, upon assessment of the same on completion of the second phase of this proceeding;
  3. Guelph shall pay to each of the sub-trades (lien claimants who have proven their claims) the amounts found by this Court to be due and owing to each of them;
  4. The damages and amounts described in paras (2) and (3) above, shall bear interest thereon in accordance with the Courts of Justice Act from the date such damages and amounts are fixed;
  5. Costs shall be determined in accordance with the judgment herein dated March 31, 2014;

 

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How the Farbridge administration fumbled incinerating waste for power in 2007

Posted June 18, 2014

This fall the Region of Durham will open its new waste, incineration power facility in Clarington. It will be a first for Ontario on such a scale to process all of the region’s homes and businesses plus a portion of neighbouring York Region.

It is estimated that some 650,000 people will experience their garbage being turned into electricity plus intensive recycling of materials not suitable for incineration.

The per person cost of the Durham undertaking is $436 based on a capital cost of $284 million. This does not include the operating costs, much of which is covered by selling excess power into the provincial grid.

Durham officials predict that when fully operational, the plant will cut waste diversion to the landfill by 70 per cent.

In 2007, the newly elected Karen Farbridge council rejected incineration as a solution to managing its waste. Instead, they chose to rebuild an organic waste facility on the same site as the one that was condemned and originally built under the previous Farbridge led council.

That facility was closed in 2006 when its operations violated the Ministry of Environment regulations governing emissions. The city was fined and the manager fired.

Suppose the Farbridge Council had proceeded with an incineration plant that produced power from waste, instead of the organic waste processing facility. To service 175,000 residents by the year 2031, as established by the provincial government “Places to Grow” directive, the plant cost was estimated $120 million in 2007. This is 42 per cent less than the Durham plant cost in 2014, but so is the client base that is smaller by 26.9 per cent.

This estimate considers site preparation, regulatory approvals, public education, electric grid agreements, and sale of power to other communities.

The per-person capital cost would have been $685 spread over a 24-year period, not including the operational costs. These costs would have been offset by selling power to the Ontario grid and providing the waste for power service to other nearby communities.

The city maintains the new Organic Waste Processing Facility (OWPF) cost $34 million. It was built by Maple Reinders and operated by a subsidiary company, Aim Environmental.

The per-person cost of this facility is $265.6 based on the current population of 128,0000. Again the costs of operation and revenue stream from the sale of compost, are unknown

The entire organic waste project is shrouded in secrecy. No reason has been given regarding why the plant was built with Ministry of Environment approval of six times the needs of the city for the next 20 years.

While hindsight is 20/20, there was a mindset among the majority of council that incineration was bad for the environment. No attempt was made to investigate why Europe has hundreds of such plants without threatening the environment.

This mindset was the by-product of a failed attempt to process wet waste during the first Farbridge term of office, 2000 to 2003. It was a failure then and it is a failure now. The millions that have been spent to establish the Waste Resource Innovation Centre on Dunlop Drive, has sucked up capital funds like a Hoover vacuum cleaner.

It’s just one of the reasons why there is no money to build a new downtown library or south-end recreation centre or public parking downtown or a new police headquarters.

Yet this administration, hide-bound by developing long-term strategic plans for the city, fails to do the work that meets the immediate needs of citizens.

This Farbridge focus has now led the city into a multi-million error in judgment come the settling the Urbacon city hall lawsuit costs. This lengthy dispute was recently lost by the city.

This is real, folks. They talk about analyzing the actual judgment and the possibility of appeal. But this is not going to go away or get covered up.

It is yet another example of gross mismanagement of the city’s business by the Farbridge administration.

Eight years of this and now she wants to be re-elected?

 

 

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Blast from the Past: This is not your average piggy bank

First posted August 15, 2012

Posted June 17, 2014

With the startling comparison of employee costs of the annual Guelph budget pegged at 89 per cent compared to that of the City of Waterloo at 56.6 per cent, guelphspeaks dug into the numbers.

Studying the reserves report, presented to the Finance and Enterprise Services committee, more than $11,736,232 has been set aside for employment compensation reserves. That’s equivalent to $23,102 for each of the 1,508 full-time employee. That number of full-time equivalent employees reached 2,063 by the end of fiscal year 2013.

Now keep in mind this money is set aside for future costs of employee benefits. Ordinarily, that is a prudent move.

But digging a little deeper what constitutes these future liabilities?

Number one is sick leave with a reserve of $10,445,856. That figure includes $3,530,693 for the firemen; $3,297,414 for police services; $894,104 for the librarians and $2,203,645 for members of CUPE 241. The other reserve is for “employee salary gapping” totaling $1,290,376.

Remember, these figures reflect the Financial Information Report filed with the provincial government for 2011.

The practice of allowing employees to accumulate unused sick leave for a bonus payment upon retirement, is unfair to taxpayers, most who do not enjoy this benefit.

Let us get this straight. Suppose employee “A”, in the last five years of his time working for the City of Guelph was earning $75,000 per year. He retires after 25 years. During that time his total sick leave benefit accumulated to 450 days (18 days a year). But during his work life, he was sick sometimes. So for our comparison, he ended his career with the city with acumulated sick leave benefit of 275 days.

For example, doing the math, employee “A” worked 260 days a year at a rate of $300 a day. This included three to four weeks paid vacation.

His sick leave benefit when he retired was: Salary on retirement – $75,000; divided by annual days worked =$300; multiplied by 275 days of accumulated sick days = $82,500. This is a taxpayer-funded bonus for not taking the sick days off during a lifetime on the job.

Why are taxpayers paying twice for work performed by employee “A”?

The same applies to vacation time not taken and accumulated. The city has a reserve set aside for this perk to be paid when an employee terminates.

But wait! Employee “A” was paid for every day he reported for work. Is this not double dipping – being paid twice for coming to work? It has been a long-term goal of the municipal public sector unions to achieve this. Unfortunately in Guelph, all employees, including Hydro enjoy this benefit. Look at it this way: Why should taxpayers have to guarantee these benefits?

The recent retirement of the chief of police, Rob Davis, is an example of how accumulated unused sick leave over the years, plus unused vacation pay, resulted in a major league bonus payment of more than $40,000. Mr. Davis will enjoy a pension of $135,313 per year indexed at two per cent per year for the rest of his life.

Don’t assume the worst. He is a career police officer and entitled, as those are the rules. The time has arrived that the right to accumulate unused sick pay and vacation time has to go. If you don’t use it, you lose it.

Already council has been told that the vacation accrual reserve of $5,122,596 is to be retired and the assets distributed to other employee compensation reserves. It has never been revealed how that money was redistributed or why? Incidentally, the $11,736,232 in the employment compensation reserve was not included in the above decision.

Another baffling fact is why there is a Workman’s Safety Insurance Board (WSIB) reserve of $2,203,520 and the city allows a sick leave benefit on top of any WSIB benefit? Every employer in the province contributes to the WSIB on behalf of his or her employees, but shouldn’t that be a budget operating expense instead of a reserve?

The way this administration works is creating many reserves or cash envelopes, if you will. Just like grandma used to do.

As of this date, there is more than $40,000,000 stashed in reserve funds. So why does council keep coming back to increase taxes by an average of 3.5 per cent every year? User fees are also increased while the taxpayers are pinched, due to mismanagement of the city finances.

Some reserves are needed. However this council justifies its actions by using the plethora of reserves as political tools to meet their misguided end-game. Further, how is all this money being managed? How is it invested and where? How is money withdrawn from the reserves without having to sell assets?

Some may call having reserves is prudent but it’s nothing but a cluster of nice plump piggy banks that can be raided at will to justify the means.

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Liberals win in Ontario but don’t expect the financial problems to go away

Posted June 15, 2014

It was a brilliant strategy that re-elected a lame-duck Liberal premier to lead the province for the next four years.

A Progressive Conservative leader who ran a mind-numbing campaign that threatened, lectured and painted a doomsday scenario, that many thinking voters could not accept, helped Kathleen Wynne’s campaign.

The delicious irony is premier-elect Wynne is eventually going to be forced to adopt most of the Hudak fiscal medicine if she hopes to meet her promise of a balanced budget by 2017.

The fiscal problems remain.

The deficit is still $12.5 million and has increased by some $1.2 billion since Kathleen Wynne took office in 2013.

The provincial debt has jumped to a projected $269.2 billion. A year ago it was $252.1 billion. That’s an increase of $17.1 billion during the new premier’s stewardship of Ontario. The debt will increase exponentially as more and more annual deficits must be financed before reaching the premier’s deficit elimination goal in 2017.

It is conceivable that the Ontario debt could reach $335 billion by 2017. It is obvious that the premier must roll back the spending. The province’s debt servicing costs will consume almost as much as the cost of healthcare, the largest spending item in the provincial budget.

There is very little wiggle room left to carry out her budget plans. Known to be a quick study, the realization of her serious fiscal position will happen within her first year in office.

Since the Thursday election, the bond rating agencies, Standard and Poors and Moody’s Investor Services, are carefully examining their credit ratings of the province. These agencies determine the interest rates of borrowing by a government, business and other enterprises.

The premier’s announcement that she will call the Legislature back, July 3 and reintroduce her May 3 budget, has the lenders nervous about the Ontario government’s ability to borrow more money.

If the bond rating agencies lower the province’s rating, it means that lenders will demand higher interest rates to those needing to borrow and finance operations. Government borrowing is always at a low interest rate because of the size and composition of its assets. Plus the guarantee of repayment of the loan.

The problem Ms. Wynne now has is a moribund economy in which more than 300,000 manufacturing jobs, have been lost since the 2008 global financial collapse. These were high paying jobs mostly in automotive manufacturing. This was a major component of the economy of Ontario.

The real problem she faces is the drop in revenues. This exacerbates the problem with increased spending, and reducing revenues, resulting in potential default.

Another problem is that under the Liberals, the high cost of working and living in Ontario, has turned the province into a high-cost state in which businesses are leaving and few are arriving. Witness, at more than 50 years, the folding up of the Heinz catsup plant in Leamington. It cost more than 2,000 production workers their jobs. Also it has affected large numbers of tomato growers who were feeding the plant.

We have experienced the collapse of two major automobile manufacturers, General Motors and Chrysler, that were forced into bankruptcy. Along with the federal government, Ontario provided some $10 billion to assist the reconstituted two companies to get back on their feet.

But those jobs never returned at the high pay and benefits in the new companies. Indeed GM and Chrysler, in addition to the government’s investment, successfully reduced the cost of labour in their plants and reduced production in Ontario.

At the same time, unionized public servants, despite the struggling provincial economy, extracted regular increases in pay and benefits thanks to the largesse of then premier, Dalton McGuinty.

This was the beginning of the separation of total pay packages between private sector employees and unionized public employees.

In the private sector there is a degenerative decline in permanent jobs. New people were brought in as independent contractors with no benefits or security.

Since 2008, the exact opposite has occurred in Ontario with public servants gaining expanding pay and benefits. In many cases those same private sector employees through property taxes and user fees, paid those wage and benefit increases.

Under the 11-year Liberal government, this has created a new elite of unionized public servants. Working for governments, be it provincial or municipal, is a gateway to retirement at 55 and an assured lifetime of financial security and lifestyle.

Hey! There is nothing wrong with that except that it isolates the majority of Canadians who are outside this select, cosseted group whose pay and benefits are paid by the taxpayers.

So, in the next four years, Premier Wynne will be charged with explaining why she supports the super elite of public servants at the expense of the majority of her constituents.

How she can justify spending more money than the provincial treasury does not have? How can she continue to spend on programs believing they are still worthy, many of which were created under different financial circumstances?

It’s back to the drawing board, Premier.

 

 

 

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