The following analysis of the Amalgamated Transit Union settlement with Guelph Transit, has been prepared by a contributor to GrassRoots Guelph possessing a background in financial analysis.
Posted September 12, 2014
A recent look at the report on the cost of the Guelph Transit contract renewal found that it is apparent that the numbers looked a little odd.
Using a spreadsheet and looking at the calculations in a more detail, the city is substantially under-reporting the “city’s annual cost of the transit operations increase”.
It has been reported that the total of the “city’s annual cost increase” will be 6.49%, versus the real figure of 8.83%.
The calculation is simple, just look at the cost of the wages for a driver for a quarter before the contract report; and the quarter at the end of the reported four-year period. The basic fallacy in their report
is that they reduced the mid-year increase by one half. This is okay for the first year but it fails to take into account that that increase carries over as an increase for the following and succeeding years.
A smaller error is that the annual increases were just added up, whereas financially, one needs to treat them like compound interest. Yes, you can play a bit of a game with the numbers by annualizing and extrapolating the January 2013 rate and come up with slightly lower figure of 8.57% but it is NOT 6.49%.
So 8.83% versus 6.49% may not seem like all that much, but it is 36% higher!
If the calculations are off that much, it would explain the city’s poor financial position. It could be that the person doing the calculations just failed to recognize the error, although that brings into question the
competence of our financial department since it’s a pretty simple calculation.
Another possibility is that it was done intentionally to paint a rosier pre-election picture. The latter seems to me to be more likely because the calculation is trivial and it was changed on the city website some time on August 6 or 7 (to paint an even rosier and less correct picture).
It’s situations like this that gives citizens great concern about how our city is being managed. It makes most residents really wish that the Ontario Minister of Municipal Affairs and Housing had taken some ownership and conducted the forensic audit as requested by a citizen’s petition prepared in 2013 by GrassRoots Guelph.
It’s not all that important to most people whether the cost increase is 6.49% or 8.83% but it is very important that the city is able to and report its business factually to the strakeholders.