Part Two – Why it’s now necessary to put Guelph on a financial diet

By Gerry Barker

Posted October 22, 2015

Yesterday, we showed how the City of Guelph’s operating costs per-person are 50 % higher than its two largest neighbours, Kitchener and Cambridge.

Today we will discuss how the current city administration including staff and elected officials must take action to stop the growth of operating costs.

This year the city has budgeted $207 million in operating costs and $52 million in capital spending. As of June 30 the operating budget was $867, 200 overspent. The capital budget was $839,155 overspent. That totals $1,701,355. It is indicative of the way the city is being managed including its budget forecasting.

We are beginning to see where the money goes.

Guelph, under the leadership of former mayor Karen Farbridge, was a virtual dictatorship because of the dominance of a majority of councillors who supported the mayor’s agenda. Also there was the influence of the various labour unions employed by the city. The financial decisions made in eight years involved a majority of council obsessed with turning the city into a world-class environmental community.

Much of it was generated by the belief of its adherents that Guelph must become a leader in imposing left-wing policies on the city at any cost and without support of the people.

What were these policies?

For starters the newly elected Farbridge council in 2007 focused on two major capital projects. The first was initiated by Coun. Leanne Piper who persuaded the council to renovate the empty 150 year-old Loretto convent on Catholic Hill and convert it to a new city museum. That project ended up costing $16 million plus being subsidized annually by taxpayers. We still don’t know the terms of the lease with the Church who owns the property or the operating costs.

The second 2007 decision was to change the $42 million contract for the new city hall and renovation of the old one. In order to meet a higher environmental standard this created more than 300 change orders, resulting in delays of completion and the premature firing of the general contractor, Urbacon Buildings Group Corp., in September 2008.

Seven years later, we now know the cost of the Urbacon firing has reached $23 million over the original $42 million contract. When the court case was decided in March 2014 in favour of Urbacon, it resulted in the Mayor being defeated plus four other councillors who either quit of were defeated last October.

These two events were the catylist in 2007 that led to reckless spending and lack of accountability of a regime that lacked financial discipline or responsible direction.

Case in point, the city is currently without a Chief Financial Officer. In the eight-year term of the Farbridge administration there were four CFO’s plus one who was a senior financial department official. She resigned and is working for Wellington County.

So how do we reduce costs?

Mayor Cam Guthrie has experienced a rough first year in office. His attempts, along with a minority of council have been unable to inject change and financial responsibility to the city administration.

The chief reason is there are seven members of council who vote as a bloc, frustrating change and progress. They include Leanne Piper, Cathy Downer, Karl Wettstein, Mike Salisbury, June Hofland, Phil Allt and and James Gordon.

This city can no longer tolerate plus 3 % property tax increases every year, or a police headquarters renovation that will end up costing an estimated $39 million, $5 million more than the original estimate. Farbridge legacy costs include an estimated $75 million spent on a waste management system that doesn’t serve an estimated 13 per cent of households and businesses; downtown residential intensification; creation of the Guelph Municipal Holding Corporation with 132 employees, that lost $2.8 million last year.

These items are only the tip of the iceberg that is about to do a Titanic number if there is no attempt to avoid a financial disaster.

The first place to start is executing a management review to reduce staff costs. This is the gtreatest expense the city faces both in the short and long term. We cannot continue using 85 per cent of the property tax revenues to pay the staff. This year the staff budget is $31,050,000. It is the greatest expense in the city budget.

It explains how the growth of the city staff and the exponential increasing costs for salaries and wages, pensions, medical and overtime impacts your property tax bill.

So, let’s get serious

Step one, shut down the Guelph Municipal Holdings (GMHI) operation. There is no direct benefit other than sending a $1.5 million dividend to the city’s general revenues despite losing $2.8 million in 2014. In the past five years $9 million has been moved over to the city as dividends from GMHI.

The source of these funds is from the GMHI-controlled Guelph Hydro. So we end up paying for it as it represents another form of taxation specific to all citizens.

There are many programs that the Farbridge Bloc of Seven on council is insistent of maintaining. In fact, Coun. Karl Wettstein insists that council must maintain the same level of services provided by the previous administration of which he was a part.

Step Two, simply, we can no longer afford spending millions on bike lanes; downtown secondary plans including reconstruction of St. George’s Square; spending millions to provide thermal-based heating and cooling to the Hanlon Business Park and Downtown: the wellness program; the transit system; offering money to home owners to upgrade their homes including windows, doors, insulation and toilets that use less water.

These programs must be severly pared back or eliminated until we can replenish the reserves that were raided to pay off the $8.9 milliom Urbacon settlement.

Step Three, put a hiring freeze in place. Also reduce the number of staffers by at least 5 per cent in the 2016 budget. This action can br spread through every department with the managers in charge being responsible for staff reductions.

Until these steps are taken to reduce costs, there will be no Wilson Street parking garage, no new downtown library, no South-end Recreation Centre and no revitalization of the Baker Street parking lot property.

The infrastructure of this 200 year-old city is in disrepair. Old sewers, watermains, and streets need replacing. It’s not glamourous stuff like the Waste Resource Innovation Centre on Dunlop Road that is mismanaged and operates in secret. Or the Market Square project that is the expensive centre-piece of the Farbridge legacy.

Mayor Guthrie was elected last year on the promise to keep property tax increases to the Consumer Price Index (CPI). Last year that was 2.4 %. The Farbridge Bloc however used its council muscle to shove a 3.96 % property tax increase in this year’s budget.

The only way this group can stop obstructing and start cooperating is to let them know the people want change. You can do that by sending a letter, or email to express your concern about the high cost of living in Guelph.

All it would take is just one councillor to recognize his or her responsibility to work creatively and responsibly as a group on behalf of their constituents and not on a broken idiology that has created this financial mess.

This beautiful city and its people deserve better.

Tomorrow, October 23, Part Three of this series discusses how public money is shifted around behind closed door creating financial confusion and hiding excessive costs. It’s a practice known as “Fungible Finances.” It has been used extensively in the past eight years by the previous administration.


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