GuelphSpeaks is proud to present an open letter sent August 18 to city council by Guelph resident Pat Fung, CPA CA. Mr. Fung will take you through the reasons why the city’s operational and capital costs are well above the average of cities across the province. The charts describe in detail eight years of soaring taxes and user fees to pay for operations caused by the previous administration. He has used 2015 and 2014 as the latest baseline for comparison purposes.
We urge all citizens to carefully examine these important documents, with Part One to be posted Monday, August 29, and Part Two to be posted Thursday September 1.
This letter is a serious analysis from publicly available documents that details the high costs of operations since 2008.
As usual, your comments are most welcome. GB
By Pat Fung, CPA, CA
I am glad to see that some on Council have now stated that our operating costs are too high (Guelph Mercury-Tribune July 15, 2016 – “Special tax levy back on Guelph council’s radar”- http://m.guelphmercury.com/news-story/6769276-special-tax-levy-on-council-s-radar
It is time to reduce operating costs from 2016 levels and freeze taxes and fees at the 2016 levels.
I will reiterate the point that I made at the public budget council meeting in November 2015 – according to the BMA report, there are areas where we spend far too much compared to other Ontario municipalities. In response to my comment, Deputy CAO of Corporate Services Mark Amorosi called BMA cost per person statistics irrelevant. Subsequently, I sent you emails proving otherwise, as such learned organizations as the Fraser Institute, BC Council of Business, Trent University and University of Toronto have stated that cost per person is relevant. Additionally the County of Brant in its local paper professed it was proud to be the low cost provider of services based on the BMA report.
Councillor Allt asked Mr. Amorosi for a full response to my query at that November 2015 meeting. However, other than repeating that he considered cost per person irrelevant and twisting the words of the president of BMA to suit his purposes, Mr. Amorosi has yet to provide what he considers to be important metrics for measuring city performance even though it was requested several times. It is irresponsible for Mr. Amorosi to say something is irrelevant without stating what he considers to be relevant. If he has his own metrics, he should provide them to the taxpayers of Guelph. If the DCAO doesn’t have metrics for measuring performance, how does the Office of the CAO defend its current rate of spending and its statement on the City website last year that said a critical review of budgets was done and the organization was lean? Statistics from the 2014 BMA report which the City paid for indicate otherwise:
A simple review of Guelph’s historical spending makes it evident that Guelph’s expenses are increasing at an unacceptable rate. As can be seen in Chart A below, operating costs rose by 56% or $139 million from 2008 to 2015 while CPI only went up 11% and population went up less than that (Census data not available).
Chart A – Guelph Operating Costs 2008 to 2015 (source: audited financial statements)
|($ thousands)||2015||2014||2008||Change ’08 to ’15||% change|
|Social and family services||43,601||52,280||51,183||-7,582||-14.8%|
|Recreation and cultural services||40,906||39,481||23,947||16,959||+70.8%|
|Planning and development||7,313||6,155||3,986||3,327||+83.5%|
|Consumer Price Index||126.6||125.2||114.1||12.5||+11.0%|
|Cost per capita (120,000)||$3,213||$3,138|
To halt this trend, I recommend laying off staff, reducing salaries of senior staff and reducing other non-payroll expenditures in the areas cited below in Chart B. There appears to be ample room for reductions because Guelph spends $30 million more per year than the average Ontario city in the following areas:
|Selected areas from 2014 BMA report||Guelph cost per person||Ontario cost per person||Excess spending relative to other Ontario Cities based on 120,000 population in Guelph|
|1) General government||$229||$104||$15,000,000|
|2) Fire||$185||$165||$ 2,400,000|
|3) Waste collection||$29||$10||$ 2,280,000|
|4) Roads||$244||$198||$ 5,520,000|
|5) Parks||$77||$59||$ 2,160,000|
|6) Library||$72||$50||$ 2,640,000|
|2014 Operating costs||$3,138||N/A|
Other notable metrics from the 2014 BMA Report:
|Water/Sewer 2014 BMA||Meter size||Guelph||BMA Ontario Average||% difference|
|Residential 200 cu M||5/8”||$808||$858||(6%)|
|Commercial 10,000 cu M||2”||$31,999||$28,849||10%|
|Industrial 30,000 cu M||3”||$94,316||$84,510||10%|
|Industrial 100,000 cu M||4”||$308,548||$273,931||11%|
|Industrial 500,000 cu M||6”||$1,522,293||$1,344,195||12%|
|Waste collection $/tonne||$137||$114||20%|
Except for residential water/sewer, why are commercial and industrial water/sewer costs 10% to 12% higher than average Ontario?
Why are waste collection costs 20% higher than average Ontario?
Why are road costs 133% higher than average Ontario?
Based on the above, if Guelph’s operating expenses are reduced by even $20 million (a 5% reduction of the $385 million actual spending in 2015), and taxes and other revenue are held constant, the City will build up its reserves by $200 million in 10 years which will go a long way to funding the capital/infrastructure gap.
Here are some specific reductions within the areas cited in Chart B that should be considered:
General Government (Chart B, line 1)
General government is not a service and all attempts should be made to reduce costs in this area. Reductions here should not affect the general population of the city.
- According to the 2015 Sunshine List, the City may have too many Human Resources personnel. We cannot afford them all. Notably,
- There are 6 people working in Guelph City Hall with HR in their title making over $100,000 per year. One that appears superfluous is the HR Manager, Client Services making $117,000. This is not a position that appears in most HR organization charts. What clients does this position serve? What is its purpose?
- In HR, there is a Manager, Total Rewards and a Compensation Specialist, both of whom earn over $100,000. Why is it necessary to have 2 positions paying over $100,000 for compensation? Isn’t most of this covered by union agreements?
- Two other staffers in other departments that look like HR people – a Chief Training Officer earning $126,000 and a Training Officer earning $119,000 – We cannot afford two people in training each earning over $100,000. How many others are there in training? This appears to be way out of line compared to what teachers earn.
Collectively, $362,000 in reductions in annual HR payroll could be achieved by eliminating these management positions – and that’s before considering whether all of the staff that report to them are necessary and/or affordable.
- According to the 2015 Sunshine List, Guelph has one of the highest paid CAOs at $257,000. The following chart compares this salary with the CAOs in some Southern Ontario cities. Why does Guelph pay more for a CAO than larger cities?
Salary Difference versus Guelph
|Population Difference versus Guelph|
Is the high salary reflected all the way down the chain of command? If so, management salaries must be reduced. We cannot afford paying more than other cities. Guelph’s high salaries certainly are not justified. The poor results that we have seen in recent years do not reflect exemplary performance (e.g. Urbacon; Direct Energy; Recycling Detroit waste; being over budget in expenses most years since 2008; 2016 budget error in waste disposal; CRA assessment reported in 2010 and again in 2012).
- According to the 2015 Sunshine List, Guelph has a General Manager, Business Development Enterprise making $156,000. The comparable position in other Southern Ontario cities is paid less, even in Mississauga and Toronto!
|City||Business Development Manager Salary||Difference versus Guelph||Population||Difference versus Guelph|
Why does Guelph pay more for its Business Development Manager? Are Business Development staff similarly paid higher than others? What are the performance metrics for this department? What revenue has it brought to the City in recent years?
- According to the 2015 Sunshine List, Guelph has a General Manager, Culture Tourism and Community Investment who is paid $142,000. This Manager’s salary seems out of line since this position only has responsibility for Tourism while directors in other cities are responsible for Tourism plus Economic or Business Development:
|City||Position||Salary||Difference versus Guelph|
|Guelph||General Manager, Culture Tourism and Community Investment||$142,000||–|
|Hamilton||Director of Tourism and Culture||$146,000||+$4,000|
|Brampton||Director of Economic Development and Tourism||$167,000||+$25,000|
|Brantford||Director of Business Development and Tourism||$134,000||-$8,000|
|Toronto||Manager of Tourism||$122,000||-$20,000|
Given the above, and referring back to point #3 above, Guelph has two high-priced General Managers covering business development and tourism. Is this necessary given the practice elsewhere of combining these responsibilities? It certainly doesn’t appear affordable. What are the performance metrics for this position/department?
- At Council meetings. there are staff present (presumably getting paid overtime or time in lieu) who either don’t get called on to explain anything or present reports that are so brief that they don’t appear to justify the staff member’s presence in a Council meeting for 4-5 hours. How much does the presence of non-essential staff at Council and other committee meetings contribute to City Hall’s high overtime costs? How many other meetings do staff attend where they are observers and not participants? Observers and other non-contributors should not attend meetings. They should just receive the minutes.
The complete organization chart for the City is not publically available. However, according to the 2015 Sunshine List, there are 92 Guelph positions with the word “manager” in their title. Clearly, the City has numerous middle managers in addition to other senior staff. The City must reduce these positions and flatten out the organization to make it more responsive and more cost effective. In our financial situation, we cannot afford this huge layer of middle management.
On Thursday, September 1, read Part Two of this important document that demonstrates the facts of soaring operational costs. Mr. Fung doesn’t mince words pinpointing where some of our financial problems lie and how to fix them. His analysis is based on a combination of audited financial statements issued by the city since 2008 and the 2014 BMA consultant’s report.