An expert’s analysis of the numbers why City Council must lower run-away operational costs – Part One of Two parts

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
 
General government 27,070 25,136 18,891 8,179 +43.3%
Protection services 79,550 75,506 51,855 27,695 +53.4%
Transportation services 60,381 57,405 43,380 17,001 +39.2%
Environmental services 76,238 72,697 35,035 41,203 +117.6%
Health services 29,180 27,522 18,524 10,656 +57.5%
Social and family services 43,601 52,280 51,183 -7,582 -14.8%
Social housing 21,372 20,444 n/a 21,372  
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%
Total Expenses 385,611 376,626 246,801   138,810 +56.2%
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:

Chart B

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
Total $836 $586 $30,000,000
2014 Operating costs $3,138 N/A  

Other notable metrics from the 2014 BMA Report:

Chart C

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%
Roads $/kilometre $27,617 $11,847 133%

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.

  1. 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.

  1. 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?
 

City

 

CAO Salary

 

Salary Difference versus Guelph

 

Population

Population Difference versus Guelph
Guelph $257,000 121,700
Kitchener $213,000 -$44,000 219,200 +97,500
Brampton $230,000 -$27,000 523,900 +402,200
Barrie $241,000 -$16,000 136,100 +14,400

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).

  1. 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
Guelph $156,000 121,700
Kitchener $132,000 -$24,000 219,200 +97,500
Brampton $111,000 -$45,000 523,900 +402,200
Barrie $140,000 -$16,000 136,100 +14,400
Mississauga $135,000 -$21,000 713,400 +591,700
Toronto $120,000 -$36,000 2,615,000 +2,493,300

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?

  1. 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?

  1. 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.

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24 Comments

Filed under Between the Lines

24 responses to “An expert’s analysis of the numbers why City Council must lower run-away operational costs – Part One of Two parts

  1. Tony

    I think that this has been part of the Guelph factor for years. There are too many managers that have to have there 2 cents on an issue. Everyone spends all day writing emails and sitting in meetings trying to justify their jobs. The process gets so watered down and diluted that it takes forever to get anything done. Then they hire consultants to put together reports that managers can hide behind if anything goes wrong. “it wasn’t my idea” abc consulting came up with the report.
    This city needs a take your tax payer to work days. You should be able to show up down at city hall and say I want to follow and see what person abc does. Not like the open houses that they have. Those days are nothing but dog and pony shows.

  2. Joe Black

    High road costs are easy to answer mob and kick backs what we only think this happens in Quebec.

  3. Glen

    Kudos to Pat Fung for taking the time to diligently dig thru the maze of financial information and then connect the dots to show the real picture of why our taxes are so high. I await part 2 to view how he suggests fixing the financial problems. Will council have the backbone to enact the fixes?

  4. fairpensions09

    Thanks for the update

    Dont forget those higly paid city staff qualify for a juicy pension, usually at 70% of their salary

  5. Pat, thank you for your hard work.

    We need to find a way to circulate this to all Guelph Citizens. We can’t let “Karen’s” Council ignore the obvious need for a tax increase halt and reduced spending.

    David

    • Barry Smith

      I agree 100% David but all social media were supporters of Farbridge before so how could this be possibly done? A suggestion is flood the Mayor’s blog with Gerry’s posts as the Mayor respects freedom of speech.

  6. Capricorn

    Thank-you Mr. Fung, not only for this comprehensive report, but for all the times you’ve delegated at council. It was surprising that council did not respond the last time you made these points. Facts are hard to argue with but some on council and administration seem able to ignore. I too hope this gets printed in a place that more will see.

  7. Andre

    This is an excellent summary. It supports why mayor Guthrie was quick to replace Ann Pappert with an internal candidate – Derrick Thompson. They didn’t want a new guy to provide fresh eyes. Which is also the reason the promoted Colleen Clack, and the new treasurer (previous finanical analyst) who is on maternity leave. This has Guthrie’s hands on it so don’t just blame the gang of seven.
    I’d also like to see an entire staff list made available online like other cities have with each employees job title and work location. I’d also like to know how diverse the city employee base is and how many related family members work there. My understanding is we have no visible minority or indigenous person in management which is a disgrace for people like June Hofland, Karl Wettstein and James Gordon who pat themselves on the back for fighting to be inclusive and diverse.
    I also heard one of the senior managers is married to the mayor’s secretary. The hiring practices of the city need to be investigated as something is behind these internal hirings and the fact that staff with many years experience and good pay keep leaving. Didn’t Derrick Thompson originally tell everyone he was leaving for a lower job in a smaller town until Guthrie rewarded him as our new CAO?

  8. Rena

    Thank you Pat for effort on behalf of the taxpayers in Guelph. The City could certainly use you as the CFO at City Hall. You certainly seem to be very capable and insightful regarding the finances of the City. Kudos to you.

  9. bostoncollie

    Outstanding letter Mr. Fung, outstanding.

  10. geo

    Thank you Pat Fung.
    My question is why does Guelph have a general manager of tourism at any salary? Guelph is not a tourist town and culture should be handled by volunteers. We pay for two of them??????

  11. Mary Heyens

    Pat Fung, yes, thank you for your hard work.
    Great suggestion David T. Starr. I will volunteer some of my time to help Guelph Speaks circulate this information to all Guelph Citizens. I agree with David, “We can’t let “Karen’s” Council ignore the obvious need for a tax increase halt and reduced spending.”

  12. Laura

    Looks like more senior managers have been fired. http://guelph.ca/2016/08/peter-busatto-appointed-guelphs-general-manager-environmental-services/
    Is there a way to find out the cost of severance packages per year as it must be in the millions. Does city council not realize every time they fire someone it costs money?

    • Laura: The city administration does not reveal severances costs to the public. The only time I’ve seen it happen was through a Freedom of Information request regarding former CFO David Kennedy and CAO Larry Kotseff. In that case it took more than a year for the information to be revealed. The FOI was launched by the former Guelph Mercury in 2007. The administration stated it was a private matter between the parties.

  13. guelphspeaks reader

    The powers-that-be at the money incineration pit aka Guelph City Hall are not gearing up to answer to these figures. Nor are they preparing to give citizens the answers they deserve about the years of council-supervised secret spending of tens of millions on untendered district energy contracts in exchange for magic beans. They are getting ready for only one thing: to make this “levy” happen. They are rolling out the justifications and have been greasing PR for this scheme for quite some time. The only councillor with an alternative idea, according to the linked article, is Bob Bell. The rest are all like, “it wasn’t me”.

  14. Guido

    It is appears that there is salary creep in all areas of city staff payroll. The city needs to hire (as they say in the private sector a hatchat man) to totally review all staff and their job descriptions. Every manager should be required to write his/her complete job description in detail and justify why his position should continue to exist.
    A committee should be selected consisting of 2 city staff, 2 councillors, and 4 highly qualified local taxpayers and the mayor. This review board should be empowered to act to correct this problem of overstaffing.
    We just don’t need high priced consultants it is an in house problem.
    Fiscal responsibility is required as well as a corporate mission statement outlining the fundamental services this city should be providing our taxpayers.
    Will they listen?

    • Barry

      Great analysis of the problem and I applaud your suggestion of a committee and your selected membership but I think we would be dreaming if this were to happen. Justification is a scary thing to people that have to justify their jobs and subsequent classification issues. BUT it needs to be done here in Guelph but can it happen????

    • Guido: Excellent suggestion. But will council listen? The Bloc of Seven will never vote for that but if enough people demand that they do, the negative dynamic will change, bet on it.

  15. guelphspeaks reader

    The service rationalization that would examine the waste at city hall was voted down, in a bizarre irony of “saving money and keeping taxes low”. The ‘special levy’ that staff and council are set to force on ratepayers is a cash grab to keep the status quo, plus plus. The article Pat Fung linked to shows without doubt Amorosi plans to use the unfair tax cash bonanza to pay for a library. There is something so wrong about extra taxes to pay for things the city cannot afford and in fact, opted for a different library system instead of an expensive downtown new build. They voted for the branch system, which is more fair, equitable, and affordable. Now, they are implementing an extra tax to force ratepayers to shell out. Anyone speaking out against this robbery and double-speak will be shouted down as a book hater. Which is not the case. As Fung shows, Guelph already spends far more than average on library system. it is so troubling watching city hall plan to pull a fast one with this cash grab. And covering their butts beforehand when the money starts going to things it is not supposed to be spent on. They will just say so what…fight it if you don’t like it. Why are citizens in this impossible position? There should be a referendum on this levy and its purpose, and people in power need to be accountable.

    • guelphspeaks reader: After following the Farbridge inspired voodoo financial management for the past ten years, I totally agree that this administration, still dominated by the Farbridge influence, will continue to soak us with every tool they possess in their management kit and ignore what Pat Fung has clearly stated is the solution.

  16. Guido

    Gerry, it’s unfortunate most of the public does not know what’s going on. Our local media does not hold any city issues accountable. Where is the journalism these days?

  17. DAVID BIRTWISTLE

    Gerry,surely the “GUELPH TRIBUNE/MERCURY”,as a corporate citizen of GUELPH,would,unhesitatingly, wish to print Mr.Fung’s financial analysis for the edification of their readers(might even be a jounalistic award for doing same);have they been approached?!

  18. Barry

    Great suggestion David as I also think they should be bound to publish the Fung article. It would be Mr. Fung who would be compelled to verify his data from a legal perspective no doubt or at least refute those who challenge this great article.

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