Salary Gate; The plot sickens

By Gerry Barker

October 21, 2016

When former Chief Administrative Officer (CAO), Ann Pappert, left the top city staff job last May, she walked away, after more than five years employed by the city with a gold plated pension. Her final months gave her 70 per cent of her estimated last five years at a salary rate exceeding $200,000 per year.

When she was promoted to the CAO’s job in 2011, she was making the same as retiring CAO Hans Loewig, $199,000 a year. By 2014, she was making $219,000. Then came the big bump up in pay that gave her a new salary of $257,591 for 2015 and part of 2016.

She wasn’t alone. Two of her three subordinates also received hefty increases ranging from 14 to 19 per cent.

The trouble was that the public was not aware or informed of council’s approval that December 10th in closed session.

Why would Mayor Guthrie and council go along with this? Why would the Mayor not inform the residents of Guelph of this major decision? Will we ever know the rationale of this approval or why these increases were warranted?

These three top managers of the city staff, numbering more than 2,000 employees, were awarded these increases totaling $98,000 in a closed meeting held either before or after the second day of the open public meeting to create the 2016 budget.

These increases were not made public until March 2016 when the provincial Sunshine List let the cat out of the bag.

When this occurred, Pappert was leaving; Thomson had turned in his resignation to work elsewhere and Al Horsman left for a better job in August 2015 to become CAO for Sault Ste Marie. Only Mark Amorosi, head of HR, Legal Services and Finance remained.

In fairness, Mr. Horsman was not a party to this as he was removed as Chief Financial Officer in November 2014 to take over Waste Management and Environmental Services. He was not a city employee when the council approved the 2015 senior management increases in camera last December 10.

Was there fear of recrimination or loss of reputation among this group who hid their substantial salary increases behind an ill-advised code of silence?

When I asked city Clerk Stephen O’Brien for the minutes of the closed session held December 10, I was informed closed session meetings are “not part of the public record” and are not available.

The hidden benefit

While you may think those increases were out of line without substantial performance evaluations to back them up, there was another hidden benefit that no one, especially the recipients, want to talk about.

In my opinion, Ann Pappert walked away from this city as a millionaire . For more than five years her base gross salary exceeded more than $1,073,979. That did not include annual taxable benefits or the $20,000 “moving allowance” she received as incentive to move to Guelph or the taxable benefits she received over those 56.5 months as CAO.

The real benefits story lies in her pension. Following more than five years employed by the City of Guelph, her pension is 70 per cent of the average of her previous five years plus 4.5 months in 2016. Upon retirment, that gives her a lifetime pension of $150,300 a year, indexed, plus paid health and dental coverage, any accumulated unused sick leave or vacation time and a severance allowance that was part of her employment contract. Details of these management contracts are not made public. Often called the golden handshake, these termination costs can range from a few months to multiple years of the employee’s former salaries. Throw in unused sick leave credits and or vacation and it adds up.

If Ms. Pappert had resigned in 2015 before her five-year anniversary of being CAO, and without that huge 2015 increase, her pension would have dropped to an estimated $144,120 per year. Ms. Pappert is a relatively young woman and has years to live on a very comfortable income for the rest of her life when she starts drawing it.

But that’s the tip of the iceberg. Excluding Mr. Horsman who did not avail himself of the Salary-Gate exercise, the two remaining participants will also see their pension benefits take a giant leap forward. While Mr. Thomson was employed by the city for a very short time, he is now CAO. He joined the staff in 2013 with a salary of $172,000 and is now making north of $220,000 as CAO. That’s an estimated $48,000 salary increase in not quite three years. Of course his job responsibilities increased substantially. Mr. Amorosi is still chugging along with a salary of $209,000 as the man in charge of Human Resources. City Finances and Legal Services.

The bottom line is Ms. Pappert is not the only winner in Salary-Gate. Both Mr. Thomson and Mr. Amorosi will also benefit, not only receiving 2015’s large salary increases but also growing enhanced pensions while still employed.

But here’s the underlying problem that citizens face regarding these awards to senior managers.

The growing retirement liabilities facing Guelph

The city’s annual audited financial report states that there are two staff retirement liabilities on its books: One is $14,519,000 connected to 1,944 city employees who are members of the Ontario Municipal Employee Retirement System (OMERS). This liability grew by $2,087,000 between 2014 and 2015. The total city reserve fund to cover this liability is $1,799,000. OMERS is currently underfunded by $7 billion. This means that the citizens of Guelph must guarantee payment of those defined pensions for the life of the retired employees.

Here’s more. There is another staff retirement liability on the city books is $16,850,000 covering other non-OMERS employees. It is backed up by a reserve fund of $1,147,000.

These two liabilities total $31,369,000 for 2015 and aregrowing. Adding younger workers exacerbates the rising costs because people are living longer. Also, awarding excessive remuneration to all levels of city staff pushes the liabiltiies beyond the projected rate of inflation. Last year the Consumer Price Index (CPI) was 1.1 per cent.

In the case of the OMERS employees the liability increased by 15.5 per cent from 2014 to 2015. Projecting that growth rate forward for 10 years and the OMERS employee group liability is estimated to exceed $36 million.

This is clearly not sustainable given the current operational Fund and Capital Fund growth pattern of the last 10 years. The present administration appears unable or unwilling to take the necessary steps to correct this growing cost problem.

There is a solution on the table

Guelph citizen Pat Fung, CPA, CA, prepared a thorough analysis of the audited city financial statements as published by the corporation that was ridiculed and ignored by senior city staff, Mayor Guthrie and a majority of council. The Guelph Merciry Tribune also refused to us the Fing report and denied placement of a full-page ad onnthe grounds it was not documented, too political and was inflamatory.

Fortunately, many people in the city have read and understand the Fung analysis and his recommendations to halt the bleeding caused by mismanagement. How many Urbacons, GMHI’s and secret meetings have to occur before council wakes up and takes action?

Salary-Gate is the epitome of three member of senior management self-serving their own interests and not that of the public. What kind of message does this send to all employees and the citizens?

The fact remains to this day, there has been no explanation of why the increases were awarded, or why it was withheld from the public for four months? It has already resulted in total destruction of the public trust.

If we allow this betrayal of trust and confidence then it’s a sure thing that in five years that Retirement Liability will grow to more than $5 million.

An unrelated footnote: According to the city Financial Report, the total fines made in the Provincial Offences Court in the old city hall for 2015, was $14,337,000. Of that, $8,022,000 has been considered to be uncollectable. That means that 55.9 per cent got away without paying.

What does this say about our justice system administered by the City of Guelph?

 

 

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9 Comments

Filed under Between the Lines

9 responses to “Salary Gate; The plot sickens

  1. Barry Smith

    Gerry: I suggest you post this on the facebook page for Guelph Speaks. This has to be made more public and Cam has 5000 followers on FB.

    • Louis

      We should try and spread the word of this on Facebook, I would like to hope everyone can join the page and spread this.

  2. geo

    Gerry
    Am I reading this correctly? Pappert will collect $150,300/yr. indexed plus benfits forever, after working for the City for only 5 years

  3. Joe Black

    The corruption continues……….

  4. guelphspeaks reader

    And the $450,000 service rationalization was removed from the 2016 budget “to keep taxes down”. Thanks for caring!

  5. Tony

    Remember the old saying.
    “We have to pay more to get these people to work in the public sector. They can earn a lot more in the private sector”

  6. barrie browne

    put this on FB!!!

  7. Marc

    This explains pretty well the reasons why the city has an infrastructure gap – all the taxes we pay for going to inflated salaries and pensions for city employees. Didn’t Ann Pappert, Mark Amorosi and Derrek Thompson reorganize and fire a few dozen managers during the last few years – and they all got this golden hand shake, with Pappert’s just the tip of it. hen Amorosi and Thompson got a raise out of it. How much did Derek McCaughan and Janet Laird get paid out when they were forced to retire a few years ago? I tried to look at the sunshine list but don’t think they show up and a footnote on the provinces website states only ‘active’ employees show up. I don’t think Ann Pappert won’t show up after when she is just collecting her settlement – this year, she did work and was an ‘active’ employee but not sure if she worked enough months to pass $100k threshold. Time will tell I guess. Then there is the city building inspector $1m lawsuit for wrongful dismissal. I haven’t heard any news on that lately and wonder where that is at. Can we not ask for information of annual employee settlement/buy-out costs for each year for the past few years, so we know how much this is costing the city – and more importantly how they are making up the shortfall as new employees were most likely hired to replace the ones that were let go so its double dipping. This must be a substantial cost and citizens should have a right to know where our money is being spent. I bet we could probably get a few new transit buses or have paid the Urbacon lawsuit from all the settlement costs the city has paid out the last few years it has to be a few million and has anyone noticed an increase in productivity or performance with all these staff reorganizations? I’ve only seen taxes go up, new fees for storm water, and yard waste be introduced and services like free bus tickets to a storm game be eliminated. And then city council turns around an unanimously gives all managers their annual raise…..

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