Why the 2018 budget is so important for Guelph’s future

By Gerry Barker

August 28, 2017

Let’s start by saying there are many smart people who run our city.

The problem is that the political ruling class – the council gang of seven progressives – has dominated and controlled public business for more than 10 years.

Under the leadership of former Mayor Karen Farbridge, grandiose schemes and social engineering policies have brought the city to a state of a serious financial condition. Not the least of which is the $163 million loss made by Guelph Municipal Holdings Inc. (GMHI) and its impact on Guelph Hydro.

This loss was verified in the Consolidated GMHI balance sheet audited by the KPMG accounting firm, completed last December.

Part of the $163 million GMHI losses are two debentures issued by “investors” to fund an ambitious plan to build two large natural gas generating plants to achieve electricity self-sufficiency for the city. Although GMHI purchased land to build these plants, the corporation collapsed. Because GMHI is wholly owned by the city, these debentures have been transferred to Guelph Hydro that now has a $94 million debt on its books.

There is little disposable cash available to meet the growing demands of the city. Assessment is only increasing at a rate of 1.5 per cent per year. Taxes are increasing exponentially at an average rate of 3.6 per cent per year. The city has one of the highest per capita debt rates in the entire country.

Spending remains out of control as major projects initiated by the Farbridge council have failed to meet budgets or acceptable performance. The detailed comparison of City of Guelph operating and capital spending budgets is telling. The 2015 report by Guelph resident Pat Fung, CA, CPA, compared Kitchener and Cambridge showing both those cities’ matching budgets were 50 per cent lower than Guelph’s.

There are fundamental reasons why this disparity of these two similar-sized city’s overhead and operating costs are substantially lower on a per capita basis. And yet Mr. Fung was mocked by a number of councillors after he left the chamber following his presentation. And that report was made before the GMHI audit revealed the complete failure of the former two administrations to force citizens to trust their judgment. Maybe that’s why for four years the GMHI board of directors dodged public scrutiny by holding its meeting in closed session.

The GMHI board operated like mushrooms, growing in the dark.

The GMHI board was chiefly composed of the former mayor as chair and four of her council supporters who controlled the operation. Two of those councillors are still on council, June Hofland and Karl Wettstein. Neither has disclosed any of the details of the GMHI collapse in which they were a party.

The overspending marches on. Mayor Cam Guthrie ran on the promise to match property tax increases with the Consumer Price Index. His promise was defeated in the first two months of his election by the Gang of Seven councillors who were supporters of the former mayor.

But he has accomplished some important achievements the greatest being exposing the failed GMHI Community Energy Initiative (CEI) founded in 2007 by the former mayor.

The CEI was the basis of the attempt by the former mayor to make Guelph energy self-sufficient. It was matched with a system of thermal underground co-generation piping to supply hot and cold water to a small number of buildings.

It was a colossal failure, as reports and an audit of GMHI’s operations were made public of the “initiative.” As a result, there’s a number of senior staff who left the city. Part of the reason was due to a closed session meeting of council December 10, 2015 that awarded $98,202 in salary increases to four top city executives.

Three of the four are now gone including former Chief Administrative Officer (CAO), Ann Pappert, Former Chief Financial Officer, Al Horsman, and former Deputy Administrative Officer (DCAO), Mark Amorosi. The fourth senior staffer receiving the secret increase was the current CAO Derrick Thomson.

We, the public did not discover the executive increases until March 31, 2016 when the Ontario government posted its Sunshine List of all public employees who were paid more than $100,000.

Operating a $500 million Corporation without a Chief Financial Officer

After some 28 months, the city did not have a designated CFO, although Trevor Lee has been recently hired as a DCAO taking over Mr. Amorosi’s responsibilities that includes the finance department.

The policy of constantly increasing property taxes approved last December included an extra two per cent tax levy on all city properties above the normal tax increase. Those funds were to be applied to infrastructure repairs and maintenance and city buildings. For the past ten years the increases have averaged 3.6 per cent. The exponential growth of these annual increases has created a cash box of money to fund the failed projects of the former mayor and her supporters.

Starting next month, the 2018 budget process will start. Already the staff is preparing its recommendations to council. The staff report will be the basis for discussion and provide for public input.

To say it will be the most important budget since 2007 is an understatement. Because it will occur in an election year, expect some goodies and a possible lower property tax. That’s what happened in 2010 and 2014. It’s called political survival and is the final opportunity by the 13 members of council to ensure their re-election. Or, at least that’s the theory.

I believe that it’s time for political courage and council should take the necessary steps to reduce the operating overhead of operating the city.

So, what are the choices?

There has been a fairly high turnover of staff since 2014. The biggest expense the city has is the cost of its 2,200 employees. It would be a good first step to freeze hiring for six months giving managers time to reconcile their operation to reduce costs. A real staff reduction goal of five per cent is achievable in all areas of operations. Cost reductions lies not just in numbers of employees but also in reform of operational procedures.

Hanging out there is the potential sale or merge of Guelph Hydro with another Local Distribution Company currently underway by the Strategic Options Committee. It is co-chaired by CAO Derrick Thomson and Guelph Hydro Chair, Jane Armstrong. Nine years ago, the former mayor attempted to persuade her colleagues to merge Guelph Hydro with utilities from Hamilton and St. Catharines. It was a bad idea then and it still is.

The public revolted and council voted the proposal down. In my opinion I do not believe anything has changed insofar as the current public rejection of a similar proposal. Again, the Mayor is in favour of selling the utility with current assets stated as $228 million. I see this proposed sale as a band-aid to fix a major financial problem.

Experience has shown that once council has money on the table it will disappear down the rabbit hole of personal agenda and schemes. It is impossible to repair the financial damages caused by previous administrations with an open cheque for selling an important and vital utility that pays an annual dividend to the city.

Reform city council by reducing the number of councillors to nine from 13

Another choice facing the electorate is reformation of council in the individual ward elections in which the progressives have controlled for almost 11 years. It’s a lousy system that requires amendments to make it more democratic and effective. By that I suggest reducing the number of councillors to nine, one from each ward and three councillors including the Mayor who are elected at large across the city. The present council will never agree to that, Instead the change should be included in the 2018 ballot and let the citizens decide.

Another choice that voters have is to prevent any future mayor or member of council to integrate Guelph Hydro with city operations. This is what happened with the integration of Guelph Hydro with GMHI. The mayor achieved control of Guelph Hydro that created her unwarranted full control of the financial disaster of GMHI. It must never happen again and only the voters can prevent it in the next civic election. Accordingly, we citizens should demand the cancelling the Community Energy Initiative and a wind-up of GMHI.

To assist citizens in making this happen, I suggest that Guelph Hydro dump the present appointed board of directors as of October 2018 and replace it with five elected Hydro commissioners who would elect their own chairperson.

Maintain an operational firewall between Guelph Hydro and city council

It is now essential that there must be a firewall between Guelph Hydro and its owner, the City of Guelph. The recent experience of GMHI that created long-term losses should be a grim reminder that control of Guelph Hydro should never be used again to perpetuate the will of any mayor or member of council.

Well folks, next year will be a game changer if citizens act to not only vote but also let their representatives know how they feel about the future of the city.

The greatest challenge is to seek out and persuade candidates who are prepared to be game changers to return truth to power and to the people.

Guelph Speaks will continue to report and comment on events as they unfold. Mind you, at times it feels lonely in the weird world of local media with the exception of the online paper, Guelph Today. It often produces real news stories and not the usual Pablum of rewritten city press releases instead of challenging or investigating the real issues that affect us all.

Good government is based on a system of checks and balances. In Guelph there is an absence of this because our elected representatives rarely challenge staff recommendations. Failure lies in all the closed-session meetings in which the public’s business is discussed in private often with the staff. It happens before every meeting of council and often during a council meeting.

In my opinion, the $98,202 payment to four senior managers authorized by council, in closed-session, December 10th 2015, was an affront to the public but also to members of staff. The fact that the citizens did not know of the action until the provincial Sunshine List was published four months later, only made the barn smell worse. It’s called lying by omission. And council still refuses to accept responsibility, or allow release of the minutes.

It’s something to recall in the next civic election.

Remember that all this occurred before the citizens knew about the $163 million GMHI fiasco and the losses of public money. In reality, this makes the 2014 Urbacon lawsuit that was part of the $23 million cost overrun of the new city hall, look like penny ante.

Just remember that both these projects were planned and executed by the former mayor and her elected supporters. Seven of those supporters are members of the current council.

Let’s not forget.

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11 Comments

Filed under Between the Lines

11 responses to “Why the 2018 budget is so important for Guelph’s future

  1. Joe Black

    Crooks period.

  2. Louis

    It’s what happens when you have progressives on council they just lie cheat and steal.

    It’s also a double standard as well on many fronts. Conservative council do that everyone would be on them.

  3. Keep up the good work. The citizens of Guelph need to be made aware of the need to move away from a Karen Council.

    David Starr

  4. geo

    Whatever happened to her “Royal Highness”? Things go bad she just left; speaks volumes.

  5. fairpensions09

    Does your city put the most expensive US cities to shames? Hamilton is at $3,400 per resident

    http://www.surfsantamonica.com/ssm_site/the_lookout/news/News-2016/November-2016/11_16_2016_Santa_Monica_Municipal_Budget_Among_Highest_Per_Capita_in_California.html

    *Bill Tufts *Call: 905-741-1904

    On Sun, Aug 27, 2017 at 11:07 PM, Guelph Speaks wrote:

    > Gerry Barker posted: “By Gerry Barker August 28, 2017 Let’s start by > saying there are many smart people who run our city. The problem is that > the political ruling class – the council gang of seven progressives – has > dominated and controlled public business for more th” >

  6. lurka

    At a Ward meeting last Fall, Mayor Guthrie stated that the 2% tax levy was allocated as such- 1% to infrastructure, and 1% to the South End Library. I wish I had taped it!
    Just announced- Guelph is to receive just over 7 Million , yes, SEVEN MILLION and change !! Here is an excerpt from the posting——

    “The Gas Tax Fund (GTF) is a permanent source of funding provided up front, twice-a-year, to provinces and territories, who in turn flow this funding to their municipalities to support local infrastructure priorities,” the federal government says in describing the program.
    “Municipalities can pool, bank and borrow against this funding, providing significant financial flexibility.”

    7 Million folks– think about it!!

    Also, Gerry, your idea of 1 councilor per Ward is excellent! Let’s get it on the ballot for 2018!!!

  7. Lurka

    So I had a good look through the 2018 proposed tax-supported budget, all 218 pages, and I am so dismayed! While my hours are being cut at work due to the upcoming rise in the minimum wage, and, yes, that is exactly why, the City has the nerve to suggest 16 new FTE’s! These are NEW staff positions, such as “Learning and Development Co-Ordinator at the pretty wage of $100,300.00 I could go on, but the whole thing is leaving a very bad taste in my mouth, and I will be emailing many specific questions to Councillors and the Mayor. Corp. Services Admin. wants to increase by 5 people! This is shameful. Oh, they also want to increase the levy by another 1%. Yup, bleed your citizens dry. I have lived here since 1972, and lived in this same house since 1976. Every year the old belt gets tighter, and soon the buckle will hit my spine. Does anyone else see the horror in this and want to group together to stop it! These councillors are supposed to do what we say, within reason. We voted them in, we pay them too much, and now they want more… Time to say NO!!
    Any thoughts?? Opinions??
    Thanks Gerry for letting me vent here…………..

  8. Laura

    Dear Lurka I don!t think that some council members care that our taxes are going up. Apparently we are just supposed to suck it up or sell your house and move into an apartment. Llast year at the South End Firehall Ward 6 city budget meeting Councillor MacKinnon suggested that those people who were retired on fixed incomes who could not afford their property taxes should use the equity in their homes to get a reverse mortgage so they keep their house. His rationale was that housing prices are increasing so is the equity so if you want to stay in your house use your equity to do it. He doesn’t seem to have a problem suggesting because ? Isn,t he involved in the mortgage business? Can anyone confirm if this is true?
    more staff at city hall will not make it more efficient. Just look at what happens there now. Remember the tour of sidewalks so we could pick out the colour of the paint to mark the hazards what a waste of time.

  9. DAVID BIRTWISTLE

    Laura:Talking of painting-what about the painting of the bicycle lanes?!

  10. Lurka

    I just finished watching the live streaming of the 2018 proposed tax-supported budget. We are not going to get a break at all. Now, the infrastructure levy is going up another 1% and sounds like it will do so for the next 10 years. There was a lot of discussion on having last years’ levy amount rolled into the base budget line item on our tax bill( in essence hiding it) and only showing the next 1% from the 2018 budget on the dedicated levy line. No,no,no— I want to see the levy amount that I am paying , the WHOLE amount, shown on the dedicated levy line on my tax bill. It seems that it might be too difficult for them to do this, but they are going to try and will put it on the Budget Board for all to see. So disappointing! The live stream was ended before the delegations could speak, and that is too bad as well.
    Also, it seems that all the Wards are having a public budget meeting to address citizens’ questions except Ward 5! What gives!! I guess I will have to go to another Ward meeting. Again-disappointed!

  11. DAVID BIRTWISTLE

    REFERENCE:Peter Grossman’s article-“Minimum effort to help;Ontario Liberals ignore the cost to small towns,businesses of the new wage guidelines”The Toronto Sun”,Tuesday,November 14,2017.Quote from article; “…Ontario’s Bill 148 will raise Ontario’s minimum wage tp $14 per hour on Jan. 1,2018 and to $15 on Jan. 1 2019…It mandates equal pay for part-time,temporary and seasonal workers who do the same work as full-time staff.It expands leave time,time off and vacation pay provisions…As a consequence,every city and town will face increased wages and benefits which will cost millions of dollars…”.Makes one wonder if the City’s financial staff have analyzed the affect this bill will have on our upcoming 2018 budget and beyond!

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