Tag Archives: 2016 budget

How the 2016 budget public input meeting became a night at the opera

By Gerry Barker

Posted December 2, 2015

It’s easy to understand the dilemma the city staff and council face each budget year. There is a multitude of special interests ranging from the sublime to the ridiculous.

Witnessing a fiery and forceful lecture from the president of the Guelph and District Labour Council, demanding more services, more jobs paying union rates and higher taxes and user fees, became a throwback to the days of the dirty 30’s. Janice Folk-Dawson told a questioning councillor that she doesn’t mind a 5 per cent property tax increase for 2016 so long as council approved her organization’s demand to continue Labour’s vision of entitlements.

In contrast, Pat Fung, a Chartered Accountant and Chartered Public Accountant, presented a thorough and documented presentation that showed that Guelph’s capital and operating costs were 50 per cent higher than either Cambridge or Kitchener. Mr. Fung analyzed the city’s own BMA consultant’s report on operations along with the Financial Information Reports filed annually as mandated by the province.

This basis formed his detailed presentation that the city was paying too much for services and capital expenditures compared to its two neighbour municipalities. His findings are indisputable evidence that the city is facing a major financial crisis unless it reduces spending.

Here are some excerpts from his report:

Quote from the city website:

“The 2016 budget challenged the City to find additional efficiencies in an already lean organization. By critically reviewing each line item, departments were able to reduce their individual asks (requests) to support the overall 1.58 per cent increase,” says Janice Sheehy, city treasurer. “The recommended budget meets the community’s and City’s needs for 2016 while remaining affordable; however, with such a low tax increase we were not able to account for all increased demands placed on the organization from growth.”

* Mr. Fung’s reply: I do not understand how the city can say the organization is already lean when the BMA Report clearly shows our servicing costs per capita are higher than average. Indeed the 2015 operating and capital budgets on a per person basis are 50% greater than our neighbours Kitchener and Cambridge.

Pat Fung responds: I find it unacceptable that the Office of the CAO would submit a budget that shows a 1.58% tax increase by using cuts in transit service to arrive at that number when the Office of the CAO knows full well that transit services are a lightning rod and reductions here will likely not happen. Then the real increase in taxes will be somewhere more than 2.3% when expansion costs and final adjustments are added into the final property tax rate. That resulting figure will be adjusted when the revised assessment figures are added on.

* 2015 budget capital and operating per person based:

City 2015 Operating and Capital budget combined % different than Guelph
Guelph $3,859  
Kitchener $2,588 49%
Cambridge $2,525 53%

Difference from average: $1,300 X population 120,000 = $156 million.

*   There are staff recommended expansions for roads including 6 fulltime equivalent employees (FTE) and a contract costing a total of $902,000.

* Roads Cost per kilometre per BMA report:

Guelph $27,617
Average $11,847
Median $12,151

Road Cost per person per BMA report

Guelph $244
Average $99
Median $67

* There is a recommended expansion for parks including adding two Trails Technicians for $216,400 and other items costing a total of $521,000:

Parks cost per person per the BMA report:

Guelph $77
Average $59
Median $55

Difference from average: $18 X 120,000 = $2,160,000

  •  Waste management costs:

* With reference to the recent internal audit report on waste collection, there appears to be some difference between the internal audit report and the BMA report. The audit report says collection is “being conducted effectively and efficiently”.   Per the BMA report the costs per tonne and per capita are outlined below:

  Cost per tonne Cost per capita
Guelph $137 $29
Average $114 $10
Median $90 $9

Difference from average per capita: $19 X 120,000 = $2,280,000

* Fire cost per person per the BMA report:

Guelph $185
Average $165
Median $162

Difference from average: $20 X 120,000 = $2,400,000

Fire costs are yet another example of our City spending more than others. The Office of the CAO must drive spending down, not tax the citizens of Guelph for its excessive spending. When it comes to negotiating wages, people are always comparing wages to other fire departments. How about comparing fire costs to other cities to determine the budget.

  •  The Open government Action Plan:

There is a recommended expansion for the Open Government Action Plan costing $264,200 and 1 FTE. The governance costs per person are outlined below per the BMA Report:

Guelph $229
Average $104
Median $86
Cambridge $29
Kitchener $21

Difference from average: $125 X 120,000 = $15,000,000 or $24,000,000 compared with Cambridge. All proposed expansions could be funded from this area alone if it were at the Ontario average. Why is there a need for this position? What are the benefits?

Curiously, the Fung presentation was never mentioned in the Mercury report of the meeting.

The facts are there, so why doesn’t the staff do something about it?

These examples are factual and clearly demonstrate the need for restraint on the part of the administration. This does not seem forthcoming.

Just taking the cost of Guelph’s Operating and Capital costs for 2015, why does it amount to $156,000,000 more compared to either Cambridge or Kitchener? That’s the key question council and staff must consider before they tack on another inflated increase to property taxes and user fees.

When the staff budgeted is 1.58 per cent and then the recommended expansion of another 1.25 per cent we are at 2.83 per cent. This is before public and council reviews and adjusts the final figure. The gorilla in the process is the staff recommendation to increase transit fares and decrease weekend service. The betting is council will shy away from that proposal that will boost the final figure to more than 3.5 per cent.

Guelph Transit appears to be in dysfunctional distress, functioning under a system that is geared to routes with high traffic, i.e. the Gordon Street university corridor and a central hub system for all routes. When the low weekend ridership figures are considered, it makes it difficult for management to justify the cost. Chiefly because it’s bound by the labour contract with the American Transit Union including premium overtime. It’s no wonder the Transit spokespersons at the public meeting were so adamant about extending weekend service.

The large transit delegation indicated that the city staff used the threat of lowering weekend service, and increasing fares, to set up higher taxes when the transit cutback proposals will be dropped by a sympathetic majority of council.

To me, it seems that city taxpayers are already subsidizing the service by some $15 million a year, most of whom have never ridden the bus.

Perhaps renegotiating the University transit pass cost and offering incentives to the disabled and seniors may result in making the service less contentious and more accessible. Increasing the city subsidy, as an investment in better service, would indicate there is commitment to transporting those folks without vehicles, enduring poverty, who have disabilities and seniors.

When you think about it, Guelph has a seasonal transit system geared to serving the 20,000 students eight months of the year who pay a mandatory $150 for two semesters and receive an open-ended transit pass. That contributes $3 million to Guelph Transit.

Guelph’s BMA cost of roads is shocking. The only conclusion is part of the cost has to be attributed to the aggressive former council’s creation of additional bike lanes. Also, contributing is re-striping and reducing major road vehicle lanes to accommodate bike lane expansion. The program has caused increasing traffic congestion because of lane reductions on many major roads.

Driving around Kitchener and Cambridge there are few dedicated lanes for cyclists. Now the Guelph city staff is recommending that we spend $670,800 to clear bike lanes in winter. It’s time to put the brakes on the entire bicycle lane program until costs are brought into line.

Many Guelph roads and streets are in dreadful condition. Why the decision was made to widen and install bike lanes, curbs, sewers and sidewalks on Stone Road east of the entrance to the Arboretum remains a costly planning and engineering decision. The fact that the University owns the lands on either side of the new four-lane road and there is zero development of any kind makes one wonder where the priorities were.

It’s apparent that the eight years of the Farbridge administration has severely impacted on the city budgets as the Fung report details.

The numbers don’t lie so all members of council must realize the seriousness of the city’s financial structure. They, and staff senior management, must recognize why the high costs of operations and capital spending are much greater, per capita, than Cambridge or Kitchener.

When you make an omelet, you have to break a few eggs. That time has arrived.

Will you have cheese with that?

 

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A serious look inside our city budget and where your tax dollars are going

By Gerry Barker

Posted November 21, 2015

As part of its new budget building program, the city released proposals for expansions of staff in the 2016 budget.

Prior to this the city staff presented to council an operating budget proposing a 2016 property tax increase of 1.58 per cent. Let’s call that stage one, or the window dressing portion of the build a budget program.

The staff recommends several budget expansions, over and above the operations budget of 1.58 per cent. The most costly expansion is adding 16 fulltime equivalent employees across various departments. The cost is $2,629,600. This adds another 1.25 per cent to the property tax increase.

Stage Two: Kaching! Now we’re up to 2.83 per cent

The 50 per cent growth of city staff by 700 employees in eight years is compared to a 5.7 per cent increase in population. That’s an increase of 6,897 newcomers in the same period. Wonder if they get their waste picked up by the city?

Let’s look at it this way. Assuming the city population is 121,000 and there are 2,100 fulltime employees, that means there is one city employee per 57.6129 citizens.

Taking it a step further, for the 6,897 new residents arriving since 2007, the 700 new city staff hired during the same period, means that one city employee serves just 9.852 citizens.

This indicates that Guelph hired more new staffers than were needed to cope with the increase in population, a paltry 5.7 per cent in eight years.

But the city staff increased by 50 per cent in those same eight years.

So why does the city staff keep adding staff, on average, of 20 individuals in each budget cycle?

In the space of just six months, completing two budget cycles, 2015 and 2016, some 37 new employees are authorized. While the 2016 budget has not been finalized, it’s a safe bet the staff recommended 16 additional staffers will be approved.

Stage Three: Citizens get their chance to ask for money

But wait! Yet to come are the citizens requesting public funding at the November 30 public meeting. This is when the vociferous bike lane lobby swings into high gear to extend the network of bike lanes in the downtown core and major arterial roads. This is one of those Farbridge legacy hangovers that will be ardently supported by the Farbridge Gang of Seven on council. This group is trapped in an eight-year time warp that has witnessed millions spent to accommodate a tiny minority of bicycle riders.

Their pitch is to demand that council live up to the Farbridge sponsored ten-year plan to spend $1.3 million on bike lanes Reminder, the 2015 budget contains a $600,000 item for bike lanes on Woodlawn Ave.

It’s difficult to understand why driving through Kitchener and Waterloo, there is not the numbers of bike lanes on the major roads in comparison to Guelph.

There will be other organzations and individuals pitching council for money for a variety of causes and interests. Council will be polite with each petitioner, ask some questions but rarely commit, except if you ride a bicycle.

The final stage will be council’s final review of the 2016 budget and approve it December 9.

It’s a good bet that the 2016 budget will exceed a property tax increase of 3.5 per cent not including the increase in citywide property assessments that contribute to the bottom line.

Let’s take a look as these staff recommended expansions.

One that stands out is hiring a manager of city assets for $157,000. A second is hiring an asset analyst for $120,100. Total for the two jobs is $277,500. It is not clear where these two hires fit in and are they necessary? Is not the Guelph Municipal Holdings Inc (GMHI), responsible for managing city assests? That’s what the charter says and already has a general manager.

The Corporate Services department requires the following staff additions and programs:

An internal auditor – $133,800; Asset manager mobility specialist, $79,300; Information technician GIS program, $483,500; Clerk’s office, Access coordinator $86,800; Ward boundary review, (an election will not be held until 2018), $190,000; Contingency reserve $500,000; Stabilization reserve, $500,000.

It’s interesting to note that some programs all have the same $50,000 cost. Two are not recommended: Graffiti removal cotrol and the Goose mitigation strategy. City hall maintenance of $50,000 is recommended. Does that include the living wall?

The Parks department is a beneficiary of the staff recommendations. There is a parks planner, $56,050; an Arborist, $107,400; an Inspector Arborist, $130,700; Seasonal Horticultural crew, $69,600; parks infrastructure maintenance, $35,800; turf maintenance, $69,800; trails maintenance, $35,000; Adding two trails technicians costing $216,400. This adds up to $720,750.

The Farbridge-initiated Open Government Action Plan gets an additional $264,200 on top of the $92,000 approved in the 2015 budget. This money has boosted what was first a one-year contract job for Farbridge loyalist Andy Best. Apparently, the position has morphed into a three-year commitment.

So much for the integrity of the public service.

We have a Cadillac staff powered by a four cylinder engine

While the staff has taken steps to reduce spending, it still fails to address the real spending issue: The growing cost of the city staff is too much for the supporting tax base to afford.

It is not something that started this year. Under the Farbridge administration, staff numbers soared from 1,400 to more than 2,100. Some 37 new employees will have been hired in the 2015, and proposed 2016, budgets. The staff employment costs currently consumes more than 80 per cent of the tax levy.

Glancing over the proposed new staff group for 2016, many are specialists and management people, with compensation packages that are ahead of similar positions in private industry.

The comment made by Derrick Thomson, DCAO, in charge of operations is ludicrous. He says the increase of staff is required to serve more residents. In eight years, the population increased by 5.7 per cent. But in the past ten years, the city staff has increased by 85 per cent.

Just looking at this position, there is a whole crop of candidates for the provinces’s annual Sunshine list of those public servants making more than $100,000 a year.

This continuation of the staff setting the terms of employment is with little input from some members of council, or a responsible Chief Financial Officer (CFO). That job has not been filled since former CFO Al Horsman was moved to Waste Management, Planning and Engineering a year ago, and two budgets since. He left Guelph this past summer.

For additional information about this budget process, here is the link:

http://guelph.ca/wp-content/uploads/council consolidated-agenda budget 111815.pdf

 

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

By Gerry Barker

Posted October 22, 2015

Please note: Part Two of this series failed to be posted on the blog site. Parts One and Three can be read in the guelphspeaks archives.

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 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 and influence of the various labour unions. 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 catalyst 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 severely pared back or eliminated until we can replenish the reserves that were raided to pay off the $8.9 million 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.

Part Three of this series discusses how public money is moved around 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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