By Gerry Barker
July 25, 2019
Part One of Seven
The beginning of the downhill drain of public money called the Community Energy Initiative (CEI) was unanimously approved by city council in 2007. The first year of the Farbridge administration’s dominant 2006 victory elected 11 councillors supporting the mayor.
The blueprint of change was discussed and approved by a select group of citizens ranging from business leaders, the University of Guelph, Chamber of Commerce, senior staff, Guelph Hydro, and key supporters of the Farbridge administration.
That election formed the genesis for committing public funds and the city on a number of projects to change the way we live. These include electric power, clean water, transportation, unorthodox waste management, home development, city operational management, industrial development, and restrictive procedural bylaws.
This unfettered control of the city administration, provided the ignoble ending of accountability, transparency and open government. The firing of two key city executives, Chief Financial Officer David Kennedy and Chief Administrative Officer Larry Kotseff led to the tightening control by Mayor Karen Farbridge to carry out the mandate surrounding the CEI and approved by leaders in the community.
It also began the 13-year increases in property taxes, averaging more than three per cent each year. The elimination of veteran senior managers removed the key checks and balances needed to control finances, to meeting provincial requirements. It’s required to balance the budget at the end of the calendar year and avoid a deficit.
This left the city administration with three choices: Raise revenues (property taxes and user fees) or increase the debt, or raid accumulated reserve funds to balance the city books. It is reported in the annual Financial Information Report (FIR) submitted to the Ministry of Municipal Affairs and Housing.
The contents of this voluminous report are not made public until the middle of the following year and generally not read by the citizens. So much for open government.
There is one exception to the content of the FIR. It contained the salaries of all public employees earning more than $100,000 plus taxable benefits. It is called the Sunshine List and is published every March.
This eventually became the Achilles heel of the city financial reporting. In December 2015, a closed session of council, in closed-session, approved a $98,202 increase to three senior staff CAO Ann Pappert, Deputy Chief Administrative Officers (DCAO) Derrick Thomson and Mark Amorosi.
In March, the Sunshine List revealed the trio’s 2015 salary and taxable benefit increases.
I am acutely aware of this issue as DCAO Mark Amorosi subsequently sued me for defamation after comparing the difference between the 2014 Sunshine List and 2015.
This matter after almost three years is now in the hands of Superior Court Justice Cynthia Peterson who has heard the submission of both counsels in which my lawyer is seeking a dismissal of the charges.
For the Farbridge administration it was only the beginning of raising revenue. User fees were increased as the city morphed into a growing municipality. The focus was on reducing fossil-fueled vehicles that were denigrated by a string of environmentalists whose representatives formed a majority of city council. All in the name of reducing greenhouse gases affecting climate change.
The bicycle lanes frequently started and stopped during expansion on the major routes shrinking vehicle lanes. Today, the result is congestion, worse that it was in 2007 because the population increased, the major streets hogtied the space for vehicles that were established years ago. What did the planners think was going to happen?
In the eight years of Mayor Karen Farbridge’s administration, few people cared about the ongoing development of increasing traffic In the city.
But here was a new major city redevelopment brewing that would lose more public money than any project known in the history of Guelph.
In 2012, wedged in all this was a citizen’s petition to the Minister of Municipal Affairs and Housing to audit the finances of the city. Ordinary and concerned citizens generated it. The likelihood today is not many people read it. If they did they probably would not remember it after seven years. The petition was carefully researched and vetted for accuracy. But was shot down by the Minister.
The citizen’s activist group, GrassRoots Guelph, prepared the petition, it was signed by 160 ratepayers. It was documented using official city figures as submitted in the annuals FIR mandated by the province. The petition detailed the discrepancies in the FIR over three years. Here is a draft copy of the petition. Today it only adds to the lack of financial management that has plagued this city since 2007.
As it was denied the Minister, Linda Jefry, she resigned from the government shortly after to run for Mayor of Brampton in 2014. In 2018, former Ontario Progressive Conservative leader, Patrick Brown defeated Jeffry.
Application to the Ministry of Municipal Affairs
Requesting an audit of the City of Guelph’s finances and operations
As per the Municipal Affairs Act R.S.O. 1990, Chapter M.46 Part II
September 12, 2013
Please note that this petition does not include the Urbacon city hall lawsuit settlement and associated costs was brfore the courts at thos time.
Under part II section 9 (1) we, the 162 undersigned taxpayers, request a Provincial Municipal Audit of the City of Guelph’s finances and operations. Our concerns are the management of the city that has resulted in exponentially increasing liability to the taxpayers now and in the future.
In our collective opinion we citizens agree with the following:
- In the past four years, when figures were available, the City of Guelph expenditures exceeded budgets by a total of $24,771,000. The amounts were: 2012; $10,750,000; 2011; $5,783,000; 2010; $2,581,000; 2009; $5,657,000. In our opinion if the trend continues, these figures will exacerbate future liability to the taxpayers and the corporation.
- Further, the audited financial statements for the City of Guelph in the comparison year did not compare to the figures of the previous year. For example, the 2011 statement showed 2010 expenditures of $309,198,000 while the previous audited statement showed a figure of $305,482,000. This is a difference of $3,716,000. Similarly, 2009 shows a difference of $3,668,000. In our opinion, expenditures exceeding budgets year after year produced by the required annual audit, does not imply confidence in the accounting numbers.
- The above data points out some of the imprudent financial decisions and management by the City of Guelph.
- The current administration created a municipal holding company of which the chief revenue component is Guelph Hydro. In the current year, the holding company, controlled by the Mayor and her cohorts on council, plus two independent directors, approved a $2,995,000 dividend that was 96.7 per cent higher than previous years. Despite an income decline of 44.1 per cent to $1,057,000. The result was a 179 per cent payout ratio as dividends exceeded earnings. In our opinion, this withdrawal does not meet corporate standards of risk/reward and is a misuse of public funds.
- A non-budgeted and undocumented item that appeared in the 2011 and 2012 City of Guelph annual reports was used to boost revenues. In 2012, a $20,744,000 entry labeled “contributed subdivision assets” was stated while a similar item in 2011 totaled $9,901,000. Neither was in the budget. In our opinion these non-cash entries only serves to embellish revenues.
- A report dated April 10, 2012, from the finance department labeled “Unaudited Operating Variance Report” stated that the total enterprise budget had a favourable variance of $4,304,000. Please note that this occurred three months past year-end. Yet in the Guelph audited Annual Report dated June 27, 2012, the expenditure variance was a negative $5,783,000. On the revenue side, the variance was $39,495,000. Neither figure was remotely similar to that presented to Council. In our opinion this does not instill public confidence in the City of Guelph accounting methods.
- The reporting of financial data to taxpayers lacks clarity and accessibility. In our opinion, posting a 300-plus page 2013 budget document on the city’s website is not sufficient or accessible to most taxpayers.
Legal matters facing the city
- As of March 11, 2013, there are 16 court matters reported in the Litigation Status Report. In addition, there are 16 outstanding Ontario Municipal Board hearings. There are 23 insured matters to be resolved. In our opinion this represents a potential unfunded liability to taxpayers. (Current Litigation Report in attached as appendix A)
- An example was the city’s attempt to leave the Wellington Dufferin Guelph Public Health Unit. The resulting court case was lost but the legal costs incurred were never revealed. In our opinion this was a politically motivated attempt to opt out of a Provincially mandated Health Unit and failed to publicly disclose the cost to the taxpayers. Until the court case was settled, Guelph council’s representatives refused to attend WDG Health Unit meetings for many months.
- In our opinion, in 2011, the city breached its 55 per cent of current budget capital spending limit. Under the self-imposed limit, the 2011 debt ceiling was $94 million. Instead the debt rose to $121 million.
- In our opinion, taxpayers are concerned about city announcements of proposed capital spending projects including: A $73 million downtown library to be operational in 2017; a $37 million south-end recreation centre and then propose to spend $16 million to expropriate an existing commercial centre and convert it to a new riverside park.
- In our opinion, the capital and operational spending in Guelph’s downtown has created a vacuum preventing needed spending on projects in other parts of the city. For example, the proposed south-end recreation centre, to be built in an area where there has been substantial residential development in the past ten years, is proposed in the long-term capital plan
4. Employee Costs
- Figures released by the city audit in 2012 showed that civic employees
- Total compensation costs were 88 per cent of the city’s property tax levy.
- From 2008 to 2012. Guelph civic employees’ received total compensation increases of 31 per cent. In 2008, the city spent $124.8 million on compensation. In 2012, it spent $163.6 million. In our opinion this was triple the annual inflation rate during the same period.
- Between 2006 and 2012, during the period controlled by the present administration, City of Guelph employees’ costs increased by 68.1 per cent. Or 10.9 per cent per year. During the same period, the comparable employee cost increase of its peer group included: The City of Kitchener, (35.3 per cent), The Region of Waterloo, (42.8 per cent), the City of Cambridge, (29.6 per cent). It represents a 41 per cent increase in employment costs over the peer group.
- In our opinion the Guelph employee costs are excessive, in view that the population of the city grew by 5.8 per cent in the same period.
- Reference: Presentation to Guelph council by taxpayer Milton Burns November 29, 2012 based in city administration reports and the Ministry of Municipal Affairs FIR report, schedule 42 (Copy attached).
- Between 2006 and 2011, the city has had four individuals performing as chief financial officers. One of these was a deputy treasurer in the financial department who was responsible for managing the city finances for more than a year, following the dismissal of the previous CFO. Another candidate lasted one week on the job. The current CFO was hired in July 2012. In our opinion, this has resulted in a lack of taxpayer confidence in the management of the city’s finances.
- Failure by the city administration to provide taxpayers the opportunity to comment on operational decisions, involving major capital spending of waste management projects.
- In our opinion, the building of a $33 million organic waste processing facility (OWPF) without revealing details of the construction, operational costs and contractual obligations, represents a breach of fiduciary responsibility of the city council.
- The question arises as why the processing capacity of the facility, as approved by the Ministry of the Environment, is six times the wet waste needs of the City of Guelph.
- In our opinion, selling the right to 20,000 tonnes of the facility’s capacity to the Region of Waterloo, without revealing the operating costs, has not served the taxpayer’s interests.
- In our opinion, City Council, without informing taxpayers or consideration of the accessibility to collect waste from all residences, awarded contracts totaling $15 million to install an automated bin-based waste collection system.
- This system is not available to 6,400 condominium residents due to the city refusing to pick-up waste in these developments. This represents 13.6 percent of the 47,000 Guelph households being forced to not only pay taxes for waste collection, but also pay private contractors to remove garbage. In our opinion, this is not fair to those homeowners affected.
- Terms of a contract with the Lystek Company of Cambridge that processes human waste to store and dispose of city treated solid sewage sludge have not been revealed. In our opinion, this fails to detail safe disposal.
- In our opinion, the present financial and operational situation in the City of Guelph will provoke future tax liabilities that cannot be corrected in a short time frame. Among these, is the growth of staff, defined pensions and sick leave liabilities under OMERS and employee associations, of which the majority of civic employees are members? This will adversely affect the municipality’s budgets for years to come.
- Considering that in 2011, 52.2 per cent of city revenue was derived from property taxes, plus another 20.9 per cent in user fees, we request an independent audit of the city’s finances and operations to examine taxpayer exposure to current and future liabilities.
Respectfully submitted by the attached list of those supporting this petition.
The Minister said that the two parties, the city administration and GrassRoots Guelph should settle the matter. That did not happen because GRG demanded that the meeting be held in public and in the River Run Theatre. It never happened and CAO Ann Pappert called the petition a waste of time, but whose?
Next, Part Two: How the 2007 Community Energy Initiative plan steered Guelph down the financial rabbit hole