It’s not about tax and spend in Guelph; it’s now about spend and tax

By Gerry Barker

December 5, 2016

Editor’s note: I want to thank all those folks who have expressed support for me and www.guelphspeaks.ca.

Here we are nearing the end of the 2017 budget exercise to determine the taxes and fees the citizens will have to pay next year.

Wednesday, December 7, council will finalize the 2017 budget. It has been a carefully orchestrated process to meet a number of capital spending proposals and operating expenses that council is facing today and next year and the years following.

Along comes Ward 6 Councillor Mark MacKinnon stating he intends to introduce a motion to increase the special property tax levy from .5 per cent, as proposed by staff, to 1 per cent for 2017. Councillors Cathy Downer, June Hofland and James Gordon will join his motion but for different reasons as it turned out.

Let’s examine the motives and background of these four members of city council.

Mr. MacKinnon has implied that paying taxes is a privilege of citizenship and citizens owning property should mortgage their properties to pay their taxes. Further, he argues that with the increasing equity in private properties is reason to force people to pay for the wasteful spending of previous administrations. This outrageous theory is the hallmark of the previous administration. The property taxes and user fee increases in the past 10 years have soared in Guelph to a point where the city operating and capital spending costs are 50 per cent greater than either Kitchener and Cambridge.

The MacKinnon theory is that we all have to pay taxes and user fees whatever council demands. Question: Does that mean that when property values decline, that taxes are lowered?

First, during this entire 2017 budget process the fiscal elephant in the room has been the condition of the city’s infrastructure. There is ample reason for concern. Following a lead by Coun. James Gordon, council spent hours debating the state of the aquifer that supplies water to the city. His target was Nestle who draw on the same aquifer, one of the largest fresh water sites in the world. The fact that the Nestle bottling operations are not in Guelph, failed to deter Gordon and his fellow travelers from trying to plug the Nestle draws.

Which brings us back to the Guelph infrastructure problem. It is reported that the underground water pipes are leaking far more aquifer water that the draws by Nestle. You have to give Mr. Gordon credit. His water crusade caught the eye of the Wynne government and they are debating stopping Private Corporations from drawing water from Ontario sources

Question: Why is attacking a private company licensed to draw water more important to city council than working to fix our leaking infrastructure?

The city infrastructure now needs capital spending of more than $200 million according to an estimate of the Association of Municipalities of Ontario (AMO).

Ward 5 Coun. Cathy Downer, is a member of AMO and presumably she concurs with the estimated cost of restoring the city’s vital infrastructure. It has been starved of funding for nine years because money was being spent on major waste management and other environmental projects. Ms. Downer, although not on council from 2006 to 2014, was a close personal friend of the former Mayor, Karen Farbridge, and was her campaign manager for the 2010 civic election that the Mayor won.

So while Ms. Downer supports doubling the levy for 2017 she wants to split the funding with half going to infrastructure and the other half going toward “city building projects.” She did not detail which city building projects she had in mind.

Ward 3 Coun. June Hofland, agrees with the Downer position in supporting the 1 per cent levy motion. She took it a tiny step further saying that “city building” included partial funding of the south end recreation centre.

To sort this out, this Wednesday night, council will vote on the motion to double the levy for one year. The staff proposed a .5 per cent levy on property taxes for ten years with a reopening of the levy on a regular basis. The staff did not propose doubling the levy in the first year.

Let’s review. Coun. MacKinnon believes that citizens must pay taxes and fees even if they have to increase the mortgage on their homes.

Coun. James Gordon takes the position that fighting a private corporation is more important than solving a serious infrastructure problem in the city he represents.

Coun. June Hofland, supports doubling the levy to 1 per cent but splits the funds to support a recreation centre in Ward 6. That derails the staff proposal to take a longer view to solve the neglected infrastructure problem. She was a member of council during the Farbridge administration and apparently, in her mind, infrastructure repairs and maintenance was not a priority for eight years.

Cathy Downer was not on the Farbridge council. Her proposal to split the property tax levy between operating budget and capital spending, defeats the urgent intent to clean up a neglected mess underneath our city.

Finally, it is interesting to note that the proposals made to council and staff by Guelph resident Pat Fung, CPA, CA, to reduce the operating overhead without affecting services. Staff and Council has largely ignored his recommendations freezing the 2016 budget, reducing staff and non-essential projects.

His analysis of audited city financial statements for four years plus the report of city hired consultants BMA of Hamilton, led to his detailed report that has been received by thousands of citizens.

If the elected officials that you supported don’t listen and react to proposals made by a highly qualified financial professional, what alternative do we have?

Your turn for action comes October 2018.

 

 

 

 

 

 

 

 

 

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Part Three -We’re stuck with Farbridge’s Fungible Financial Folly

By Gerry Barker

Posted October 23, 2015

Yesterday, we addressed the need for the city to be put on a financial diet. Here is one of the chief reasons our finances are in such a mess, it’s called fungibile financing.

At the outset we should give you the dictionary definition of the word “fungible.”

According to Mr. Webster, it is an adjective meaning: “Any unit or part of which can replace another unit, as in discharging a debt, capable of being used in place of another.”

Translated it means that after a budget is created by a municipality or any organization, the moving around of money is counter-productive to basic accounting principles.. If a department has an overrun on one project, it is fungible to move money from a reserve or another less important project in the budget. Starting to sound like it’s a method to discharge an internal debt?

It happens all the time in many organizations around the globe. The difference in Guelph is that the public does not know how their money is being moved around in a budget. The city administration has fungible-ized the practice to perfection.

It has been going on in the city of Guelph for more than eight years. The prevailing attitude is what the people don’t know won’t hurt them.

It’s a lullaby for financial disaster

Just look what happened when the city embarked on a foolish exercise to fire the new city hall general contractor. It took seven years of negotiations, mediation and finally, a $19 million wrongful dismissal lawsuit brought by the contractor, Urbacon Building Group.

The city was found to have wrongfully dismissed Urbacon in 2008 and, being that it was a civic election year, the matter was quickly negotiated to cost $8.9 million.

In a second trial shortly following the lawsuit loss, the city attempted to stall the costs portion of the wrongful dismissal trial until after the October 27 civic election. The judge asked the city why they did not settle the lawsuit. The city lawyer replied that because they thought they would win. Just that simple yet arrogant reply was a telling attitude that cost the citizens some $2.3 million in legal costs.

Another fungible exercise was the renovation of the downtown Farmer’s market. City staff told council the cost would be $170,000. Later, it revealed it cost more than $350,000. But not to worry said the staff at the time, we’ll take the overrun money from the new humidifier to be installed in the West Recreation Centre pool area. That’s fungible and stupid because forecasting budget is not a skill set used by many on city staff.

For Finance chairperson Coun. June Hofland, it seemed like a good idea at the time.

So, the Chief Administrative Officer, Ann Pappert, states that the $8.9 million Urbacon settlement will not affect property taxes. They took the money from three unrelated reserve funds to pay off Urbacon. Then they announced that those funds would be replenished by budgeting $900,000 a year for five years.

On the eve approving the 2015 budget, Coun. Karl Wettstein moves that the city spend only $500,000 instead of the previously announced $900,000. and the Farbridge Bloc of Seven agreed. Wettstein added that the staff should come up with an alternative reserve replenishment plan for the 2016 budget. Now engaged in 2016 budget planning, it will be interesting just what the staff will propose to replenish the reserve funds.

Where is our Chief Financial Officer when we need one?

One of the reasons that this practice continues is the absence of a Chief Financial Officer (CFO). We’ve had five in eight years and they’re all gone. Without a trained and experienced CFO, the stage is set for manipulation of finances. And that’s exactly what has happened. Oh, attempts have been made to put the city finances in order by the parade of CFO’s to no avail. One only lasted one week on the job. That’s probably how long it took him to see what was going on. And fungible manipulation of money was happening at the public expense.

Now here is a perfect example of fungible financing. Coun. Mike Salibury, speaking to the 2015 council budget meeting, suggested that instead of spending $300,000 in creating bike lanes on Woodlawn Avenue, increase it to $600,000.

And where did the extra $300,000 come from? He said it was included in the 2014 budget but was not spent.

This is just another example of fungible stupidity. The Municipal Act requires all municipalities to close their books by December 31 and balance them. If Salibury and the rest of that bloc don’t understand that, then they shouldn’t be on council.

This attempt to spend money, that was not part of the current year budget, is the direct result of not adopting zero based budgeting. That means that each year stands alone and unspent money from the previous year’s budget cannot be used.

This practice has been going on for several years. In 2012, GrassRoots Guelph presented documented figures, showing that the annual closing of the books revealed the final balanced accounts. But then a different figure, usually showing a surplus, popped up in the next year’s budget.

Most people were not informed of these differences because the 400-plus page Financial Information Report, filed by the city to the province, was not available to the general public except by request. Few bothered.

This was pure manipulation of the city finances by the city staff, with the complicity of the council.

It is a practice that must stop

 Yet, earlier this summer, the President of the Guelph Chamber of Commerce, Keitho Mwanza, asked the city to adopt a budget system that had a true zero starting point. He did not use the expression “zero based budgeting” but that’s what he meant.

What followed was an hour and a half debate by council that resulted in no changes in the way the budget was prepared. There were three votes to accept the zero based system and all were defeated by the Farbridge Bloc of Seven.

In other words, continue the fungible ways of running the city. Increasing costs annually; hiring more staff; paying higher salaries, wages and benefits, is making Guelph staff one of the highest paid in the country of a city of similar population.

If Kitchener and Cambridge can maintain lower per-person costs, why can’t Guelph?

Note: If you missed the first two parts of this series, check our the guelphspeaks archives.