Learn from the Mistakes of the Past
As a former chief financial officer of a public institution and an Owen Sound
taxpayer, I was alarmed when I reviewed 9-years of the city’s audited financial
statements. Unlike most public institutions, that are totally reliant on a
reluctant provincial government to make up the difference between revenues and
expenses, municipalities have the ability to stretch revenues to match expenses
by simply raising taxes. This provides municipal councils with the freedom to
approve staff requests for budget increases that would never be approved in
other public institutions. Inflation during this same time period grew by only 18.3%. Had council held
expense increases to inflation, expenses would have been $5 million less and
taxes would have been $4.3 million or 14.1% less in 2020. There is only one
reason that your tax bill in 2020 was 14.1% higher than it should have been.
That is, members of council trusted city staff when they were told that the
expense increases being requested were absolutely essential. Instead of applying
independent, critical thinking and rejecting budget increase requests that were
beyond inflation, they trusted that budgets were thoroughly scrutinized as they
made their way to the council table. Yet, I found that this is not the case when
I interviewed John Tamming.
Draft Budgets are Not Challenged by Senior Staff: For outgoing Councilor
Tamming, the light bulb went on last Fall during an exchange at a council
meeting with the head of Corporate Services. That is the department which
compiles the numbers from all city services and presents them for inclusion in a
draft annual city budget. He asked whether it was, “the role of her office to
interrogate the numbers, to press the city departments for maximum savings, to
go back to them and say ‘try harder’, ‘not nearly good enough’ or ‘you can and
must find efficiencies in this or that area’.” The simple answer he received was
no. It turns out that she didn’t see it as her job. Her office just performed a
post-office function and took it on good faith that the proposed numbers from
other section heads were accurate. “That is all good and well”, Tamming told me,
but the result he noticed was that minimal, if any, pressure or pushback on
budget increase requests was exercised by senior staff. This explains the many
errors I discovered in the departmental financial statements such as the Art
Gallery claiming that its burden to taxpayers was only $10,482 when in fact it
was $505,482. Neither senior staff nor the city manager challenged this before
it was presented to council.
This is the perfect recipe for the unchecked, annual spending growth that we
have seen for many years. Yes, the buck stops with city council. Yes, council
does spend some days each year going over the budget. But now it’s very clear
that council has little to no insight into what efficiencies might lay in an
operating budget. Council may have suspicions, but they have no real way of
knowing if there are administrative redundancies here or there. To get into
those weeds it will require an aggressive cost cutting approach from an internal
budget office. This has not happened and it now appears to be by design, not
accident.
To cite only one example, Tamming points out that our city has not one clerk,
not two clerks but three city clerks. We have a Clerk, a Deputy Clerk and a
Legislative Clerk. Tamming calls this is nuts. A tiny city of 21,612 cannot
possibly justify that many hires. If pressed, the city could easily get by with
just one city clerk. But that’s the thing – no one has ever pressed the issue.
Councilor Grieg has proposed a standalone budget committee. Perhaps this will
act as an internal budget office and provide one piece of the puzzle.
Below are three examples of what a budget system, with no checks or balances at
the senior staff level, can produce.
New Transit Contract Delay: Instead of ensuring that the Tendering Process for
the new transit contact was completed in time for the new contractor to assume
services on the expiration date of the old contract, council decided to delay
the process so they could review the results of a transit study. Therefore, the
old contract had to be extended and since the buses were at the end of life,
other vehicles were required by the transit provider to safely provide services
during the extensions. As a result the cost of the contract extension was
significantly increased. This was a mistake that cost taxpayers several hundred
thousand dollars.
Art Gallery Growth: In 2018, the Art Gallery operated on a budget of $285,000.
The Art Gallery now requires a budget of $505,482 to operate. That’s an increase
of $220,481 or 77.3% in just four years. Such a large budget increase in just 4
years should never have been approved. This was a $220,481 mistake which will
re-occur every year until corrected by a future council.
2022 Transit Budget Increase: Transportation Services grew by 79.9% between 2011
and 2020. A large portion of this increase was due to increases in the Transit
budget. On top of this growth the transit budget was further increased in 2022
by $504,000. This budget increase was based on an assumption that 2022 ridership
would be only 50% of what it was at the peak of the pandemic, and that the cost
of new transit contract would be significantly greater. As it turned out
ridership is actually up and the cost of the new contract was less than the
previous contract. This 2022 transit budget increase was largely unnecessary and
amounts to a $500,000 mistake.
More Questionable Budget Increases: In addition to this large budget increase
for Transit, council was presented with a request for a 71.9% increase in the
city manager’s office, a 52% increase to the HR budget and a 23.7% increase for
Community Development for a total increase request of $1,057,241 or 41.9% in a
single year. The budget increase requests from these four departments were
reduced to $880,512 or 34.8%. John Tamming spoke passionately about why he
thought the 2022 budget request should not be approved. Interestingly, he
included overstaffing and an unaffordable transit system in his reasons.
Remarkably, six members of council voted to approve the entire budget at a time
when we have residents struggling with high rents, high taxes and some residents
living on the streets. Any ideas how we could have put that $880,512 to better
use?
Conclusion
The budget process at city hall, as currently designed, can never produce a budget without increases and needs to be replaced. Perhaps a Zero-Based Budgeting process, where each year’s budget starts with a blank sheet of paper, will force senior staff to deliver a well scrutinized draft budget to council that will result in annual tax reductions, instead of the tax increases we’ve seen for many years.
There were only two councilors who had the courage to join Councilor Tamming and vote against approving the budget. They were, Carol Merton and Brock Hamley. These are the only two incumbent councilors that will receive my vote. We have to put an end to these double digit expense increases and that will only happen if voters send a strong message by voting in five new councilors to join Carol and Brock.