Editor's note: The following is a presentation by Mr. Rennick to North Bay council on Tuesday.
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To the editor:
During the last election. we had a complete turnover on council with seven new faces promising new beginnings and a new focus. I’m sure that these new council members were serious about living up to their promises and bringing about change. But with a couple of notable exceptions, all the rhetoric during the election campaign concerning new beginnings and a new focus has not resulted in any changes whatsoever.
Here are a few examples supporting my reasons for this position.
In 2023 this council approved a 5.21% increase in the operating budget which was reduced to 4.62% after applying an additional transfer from reserves of $890,000. This was virtually unchanged from the staff’s recommendation. The dollar amount of this increase was the largest in recent history except for a slightly higher amount in 2019. Meanwhile, it now appears that the 2023 budget surplus will be a $2.5 million surplus and during deliberations, no one could find a penny in reductions.
The 2023 and 2024 water budgets with increases of over 5% were approved without any changes from the staff recommendations and then $825,000 in reserves was used to lower water rates. A similar amount will be used in 2024. This activity is just playing with figures and using funds previously contributed by taxpayers and does not represent a reduction in cost to taxpayers or a reduction in expenses.
If I was not aware of the results of the previous election, it would not be obvious that there had been any changes made whatsoever. Your actions have been déjà vu all over again.
Budget deliberations
One of the reasons for this is that the budget review carried out by the finance committee virtually ensures that there will be no major changes in the staff reports. What occurs now is department heads read out the figures in their particular budgets and any questions are answered by describing the process followed to arrive at the budget figure. For example, “We started with last year's figure and we added so much because prices went up or we need more of this or that item” and the budget head is thanked for his explanation and the process moves forward. Or a general comment is given such as “The budget process is based on a zero-based budgeting philosophy” or “This is in accordance with city policy.”
Members of council do not have, and cannot be expected to have, enough knowledge to dispute any explanations provided by staff and the result is, as we have seen time and time again, the budget is approved as presented and then the discussion begins regarding how much we are going to transfer from reserves to lower the tax levy increase.
A process that is in taxpayers’ interests begins with the mayor establishing budget guidelines with the CAO which means among other things setting an upper limit on any increases. This puts the onus on staff to reduce the budget before it comes before council. This ensures that when discussions begin at the committee level the amount of the increase is within reason. This allows committee and council members to concentrate on improving budget reporting methods, suggesting efficiencies in providing services, questioning specific line items, and reducing or eliminating services.
This review process should not begin until the previous year's actual figures are known. By this, I mean that the previous year’s results should be completed to be accurate enough to be comparable with the budget figures presented, and readers can make comparisons between the prior year's actual results to the current year’s estimates.
Any calculations regarding budget increases should be made between actual figures for the prior year and the current budget. The current practice of only using budget figures to calculate YOY increases embeds any realized surplus figures in the tax levy for years to come. This simple move would have reduced taxes by almost 5 million dollars over the past six years and resulted in the current levy being 2 million dollars lower than it is now.
The tax levy for the new year does not need to be finalized by December or January and could be delayed into May if need be. The CAO should instruct staff to finalize the previous year’s figures as early as possible in the new year. The suggestion that this requires the preparation of the records for the annual audit is incorrect. The budget preparation and the annual audit are not connected and the two have virtually no relationship to one another.
Adherence to the mandates of the Municipal Act
The Municipal Act is used by staff to support hundreds of actions and recommendations throughout the year. Surprisingly, the requirements of the Municipal Act are ignored or not followed in other cases. When it comes to treating prior years' surpluses as income in the current year's budget, the Act is ignored. The suggestion that doing this would somehow be problematic for taxpayers is not a valid argument. If actual figures from previous years had been used. The requirement to follow this mandate of the Act should be enforced and one of the failings of the long-term new budget policy.
Here are some issues that should be discussed at budget time and beyond.
An OPP costing of policing services. This was voted down by council in prior years. This is something that needs to be costed out and decided on its merits not pushed aside over the objections of invested parties.
A hybrid fire department has never even been seriously considered. At present, we have a $14 million a year, and rising, full-time fire department where the compensation costs do not reflect the level of service that taxpayers require or that taxpayers can afford. The majority of the fire department activity involves attending to fender benders. Incidents that are handled by the other emergency services should be backtracked from the fire department.
The communications officer simply adds another layer of bureaucracy between council and citizens and the benefits to taxpayers are virtually non-existent. Elimination of this position would go unnoticed by the population. Is there any council member willing to debate with taxpayers that this expenditure represents value for money spent?
The position created to handle the Municipal Accommodation Tax (MAT) contributions should be eliminated. This activity must surely amount to a few hours of effort at the end of the month not a full-time employee. Has anyone on council inquired how taxpayers are receiving value for money by supporting this position?
The Economic Development Department 2023 budget was over $900,000 with a wage cost to taxpayers that has risen to over $685,000 for six employees. It appears to me that what we have here is an expensive welcome wagon whose cost is approaching $1 million a year. Our population is the same as it was 20 years ago. The number of commercial and industrial businesses has not really changed in the past 20 years and is just treading water. Is there any council member who can defend the cost of this activity as providing a benefit commensurate with this yearly cost being included in property taxes? This is the type of thing that should be discussed in council meetings.
Elimination of the assessment officer position whose wage costs are now in the six-figure range is overdue. I have personally been before MPAC on at least two occasions and despite being specifically invited to do so this employee has never appeared on behalf of the city. Regardless, I am baffled as to how that position, which has existed since 2016, requires a 7 ½ hours, five days a week effort. Surely, this is a contract position.
Elimination of the community services administration department, which is costing taxpayers over $600,000, seems to exist absent of any tangible benefits that could easily be supplied by other city departments. The 2023 budget shows a salary cost of $465,000 for one person. I assume there is an explanation for this but as far as I can recall this item was never even questioned by council members during the 2023 budget discussions.
Adding interest to discretionary reserves is forbidden by generally accepted municipal accounting principles. In passing the long-term policy, council just approved allowing the CFO to confiscate this. The city’s annual financial information describes these funds as “Discretionary Reserve Funds”. This is incorrect as they are not reserve funds but merely allocations of surplus. As such they do not attract interest. The municipal accounting manual’s description of reserves is quoted by staff in their long-term policy report but the report surprisingly excludes any mention of this fact. The actual cost to taxpayers in 2022 for this diversion of interest earned on reserves contributed by them was 1.54 million dollars.
The city is currently advertising for a financial reports coordinator position which will cost at least $100,000. We are currently supporting four of them, one of whom is the MAT tax specialist I mentioned previously. If we had one at this price, there might be an argument for it, but four or five!
For example, over 16 new homes valued at $400,000 each, and paying $6,000 a year in taxes would be required just to offset the cost of this one employee. Just to avoid any increase in taxpayers' individual tax bills $6.4 million in assessment would be required. Once again new assessment does not increase taxation revenue. The addition of an employee costing $100,000 simply raises revenue requirements.
Summary
What this council has done, like many councils before them, is approve the extraction of funds from citizens who are legally bound to supply them while city hall administration proceeded to spend those funds. What they didn’t spend, they squirrelled away, with council’s approval, in reserves. Reserves have increased from $22 million in 2012 to over $64 million ten years later. That’s an average of $4 million per year out of taxpayers’ pockets! How much of expertise or financial know-how is required when you are routinely collecting an average of $4 million a year more than is required to run your operations?
Council members appear to be unable or unwilling to influence the actions of senior staff even when some of these actions are clearly detrimental to taxpayers, contrary to the Act, and fly in the face of sensible practice.
One of many examples is the long-term policy report recently approved by council. This policy ranks right up there with the 2016 Mayor’s Plan as one of the most detrimental pieces of legislation I have ever seen. The important budget, reserve, and asset management policies all contain references to sections of the Act that are incorrect or irrelevant. They contain policies that are in violation of the Act and/or established municipal practices. The approval of this report now enshrines some of the most anti-taxpayer tactics as being acceptable.
The operational review and the enterprise resource planning were touted by the mayor as two of the major key projects of the previous year are simply activities, not results. What citizens and taxpayers need are results, not promises, plans, or agendas.
Does anyone remember the internal operational review initiated by the former mayor a few years ago which was slated to take a year to complete? Never saw the light of day! Also, does anyone remember the 2014 Fleet Department operational review which cost $100,000 and was initiated after a large amount of fuel went unaccounted for.
Although promises were made in both 2016 and 2017, it appears as if none of those recommendations were implemented by the Fleet department. What I do know is that the Fleet department budget has increased from $4.3 million in 2015 to $7.4 million in 2023 which is an increase of 63% in 8 years even if one takes the supposed $1.5 million reduction in transfers to the capital account into account. This change in capital funding policy replaced one that has served the city adequately for decades with one that is detrimental and costly to current taxpayers.
The enterprise resource system currently being considered is basically a data collection software that requires extra entry time, third-party software, continuous maintenance, and training costs. Meanwhile, its specific benefits as opposed to a reliable accounting system are questionable. In addition to the implementation problems that always accompany a new system, how will this initiative specifically benefit taxpayers and save money?
North Bay is not a big operation. North Bay is a small northern city with a few advantages based on our location and natural amenities. We are not an economic powerhouse or tech centre. We are not a major tourist attraction. Which is not a bad thing. I’ve lived here for over fifty years and it has been a great place to live and work. However, the increasing reduction in value for money spent on municipal services, resulting from the focus on champagne wishes and caviar dreams, is changing that perception.
Let’s stop this pie-in-the-sky notion that we can grow our way out of this situation. No one has ever had any actual plan that guaranteed any degree of success in this effort. What has passed for a plan in North Bay is a glorified wish list resembling a travel brochure. The idea that efforts by the city administration will grow North Bay is a fairy tale and amounts to higher taxes with zero results.
The failed Invest North Bay initiative proved that in spades.
Secondly, new growth is not new revenue, and anyone suggesting that is deluding themselves and others. New growth assessment merely spreads the tax burden. Market-based increases in the assessment base carried out by MPAC do not have any effect on revenues. Both new growth and MPAC assessment simply change the tax rates, not tax revenue. Furthermore, new growth is eventually followed by increased costs which are never offset by reductions in tax bills.
What this and previous councils are doing is establishing budget levels based on the income levels and financial abilities of the four or five thousand homeowners who work at city hall, the police department, the boards and commissions, the hospital, the university or college where average salaries are as much as two and three times the average salary in North Bay.
Let’s start protecting the interests of the 13 or 14 thousand average-income households who are in the majority. Despite having virtually no growth in the last 10 or 20 years, the tax levy has increased by 40% since 2013 compared to inflation that has risen by 21% during that period.
A ten-minute presentation to council or an email containing budget suggestions is not engaging the public in any meaningful manner. I and others have been raising these and similar points for years and have received no authentic responses. The responses received have been few and far between and consisted of shooting the messenger, spurious accusations of inappropriate behaviour, straw man arguments, avoiding answers to the questions completely, and suggestions that changes take time, or that the problems are being worked on.
None of these have allowed any subsequent discussion designed to rebut the responses given. There have been no significant changes made. This must be a give-and-take discussion that requires real answers. Let’s get this matter settled once and for all.
Don Rennick
North Bay