Motion: Mayor to Take Leave of Absence

Nov. 26, 2012

Joni Baechler – Speaking Notes Finance & Administration Committee

I appreciate the Mayor and his family are going through a distressing time. I don’t take any pleasure in raising this issue; it is a troubling time for councillors as well. This motion is one of the most difficult things I have had to do in my 12 years on council.

At the outset, I want to preface my remarks by stating unequivocally my comments are not intended to make any judgement on the issue of innocence or guilt with respect to the charges facing Mayor Fontana.

Every member of council was elected with a mandate – the authority to govern. That mandate, however, isn’t without parameters. In carrying out our obligations, we must exercise a fiduciary responsibility to those we serve.  Fides is Latin for faith and fiducia trust. The public must trust we will faithfully carry out our responsibilities with competence, responsiveness, integrity, and in the best interests of the corporation. Each element is what makes municipal government legitimate in the eyes of its citizens.

The following quote from a court decision describes this responsibility, “Council members are the repositories of the citizens’ highest trust. They must at once be strong in their debate to put forward their electorates’ concerns; they must always have an ear to dissent in their voters. They must not only be shakingly honest, they must be seen to be so, by those who voted for them and those who voted against them. Their role though noble in calling, is demanding in its execution.” (Halton Hills (town) v. Equity Waste Management of Canada, 1995)

Each of us has a responsibility to lead and we must have the confidence of the public to do so. The public confidence and trust in our government has been shaken with the recent charges laid against the Mayor. Emails, phone calls, tweets, public commentary have clearly indicated the growing concern. If we are to exercise our fiduciary responsibility we will be acting in the best interest of the corporation and the electorate when we request the Mayor steps aside until the charges have been conclusively determined in court. My fiduciary responsibly demands I raise the issue otherwise I am not fulfilling my obligations to the constituents I was elected to serve.

This is not an irrelevant motion. There has not been any council discussion on arguably one of the most important issues to face council in decades. To not discuss this issue is absurd at best and a dereliction of duty at worst. Councillors must be accountable and the only forum to demonstrate our accountability to the electorate is at council. Regardless of the Mayor’s willingness to step aside, regardless of whether or not there is the force of law or by-law to make him do so, and regardless of the effectiveness of moral suasion on the Mayor, the public must see Council act in their best interest.

It is standard procedure in most places of employment to ask an individual criminally charged to take a leave of absence until criminal proceedings conclude. The Mayor has resigned from the Police Services Board; yet he has not taken a leave from council. I appreciate the issue of public trust with respect to the police, but surely the public trust in elected officials should be subject to an equal standard.

We must assert our responsibility as elected officials to protect the public trust in our government and to give voice to the citizens that elected us. Council must resolutely indicate we are disturbed by this issue and the implications to public trust, citizen engagement, and the well-being of the city of London. The legal process may well take a year or more to be resolved, encumbering our actions over a long duration. A question mark will punctuate the actions of the Mayor; council will not be immune. This is an untenable situation.

In the interest of the corporation and its citizens, I move that the Mayor take a leave of absence with pay until final disposition of the criminal charges against him.

Integrity Commissioner Needed

The Ontario Municipal Act, 2001 as amended in 2006, granted broad and sweeping powers to municipalities and balanced the expanded power of local government with requirements for improved accountability and limpid conduct. Section 224 (d.1) of the Ontario Municipal Act 2001, summarizes the role of Council and explicitly includes “accountability and transparency”. The Act outlines potential actions municipalities may take in ensuring their obligations of accountability are fulfilled. These include: engaging an Integrity Commissioner, a municipal Ombudsman, an Auditor General, a lobbyist registry.

The Integrity Commissioner independently reviews the application of procedures, rules and policies governing the ethical behavior of members of council. If council follows the rules then an investigation by the Integrity Commissioner is not needed and furthermore no financial expenses are incurred. Most Integrity Commissioners are lawyers who allow municipalities to retain them on stand-by.

The lobbyist registry establishes a public registration system for those wishing to meet with members of council to further their private initiatives. The registry would allow the public to know who is meeting with councillors and why. The lobbyist registry applies to private meetings with members of council regarding private business interests. Lobbyist registries do not apply to anyone expressing opinions through public meetings such as council, committee, neighbourhood, boards and commission meetings.

By supporting an Integrity Commissioner, members of council are advising their constituents that they will hold themselves to the high ethical standard, expected of an elected official. Yes complaints concerning conduct may be filed with the Integrity Commissioner and this aspect is critically important to ensuring accountability. It is easy to say ethical conduct is always adhered to, but words don’t assuage public perception. To put in place the independent protocol to ensure council members are held to account provides taxpayers with direct accountability.

There will always be differences of opinion on council, and sometimes these will be expressed more forcibly than others. Strong opinions do not reflect a lack of integrity. It is about putting in place the mechanisms that will assist in ensuring public confidence in open and accountable government.

.A quick search (not extensive) shows the following municipalities use an Integrity Commissioner: Toronto, Mississauga, Vaughan, Ottawa, Kitchener, Waterloo, Windsor, Hamilton, Oakville, Brantford, Carleton Place, Port Hope, Caledon.

Zero is Not a Vision

Zero Is Not A Vision

I dislike paying property taxes as much as anyone else. I want the lowest possible tax increase. I want value for tax dollars and efficient and effective service delivery reflected through good fiscal policy.  I also want to live in a city that is a vibrant regional hub, unique in urban design, environmentally conscious, progressive in innovation and cutting edge research, with centres of excellence, and low unemployment. When I examine the proposed cuts needed to achieve a 0% tax increase it does not reflect a vision for London’s future. Zero is not a vision.

The Facts: Important to Understand What Can & Can’t Be Cut

The former GM of Finance for the city succinctly bundled the services offered by the city into three categories to help Councillors discern their ability to control costs. The three categories include:

Category 1: Programs mandated by the province which includes Ontario Works, social housing, and associated social programs, Conservation Authorities, Middlesex London Health Unit. We have little to no flexibility in reducing these budgets. In addition, this bundle includes Boards and Commissions which have independent autonomy as confirmed through by-laws. Again, council’s ability to mandate substantial budget changes is very limited.

Category 2: Protective Services: Police, Fire and Ambulance. By provincial regulation, council is not able to direct the Police Services with respect to any aspect of policing. Once the Police Services Board has approved the police budget, council can alter the total amount requested and the police can appeal to the Ontario Civilian Commission on Police Services. The majority of the police budget is personnel. Reducing staff is the only way to achieve savings and council has not shown an interest in doing so. Similar comments can be made for fire and ambulance.

Category 3: City Hall Services. This is the category that directly affects programs to business and residents. The bundle includes garbage, recycling, road repair and maintenance, urban forestry, finance, legal, planning and development, parks, recreation and culture. Over the past five years we have cut $24 Million out of city hall. It has included salary freezes, reorganization, reduction in the work force and efficiencies. There is very little low hanging fruit remaining.

The Category 1 mandated programs, Boards & Commissions budget is approximately $107 Million, Category 2 Protective Services budget is approximately $144 Million and Category 3 budget which includes services council has direct control over is approximately $130 Million.

The Challenges

  • Almost two thirds of the budget is mandated, or includes services that council has little to no control over.
  • Over $300 million of the budget is attributed to contractual agreements. A 2% increase in salaries, wages and benefits equates to $6 million increase in property taxes, or approximately 1.4% tax increase.
  • The Ontario Works caseload is anticipated to remain at a high level given the uncertain economic factors.
  • The Ontario Municipal Employees Retirement System (OMERS) sponsor corporation identified a rate contribution increase that equates to .9% tax increase for 2013.
  • Utility costs are anticipated to rise 10 – 14% over the next 5 years.
  • The roads and transportation division have identified that road and infrastructure repair is falling behind by $5-6 million per year. This does not take into account any plan to tackle the $300 Million dollar infrastructure deficit. It is not anticipated that senior levels of government will assist with a substantial influx of tax dollars.
  • Emerald Ash Borer is devastating the urban tree canopy. Approximately 10,000 ash trees in declining health are on city boulevards. The removal and replacement will require an additional $1 million to the base budget each year.
  • The Mayor wants to establish an economic levy which will be used for new capital projects. How this will be funded is not known but may include a tax increase.
  • Diverting or using Reserve funds to achieve a 0% tax increase simply defers costs. It is short term financial gain with long term implications, usually felt after the next election.

So how do you get to 0% tax increase?

It can’t be done through efficiencies alone. $25.6 Million must be reduced from the budget to get to 0. Remember, the challenges noted above with our limited ability, and in some cases inability to cut mandatory programs, protective services, Boards and Commission. No matter what anyone tells you, it will require deep service cuts.

Questions for Councillors’

What services do you want to cut? To get to 0 means laying off 73 police officers, closing or cutting library hours, reduced recreation programming, reduced operations of swimming pools and community centres, a reduction in London Transit Service, grass cutting on boulevards, sidewalk snow removal etc. For full report: http://bit.ly/MKGC3e  Appendix A.

What is their plan? If you are told it will be easy to find $25.6 Million ask for the financial plan. No one on council has provided a financial roadmap to 0. Some have confused basic budgeting principles.

Ask if they plan on raiding/diverting funds from Reserves? If they say yes you should refer them to the Chamber of Commerce letter: item 2b http://bit.ly/MKGC3e . Ask them how the Reserve funds affects our Triple A credit rating.

If they point to a municipality in another province as the financial model, you can remind them that only Ontario municipalities have been downloaded social programs.

What is their vision for London

A recent staff report noted London taxes are ranked as the lowest to third lowest in the province across all categories; residential, industrial and commercial. The Chamber of Commerce recommends: “ tax growth rates should not exceed the combination of inflation plus an allowance for population growth” http://bit.ly/MKGC3e . Council needs to hear your feedback. If you want 0% tax increase, what services do you want cut? (Go to the listed items noted in Agenda item 2, Appendix A, second pdf file on right hand http://bit.ly/MKGC3e). If you are concerned about the drive to a 0% tax increase what do you recommend? Does the strategic vision drive the budget or is 0 the vision, because that is what you will get.

2013 Budget Targets

The city treasurer presented council with a report on projected property tax targets for the 2013 – 2017. The report indicates preliminary budget targets from city services, boards and commissions project a property tax increase of 5.5% for 2013. The treasurer through discussions with service sectors reduced the target to 3.8% with targets over the next three years of approximately 3.2% each year.

Challenges facing the city’s finances are numerous.  Over $300 million of the budget is attributed to labour costs. A 2% increase in salaries, wages and benefits equates to $6 million increase in property taxes, or approximately 1.4% tax increase. The Ontario Works caseload is anticipated to remain at a high level given the uncertain economic factors. The Ontario Municipal Employees Retirement System (OMERS) sponsor corporation identified a rate contribution increase of $1.4 million for 2013. The roads and transportation division have identified that road and infrastructure repair is falling behind by $5-6 million per year. It is not anticipated that senior levels of government will assist with an influx of tax dollars. Emerald Ash Borer is devastating the urban tree canopy. Approximately 10,000 ash trees in declining health are on city boulevards. The removal and replacement will require an additional $1 million to the base budget. The Mayor wants to establish an economic levy which will be used for new capital projects. How this will be funded is not known but may include a tax increase.

The report also outlines a comparison of London property taxes other cities as rated in the annual BMA Management Consulting 2011 report. For residential taxes London is below the comparable group average. For commercial property taxes London is the lowest of all comparable municipalities. In the Industrial class we are third lowest of the group comparison.

In response to the treasurers report council requested staff bring information as to the implications of a 3.8% budget increase, a 2% budget increase and a 0% budget increase. We expect to see this report in late June or early July.

The full treasurer’s budget report can be found at the following link: http://bit.ly/IhzA6s

History & the 2012 Budget

Sometimes knowing history is important so you don’t repeat mistakes of the past. When it comes to London 2012 budget a glimpse back a few short years ago is informative.

In 1999 and 2000 the city had a tax increase of 0%. This was achieved in part, by using a two year break in the OMERS – Ontario Municipal Employees Retirement Savings Plan contribution of $6M. Instead of putting the dollars in a Reserve fund in preparation for the next OMERS increase two years out; the money was given back to taxpayers by way of tax reduction. In turn, when the OMERS holiday ended, the municipality levied taxpayers for the additional $6M, which translated into 2% increase, plus any cost of living increase for that year.

Also occurring around this time was the move to debt finance life-cycle maintenance repairs coupled with massive spending of over $250 M on capital projects– all debt financed. A perfect financial storm was waiting to happen.

Debt financing is akin to maxing out the credit card. Payment in full is put off and the carrying costs escalate exponentially. It was no surprise when the tax increase steadily rose for the next few years. In 2004 the tax increase released was 11.2% and ultimately whittled down to 8.1%. In 2005 the increase at budget release was 8% which was reduced to 6.6%. In reviewing our triple A credit rating in the midst of this financial mess, Moody’s advised to get spending under control, or risk losing the triple A credit rating.

Financial staff, under a new City Manager, and a new General Manager of Finance, prepared a series of cost containment measures and policies which were adopted by council. They included: 1. Instituting a debt limit to curb new spending. 2. Instead of debt financing life-cycle maintenance for road repairs etc. incrementally move to levying for life-cycle maintenance. 3. Do not use “one-time” money, such as the OMERS example noted above, to pay for on-going annual costs as you are simply deferring a tax increase to artificially keep taxes low. 4. Pay down as much debt as possible. At present the city pays $60 M annually for principal and interest on the debt we are carrying (approx. $317M plus additional debt approved but not issued). Every $1 M in debt retired is $130,000 in permanent savings to the taxpayer. 5. Don’t use the reserve funds to lower taxes. The reserves are analogous to your bank account. It provides the city with working capital to carry out projects, repairs etc. Raiding the reserves for tax breaks means the cash flow is reduced requiring further borrowing of funds (issuing debt) which in turn costs taxpayers more. 6. Use a percentage of new assessment growth to pay down debt.

The institution of these fiscal policies has moved the city toward a solid financial foundation, but we are not there yet. We know our Reserve funds a substantially lower than the recommended threshold by multi-millions (we are awaiting a financial report on Reserve levels due by the end of the summer).

I have been very vocal about compromising the above principles to deliver a 0% tax increase. Let me be clear, we should always try to achieve the lowest possible tax increase. To get to a 0 % increase, it must come from permanent service cuts or increased revenue. To do otherwise means you have simply deferred a growing financial mess that someone else will have to clean up. I hope history will not repeat as we continue to dig London out of the fiscal hole created a little over a decade ago.