MTAG presentation ($26 Billion Municipal Debt) to Ontario Standing Committee on Finance was well received by the NDP

 

Presented on March 13

 

Ontario’s consolidated outstanding municipal / school board debt is $18.96 billion, while its contingent liability predominantly from unresolved litigation and loan guarantees is $92.7 billion. http://csconramp.mah.gov.on.ca/fir/FI11PROV_SCHED74.pdf

OMERS unfunded liability in 2011 was over $7 billion. Issues like binding arbitration / wage freeze already have visibility at the provincial and AMO level. Our comments focus on Ontario’s fiduciary responsibilities to municipalities:

 

1) Implement changes to high value (over $20 million is US threshold) sole sourcing  and contract cancellation laws through the AIT (British Columbia supports tougher AIT rules), Ontario Broader Public Sector Procurement Directive and the Municipal Act (see submission http://www.municipaltaxpayer.com/Sole-Sourcing-Laws.html on sole sourcing laws). We estimate this to be a $15 billion direct and indirect costs issue in Ontario, while an Ontario wage freeze would only save about $2 billion.

 

2) Freeze the compensation (salaries, benefits and overtime) cost / property tax ratio and implement pension reform (see submission http://www.municipaltaxpayer.com/news30.html on pensions).  In Ottawa, 2002 we spent 92% of property tax revenue on compensation, in 2013, that figure is about 100%. While a City cannot break existing union contracts, it can ensure that the compensation / outsourcing via attrition budget for each department does not exceed the rate of property tax increase (transit compensation was up 9% but taxes went up 2%), while also ensuring that the compensation / property tax ratio does not exceed the 2013 figure. Applying this principle in Ontario would imply a freeze in compensation / income tax ratio.

 

3) In 2011 and 2012, Ottawa received $32.67 million in provincial uploading money; there was no documented or public prioritization process on how to spend it. Using funds for water infrastructure is in line with the Drummond recommendation. If taxpayers had to choose between rewarding of groups by Mayor Jim Watson and a 9% rise in water rates the choice is obvious.  http://winnipeg.ca/cao/pdfs/2011CalgarysPropertyTaxSurvey.pdf showed that Ottawa had the largest average at $3,135, Hamilton was 2nd at $2,900; therefore applying uploading as a credit note to taxpayers or payment of municipal debt would be acceptable.

 

4) Ontario and its municipalities should implement “No New Money” new spending initiatives must be accompanied by an equivalent cut in existing spending. The parliament should implement a monthly budget variance report and debate for select operating expenditures and metrics as wells as select capital projects. This would ensure that cost overruns like gas plants, presto, can be predicted and addressed much earlier.

 

5) In the case of BC a new Auditor General for Municipalities was created, we prefer to expand the mandate of the Ontario Auditor General to include municipal expenditures and make recommendations for systemic changes that could apply to all municipalities e.g. a freeze of compensation / property ratio or an outsourcing and P3 award for municipalities that show initiative or open tendering (see submission on outsourcing http://www.municipaltaxpayer.com/news40.html and P3s http://bulldogcanadian.com/new-format-4/). Some municipalities do not have auditor generals, the main goal would be to provide oversight while not interfering in local AG investigations, indeed even the function of municipal oversight can be outsourced to forensic accountants like Al Rosen. Halifax looking to outsource finance, SAP, IT services to the Province is a good initiative with economics of scale benefits; we prefer outsourcing to the private sector since they do not have public sector post employment liabilities.

 

 

Ade Olumide

President

Municipal Taxpayer Advocacy Group

admin@municipaltaxpayer.com

 

 

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