Bill Hulet Editor

Here's the thing. A lot of important local issues are really complex. And to understand them we need more than "sound bites" and knee-jerk ideology. The Guelph Back-Grounder is a place where people can read the background information that explains why things are the way they are, and, the complex issues that people have to negotiate if they want to make Guelph a better city. No anger, just the facts.


Wednesday, December 6, 2017

Yule Vacation Plus a Request for Topics


It's been a pretty hectic year for me. Beyond the work I've been doing researching and writing stories for the "Back-Grounder", I also continue to put out stories for my other blog, "Diary of a Daoist Hermit". In addition, my day job became somewhat Hellish this summer and fall as the federal and provincial governments decided to dump millions of dollars on the library---which meant lots of days moving dangerously heavy pieces of furniture. (I'm almost 60, and have tendinitis in both my left leg and arm---which means nasty moving isn't as much fun as it used to be.)

This means that I am really in need of a vacation. As it turns out, my sweet, dear, lovely wife Misha asked me to come down to Saint Louis over the winter holiday in order to help her with clearing out her house. (She's finally moving to Guelph to live with me as the last of her family obligations has cleared up. The next hurdle will involve the Canadian government and getting her registered as a landed immigrant.) As a result, I'm going to be putting my writing on hold in order to take a breather from my usual crazy work load.

The last article, "Why Are My Taxes So Darn High?",  was by far the best received of all the ones I've published. It got shared widely and three people signed on through Patreon as subscribers. (Thanks Marian, Ben and Marty for being so awesome!)  Since I'm taking a bit of break, I thought I'd ask readers if they have any ideas about what they want me to research and explain for them. Is there something that really bugs you?  Or just mystifies you? If so, drop me an email at:  thecloudwalkingowl@gmail.com .

In the interim, Misha and I would like to wish all of you a good time this winter solstice---don't get stressed by the materialism, but do enjoy the time spent with friends and family. I'll be back in January with more background information about the city we love. 


Monday, November 27, 2017

Why are my taxes so darn high?

I often hear people complain bitterly about city taxes, and why they just keep going up and up and up. I thought I might devote an article to analyzing our property taxes. Are they really all that high? How are they calculated? Are they that bad in comparison to other communities? If they really are high, why?

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The first question is to ask "How do Guelph's taxes compare to the other levels of government?"

Let me start by trying to come up with an average tax bill in Guelph. According to the Municipal Property Assessment Corporation (MPAC), the average home in Guelph has an assessed value of $399,000. In 2017, the residential tax rate (ie: the Municipal taxes plus the special Infrastructure Levy, but not including the education rate---which Council has no control over), was 1.022948%. Multiply the assessed value of your home by this percentage (the "mill rate"), and you get $4906. (I would have much rather had a median assessed value of a Guelph home, but I couldn't find that number. The problem with average anything to do with money is that our society is becoming so stratified according to wealth that a very small number of hyper rich individuals can draw up an average and give casual observers the idea that most people are a lot better off than they really are. One Bill Gates or Warren Buffet added to the mix can draw up the average income of an awful lot of people making minimum wage at fast food restaurants.)

OK, let's look at the median household income for Ontario, which was $81,480 in 2015. That means that if a family earning the median paid the average Guelph property taxes (for the city, not the school board), $4906, that works out to about 6% of a family's income going to city taxes. Now let's see what that household would be paying in federal income taxes. First, let's assume that there are two people bringing equal amounts of money into the household. That means that each person is making $40,740. Now let's look at the federal income tax rates, which in 2017 said that people making under $46,000 had to pay 15% of their income. Next, let's look at the provincial income tax, which says that people making less than $42,000 have to pay 5%. This means that the average Guelph citizen pays 20% in taxes to the federal and provincial governments, which for my hypothetical median couple, comes to $16,300.

So through all that dubious, "back of the envelope" math, it turns out that we pay slightly more in city taxes than we do for the province.  But we certainly pay a lot less money to the city than the Federal government. (This is generally true, but be careful about specific numbers---the federal government also transfers revenue from it's slice of the tax pie to the provincial government. But if I tried to figure that out in detail, we'd be so far out "in the weeds" that I'd end up writing War and Peace.)

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The second question I'll answer is "How are the taxes assessed?"

The mass media report primarily on the federal and to a lesser degree, provincial. So many people vaguely assume that the local tax system is like those others. It is actually very different. Ottawa and Queen's Park start from revenue---what rates are people going to be taxed---and then develop a budget around that. This is how it has to be because they both raise their revenue through a combination of income tax and a Value Added Tax (VAT), which Canada calls the "Goods and Services Tax".

These two sources of income fluctuate quite substantially over the country's economic ups and downs because people's incomes fluctuate based on employment. And the amount that they buy also changes due to their income. Moreover, what the government spends also fluctuates in the opposite direction---as more people get laid off and stop paying taxes, they also tend to need more government services to support them during this "down time". Because of these two tendencies, both federal and provincial governments are forced to borrow money---at least some of the time---in order to navigate the up and down of what economists call "the business cycle".

Under Ontario law municipalities are not allowed to levy either sales or income tax. Nor are they allowed to run an operating deficit (except under extremely limited circumstances.) This means that they have to calculate tax rates very differently. What they do is decide how much the city is going to spend over a given year, then they divide that by the value of the total stock of property in the city. The resulting figure is known as the "Mill rate". When you get your bill, you get a statement that says that your property is assessed as being worth so many dollars, this is multiplied by the Mill rate, and, that ends up being your bill.

As you might imagine, the assessed value of your home has a big impact on how much property tax is paid. This means that it's important that a standard, impartial mechanism is used to come up with that number. Each city used to do this for itself, but in 1970 a provincial system was put into place that municipalities could use to assess the value of each person's home. This was voluntary, however, and some municipalities continued to use their own unique system to evaluate the value of homes. In 1997, the province created a mandatory system called the "Fair Municipal Finance Act". The next year, the government created a stand-alone, non-profit corporation titled "the Ontario Property Assessment Corporation", which eventually changed its name to "the Municipal Property Assessment Corporation (MPAC)".

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This property assessment issue is something to really think about. That's because for tax purposes the important issue isn't how much your house is worth, but how quickly it's increasing in value compared to other homes in the municipality. This is because the increase in value for a home is supposed to be revenue neutral. That is to say, if every home in the city goes up by a uniform 10% in one particular year, the share that each home owner pays for the city budget will still be the same. If the budget is the same in that year as the year before---and no new taxpayers have been added to the rolls, or, old ones subtracted---then each household will pay the same tax. But, if your home alone goes up by 20% and everyone else's only goes up by 10%, your taxes will increase---because your house now is a greater part of the total value of the real estate in the city. Moreover, if your house only increases by 5% and everyone else's goes up by 10%, that means that your taxes will decrease. 

If you have trouble following this, here's a video from MPAC that explains what is going on in a different way:


The issue that people now need to consider is the first law of home sales "Location, location, location". Remember this graphic from a previous article I posted? (You can click on it to get a larger view.)



This map shows the relative property values of real estate in the city of Guelph, based on their geographic location. As you can see, where your property is has an enormous impact on how much your property is worth. Buildings in the downtown core are worth a lot more money than ones in the periphery of the city. Moreover, I would suggest that they have dramatically increased in value---faster than similar buildings in other parts of the city. (I can attest to this myself, I have a modest home in the downtown and it is well on the way to quadrupling in value over only 20 years---a 15% rate of return on my initial investment. I am anticipating an interesting tax bill when MPAC gets around to re-assessing my property value.) When I hear people complaining bitterly about how much their property taxes have increased, I wonder if at least some of them are people who---like me---have had their homes increase in value a lot more than their friends, and don't understand that that is why their taxes have gone up, not because of excessive spending at city hall.

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The next question to answer is "How do Guelph Taxes compare to other municipalities?" To understand this, it's important to realize that the specific tax rate doesn't compare across municipalities. As I pointed out in the above, that is calculated by dividing the budget by the total real estate value of the city. In a city with a really hot market, the tax rate can keep dropping while at the same time the actual taxes paid can stay the same or go up. In a city with a stagnant market, the rate can be high but the actual taxes paid can be less than another city that has a very low tax rate.

To get a real feel for how taxes compare across municipalities it makes more sense to compare the specific taxes on one type of home across different municipalities. Luckily, (may the Dark Lord of the North forgive me for saying so) the Fraser Institute has published a paper where an economist actually did this. These are the results that Livio Di Matteo from Lake Head University came up with. As he describes in the paper,
"The basis for comparison is a detached three-bedroom single-storey home with 1.5 bathrooms and one-car garage with a total house area of approximately 1,200 square feet on a lot approximately 5,500 square feet."  
(As usual, click on the graph to get a bigger, easier to read, version.)

From Fraser Forum,
"Ontarians face growing property tax burden in many municipalities",
by Livio Di Matteo

As you can see, Guelph is in the lower end of the graph---between Waterloo and London---with taxes of a bit above $3000 for Matteo's hypothetical suburban home.

Personally, I find this somewhat surprising. Guelph is one of the fastest growing cities in Ontario, with a population increase of 7.7% since 2011, which is much higher than the Ontario average of 4.6%. This creates all sorts of "scaling problems" for the city as it tries to play "catch up" with infrastructure that was designed for a smaller population by building new stuff (like the new police station) that has to be big enough for what the population is going to be decades from now.

There is another graph in the paper, however, that makes more sense given this context.

"Ontarians face growing property tax burden in many municipalities"

This is the rate at which property taxes are growing in various Ontario municipalities. Guelph is the fourth highest, whereas Waterloo and London are the sixth and fourth lowest, respectively. This increase in the rate of taxes seems to indicate that Guelph is trying to play "catch up" in its taxation and move from the lowest third in the previous graph towards a higher taxation rate. This is why people might perceive Guelph taxes as being very high, even though they are less than the average.

But having said that, why are Guelph's rates going up so fast? I mentioned the scaling issue above, and why it costs a city a lot of money to grow really fast. And if you look at the latest numbers from the federal census, you can see that Guelph has had a rate of 7.7% growth since 2011, whereas London and Waterloo (which had comparable tax rates in 2016) had a population growth of 4.1% and 5.5%, respectively.

Of course, no one wants their taxes to increase dramatically, but the questions voters should be asking are "Why are the taxes going up so fast?", and, "Is this rapid increase a temporary trend? Or something that will continue indefinitely?"  Looking at the information that I've posted above, I'd argue that the rapid increase is an attempt to "catch up" to a more logical tax rate---giving the extended period of rapid growth the city is going through. And that once we do that, the period of rapid growth in taxes will probably stop.  

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Lately I've been talking to various people about this magazine. I'm trying to figure out how to make it into something that people will find easier to access and read. I haven't been getting a lot of complaints about the content, but I have heard some negative feedback about the design. On the basis of these, I'm going to explain a few things that people are missing.

First, several people said that they weren't finding out when new stories were being posted. These are people who aren't on FaceBook or Twitter---and have zero interest in doing so. I've found out that the majority of these people simply don't know what an "RSS Feed" is, and frankly, have zero interest in learning. I think that that's too bad, because this is a really good way to learn about new issues of blogs that you want to read. But I've learned that while it probably isn't true that "the customer is always right", there's no profit in arguing with them.

As a result, I've added another feature to the blog. If you look at the right hand string of links on this site, between the heading "search this blog" and "subscribe", there is now a new option of "follow by email". All you have to do is add an email address, answer a simple question to prove you aren't a spam bot, and, you will have a link sent to your email address. Click on it, and you will get a short message every time a new article appears in the "Back-Grounder". Now you have that option to keep informed.

Another person said that he hates reading stuff off a screen and would rather read a hard copy. If you are one of these people, then look at the bottom of this article and look to see if you notice a little button that says "print friendly". (I don't know why, but it doesn't seem to show up all the time for me, but it is usually there.) If it is there, you can click on it to see the article reformatted to remove all the advertising and other features that are extraneous to the article in question. At the top of the screen, you have the option of either printing it directly, or, making it into a PDF file that you can save and then print off. Moreover, I intend to reprint these articles in a book format before the next municipal election---primarily so people can buy copies to give to their angry relatives who spend too much time reading other blogs that put great effort into attacking local politicians and city staff.

Finally, I got the response from a local business person I was trying to hit up for an advert that the site is too "stodgy". My wife has made the same comment and is after me to move from Blogger to some other blog hosting platform. The thing for me, however, is that Blogger is free and these other sites cost money. They also require a lot more work to design and maintain, so I'm wary of taking on something that will cost both more money and time. All I can say about this is that if you want to get a more visually pleasing magazine, people are going to have to pay for it.

Which gets me to the usual blue type plea for support. A lot of young people simply won't pay for anything on the Internet---they expect their music, their movies, and their news for free. I don't know where they expect this stuff comes from, but a lot of young people are getting the short end of the stick in this economy, so I'll cut them some slack. That leaves boomers like me, who, on average, are in a much better financial shape. Most of us are used to paying for a local newspaper, magazines, etc. Why not pony up a buck a month to a Patreon subscription to allow me to do things like get a better blogger platform? 


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Now I'm going to raise a couple issues that will probably result in some very angry reactions. If I was a "real journalist", my editor would never let me mention them in an article. But if my readers aren't going to pay me more than a pittance, well, then I guess I don't have to pander to them, do I? ;-)

Consider this graphic. (And yes, if you can't read the fine print, click on it for a bigger version.)

Graphic from the blog "5 Kids, 1 Condo",
used under the "fair use" copyright rule.
Original graphic from the Wall Street Journal.

The main point I want to illustrate is that around the end of WWII the average US home size was under 1,000 square feet and the average family consisted of 3.37 people, whereas in the late 1980s this had changed to a little under 2500 square feet for 2.53. In other words, home size has more than doubled at the same time that the average number of people living in it has declined by 25%. (The Canadian situation isn't exactly the same, but close enough that I think that similar forces are at work---especially in Southern Ontario.)

The period of time between the end of WW2 and the 2008 economic collapse was a bizarre time to be a resident of North America. The industrial powerhouses in Europe and Asia were smoking piles of rubble, which meant that there was a tremendous need for the output of American and Canadian factories. In addition, the agricultural systems of most nations outside of the New world were in chaos due to either war damage, colonies fighting for independence, or, civil wars. This meant that farmers could get top dollar for their cereal crops---no matter what quality. It was as if the fleets of heavy bombers from the war had decided to bomb Canada and the US with money instead of ordinance.

In these "fat decades" whole generations of people got used to living in ways that would have astounded their grandparents. Fortunately for the rest of the world, damaged machinery got replaced and other nations started being able to make stuff again. And countries that had suffered from starvation enacted policies to ensure that they would never again be dependent on imported food. This all cut into the huge advantage that North America had over the rest of the world, and started to force us to learn how to compete with Europe, China, India, Japan, etc. The "fat years" went on a diet. 

At the same time that North Americans were getting used to being rich, a whole new set of costs were added to the economy. We started putting a price on pollution for the first time, which added to the cost of business. We also started funding social programs instead of just ignoring the poor---this also cut away at the bottom line. A whole raft of things like pensions, medical coverage, drug benefits, welfare, job training programs, childcare, etc, popped up and started fighting for some of the public pie. At the same time, unfortunately, cities decided to ignore the importance of things like density and public transit. (I've talked in detail about these issues in articles about the Places to Grow Act, the OMB, and, the real cost of parking.) This increased the frontage of roads, sewers, water lines, electricity lines, etc, per taxpayer and dramatically increased the cost of maintaining a city. All of these seemed like "just a little more" during the fat years, but started to weigh tax payers down when competition from Europe and Asia started to be a "thing".

What this all means is that for generations people in North America (and Guelph) have gotten used to being so well off that they never really had to think much about the real cost of various aspects of life. But now things are different. We simply cannot build anymore suburban sprawl if we want to have any farmland or potable water left in the province. This means that the vast majority of young people simply cannot afford to buy the sort of homes that their parents live in. Even worse, because of global competition with the newly rebuilt industrial powerhouses in Europe and Asia, business has become insanely competitive---which has totally redefined work. Increasingly, young people have to get by through stitching together a bunch of crappy, poorly-paid, precarious jobs.

What is happening is we are facing a tremendous decline in the wealth available to live something approaching the lifestyle of a middle-class suburban family of the 1960s. This isn't just a Guelph thing---it's happening all over the world. And anyone who's response isn't to adapt to the new circumstances is going to suffer badly as they try to "force" the world to go back to the way it was before. IMHO, that's what is fueling the support for tremendously counter-productive political tendencies.  People who support Donald Trump really want to "Make America Great Again". And people voting for Rob Ford wanted to "End the war on the car". I'm sure that people who voted for the Brexit wanted to see Great Britain go back to the "good old days" of the Empire.

The problem is, however, that the "good old days" aren't coming back. First of all, the problems that governments like Guelph are facing aren't just attempts at "Marxist social engineering".  Climate change, sprawl, and the other issues I've mentioned in previous articles, aren't fantasies dreamed up in a university seminar---they are real problems. And the economies of Europe and Asia are objectively real, and they are competing head-to-head with us. We simply cannot "wish" China, India, Japan, the EU, and Korea away.

Things aren't all bad, however. By any objective standard, Canada is far wealthier that it was when I was born. Even with the present's ridiculously unequal distribution of wealth, even the poor are far better off than they were during the 1930s. Women, gays, the First Nations, people of colour, etc, are all participating in society in ways that would have been thought impossible during the 1950s. Even more importantly, there is every indication that this progress will not only be preserved by will even accelerate. But having said all of that, people are going to have to become innurred to living in smaller homes in far more dense neighbourhoods. And they are also going to have to pay more money in property taxes in order to preserve the city we live in. If you cannot afford to pay the taxes on your present home, maybe you should cash out it's accumulated value and live somewhere cheaper. If you find you can still afford it, then perhaps you should just stop complaining and be greatful that for all the problems facing us, we still live in the most peaceful, prosperous, and just time in human history. There are still a lot of people who cannot afford to own any sort of home at all, and they are worse off than you. Be grateful that you have the priviledge of paying property taxes---lots of people will never do so as long as they live.  

Saturday, November 4, 2017

Guelph Municipal Capital Investment

This post is really a case of "fools rush in", because I am writing about a very complex issue that I really know almost nothing about. But if I want to put a positive spin on this fact, I could say that in this case I'm starting from the same place as almost all voters. Let's just see if a guy with just a general education can wade through a mountain of information and find the most important points for voters to understand---. 

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The first thing to get a handle on is the scale of Guelph's capital budget. In the 2016 budget, the total revenue came to $483.7 million. Of that, $87.6 million was spent on capital investments, as opposed to operating costs, which came to $396.1 million. This means that 18% of the budget went to capital investments. The complexity for an outsider like me, is that when you read the budget document some confusing issues have to be remembered. For example, it is possible to present a budget in several different ways. You can split the money up in terms of which department uses the money (transit, versus water, versus police, etc.) Or, according to whether something is an operating cost (paying the wages of the water workers) or a capital investment (building a new water line) or a maintenance cost for a capital investment (repairing a water main that is worn out.) Also, there are a lot of different sources of revenue, such as taxes, operating fees, and, transfers from provincial and federal governments. Or, if something is a capital cost, the city can borrow the money---in which case you can record the money either as "debt" (what the city owes in principle), or as "interest" (the amount of money the city is paying just to pay for the borrowed money), or, as "interest plus principle" (the amount of money the city pays to both pay for borrowing money plus the actual amount of the borrowed money that is being paid off.)

To be totally honest, as a fairly well-educated generalist I find it very hard to understand all these distinctions. I simply do not expect the general citizenry to understand all of this. Nor do I expect a politician to understand it either. We simply have to accept the word of our paid staff because they have had the professional training and time to work through all this stuff. It's just the same thing as when I go see my doctor about an ache in my shoulder---if he says it's arthritis, that's pretty much what I have to accept.

Having said that, here's a table from the city that describes what staff say about the actual and projected costs of debt servicing for the city.


From the city of Guelph Website,
"Appendix 6: 2015 – 2017 Debt Report and Debt"

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There are even more complexities that people need to remember about capital debt. As I've mentioned before, it really doesn't do any good to just put a simple number in front of people and say that the city spent "X million dollars" on capital stuff last year, because unless you understand the context, it means nothing. That's why I try to express everything as a percentage when possible. In the above chart the cost of debt servicing is expressed in terms of percentage of net revenue. But it's also important to realize that there are two variables in this that can confuse people too.

First, you can lower the debt charges as a percent by either paying off the actual debt or by increasing the revenue. Think of this hypothetical example. If my business borrows some money in two equal loans that together cost me 10% of net revenue. I can cut that 10% in half, to only 5%, by paying off one of the loans. I can also cut the percentage in half, however, by using the money I borrowed to double my net revenue. (Let's say it both increases my sales and increases efficiency at the same time.)  This is a very important issue for Guelph, because it happens to be the one of the fastest growing cities in Canada. This means Guelph could cut the percentage of city costs due to debt servicing without paying off a penny of the principle---simply because the tax base increases.

Secondly, the percentage you pay in servicing debt can change as the interest rate increases or decreases over time. Sometimes existing debt needs to have the interest rate changed, and, sometimes you simply cannot avoid borrowing money---especially in a fast growing city where things like roads, waterlines, sewers, transit, simply have to be expanded because of increased demand. In actual fact, because the cost of borrowing money is so cheap now, this is actually a tremendously good time for the city to borrow money for capital investment.  See the following chart of the Canadian prime rate from a banking website (click on the image to get a easier to read image):

See that spike in the 1980s? Lots of people lost their homes then.

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I often hear people complaining about Council "borrowing money" to run the city. I also hear people retort that "it's against the law for the city to borrow money". Well, like a lot of things, there's a little truth and a fair amount of confusion in both statements. First of all, municipalities cannot run up a deficit for operating costs (like the province and federal government routinely do.)

Restriction
(2.1) A municipality may issue a debenture or other financial instrument for long-term borrowing only to provide financing for a capital work.  2009, c. 18, Sched. 18, s. 7 (1).
Term restriction
(3) The term of a debt of a municipality or any debenture or other financial instrument for long-term borrowing issued for it shall not extend beyond the lifetime of the capital work for which the debt was incurred and shall not exceed 40 years.  2006, c. 32, Sched. A, s. 176; 2009, c. 18, Sched. 18, s. 7 (2).
Ontario Municipal Act, 2001, Part XIII, "Debt and Investment", "Restrictions"

To understand this distinction, consider personal household debt. I'm a pretty tight-fisted guy and don't believe I have ever not paid off my credit card bill before I started getting charged interest. (In fact, I only stopped paying for everything with cash once I started having problems because I had no credit history at all.) But I have borrowed lots of money---to buy my house, to finance the boiler for my heating system, and so on. The difference is that when you borrow money to buy a house, this is "capital investment", whereas when you use your credit card, you are running a deficit on your operating costs. In effect, Ontario law allows the city to borrow for a mortgage but doesn't allow the city to run up credit card debt. (Actually, it allows the city to borrow against it's future tax revenue to be able to pay it's bills on a very short term---monthly---basis. But this is very tightly controlled.)

So yes, the city does borrow money, but only for capital investment. And yes again, the city is forbidden by law from running up a deficit, but only for operating costs. 

Moreover, the province has set a limit for how much of a city's budget can be devoted to servicing the debt on capital investments. As a general rule, most cities are only allowed to spend 25% of the money they raise through taxes on paying off incurred debt.  This is called the "Annual Repayment Limit" (ARL). In actual fact, the city of Guelph policy is that they will not go beyond an ARL of 10%, not the 25% set by the province. 

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One more thing that the Guelph citizenry should understand is that there are more than one type of "deficit". The city can borrow money to pay for stuff and run up a fiscal deficit. Or, it can "kick the can down the road", not borrow the money, and, let future generations pay for fixing stuff.

I bought my house off an absentee landlord who used to rent it out to students. When I had it inspected prior to purchase, I asked the guy I'd hired to explain why there was a line of white discolouration in the bricks a couple feet below the roof overhang. He told me that what had happened was the previous owner had let the roof go to the point where water was seeping into the walls, migrating to the outside, and, evaporating into the air. In doing so, it pulled out the lime in the mortar and that was what was discolouring the red bricks. He also pointed out that if I looked carefully there was the odd bump in the wall where a brick had been inserted length-ways into the wall. He said that the water had been in the wall for so long that the original iron clamps that held the two courses of bricks together had rusted out, and a bricklayer had been hired to painstakingly tuckpoint the rotten mortar and insert bricks at 90 degrees to the others to hold the wall together. In effect, the previous owner had let her roof go to the point that it significantly damaged the walls of the house---to the point where she had had to not only put a new roof on, but also pay a mason A LOT OF MONEY to repair the damage caused by the leaky roof.

The same sort of principle happens with public institutions. Politicians get elected that say that they can cut taxes by "eliminating the gravy train" and "cutting waste", but generally all they really do is defer necessary capital investments. Sadly, kicking the can down the road has become a key electoral strategy in our society.

It's important to understand this point, because a huge part of what it means to be a modern, civilized human being depends on the infrastructure in our cities. The roads, transit, library, hospitals, schools, etc, are not only what allow us to function as a community, they are also crucial to our economy and advancement as a civilization. Moreover, it turns out that the lion's share of this infrastructure comes from the level of government with the most limited means for paying for it.


From "The Canadian Infrastructure Report Card: 2016"
That's right, 57% of the built support for modern civilization comes from 18% of your city taxes. 

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By this point some readers have no doubt been asking themselves, "Just how much money does the city of Guelph owe? and what did Council spend this borrowed money on?" Thanks to the increased openness of our local government, it's easy to see, both in absolute terms:

From the City of Guelph Website,
"2015 – 2017 Debt Report and Debt Continuity Schedule


and, as a percentage of the budget:

"2015-2017 Debt Report and Debt Continuity Schedule"

The provincial government limits the amount of debt a community takes on according to a complex formula that is outlined in the Ontario Municipal Act as "O. Reg. 403/02: DEBT AND FINANCIAL OBLIGATION LIMITS". I couldn't find out what the province says is the absolute maximum debt that the city can take on under it's laws, but the Guelph policy statement on indebtedness says that the city has set it's own maximum limit at 55% of the yearly revenue (the red line in the above graph.)

Of course, $124 million dollars (in 2014) is a lot of money. But with a total city budget of $483.7 million (in 2016), that would only come out to 26% of the yearly revenue. (Please note the discrepancy with the chart. It lists the debt as percentage of revenue in 2014 as a little under 40%. I can only assume that the difference between this percentage and the one I just calculated is because of the growth in city revenues---both from increased taxation rates and also because of the increase in the number of people being taxed. Guelph is one of the fastest growing cities in Canada, and, as I mentioned before, this has an impact on percentage of debt to revenue.) 

Now put this into a context. I have mentioned before that it is not a good idea to make analogies between government and business or personal finance. But in this case I think it might be useful to consider the amount of debt that individuals and businesses routinely take on. My own personal economics guru, E. F. Schumacher, suggested that it is not a good idea to buy a house that costs more than twice your annual income. He also said that no business should purchase tools that cost more than twice the cost of the yearly salary of the person who uses them. Many people nowadays would find these "rules of thumb" far too conservative. But if we followed Schumacher's suggestion, the city of Guelph would be allowed a debt load of 200% instead of 55%, which would come out to a potential debt of $967.4 million---or just a shade below one billion dollars!

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Now I am not suggesting that Guelph take on a debt load of a billion dollars. It is really not a good idea to think of the city budget as either a business or as a household---it is substantially different. But I do think that it is important to understand what the debt load of the city really is as compared to many other sectors of society. It might just be that 55% is a either too low or too high---I just don't know. I do think that is something that, like me, very few people have an informed opinion about. But unfortunately, this doesn't stop some people from making very strong statements on the subject.

Please note, I haven't written a word about the levy fees that the city has introduced to deal specifically with the backlog of capital investment that many people in the city believe it needs to get working on. That's more of a topical story, and if you are interested in learning about the details of that issue, I'd suggest you follow Adam Donaldson at Guelph Politico. But if you don't know the back-ground that I've tried to outline above, it is very hard to understand the importance of the discussions between Council and staff.

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Thought you might get through this story without seeing any blue type?  No such luck!

If you like what I write, consider supporting me through either a regular "dollar a month" contribution through Patreon or a one-time donation. Just to let you know I practice what I preach, here's list of the people I regularly support:  "the C-Realm Vault Podcast", "Canadaland", and, "Guelph Politico". I've also given one-time donations to "The Professional Left Podcast", "The C-Realm", and, "The Number One Janitor". I've also bought podcast downloads from "Hardcore History". I've spent far, far more money supporting other creative people on the Internet than I've ever made. I just want to suggest that this is what needs to be the new normal. If you can afford to help people create content, you really should consider it "just part of the gig". I do.
One more thing you can do is to share this post in your social network so other people who might be interested but haven't heard about "The Guelph-Back-Grounder" can learn bout it. Again, I've just done this myself for the other content creators I just mentioned above. If you don't want to fall prey to the trolls in the propaganda farms of Russia, you have to support the people who are the "real deal", and sharing their stuff on social media is one way to do it. 
  

Saturday, October 21, 2017

Guelph's Local Boards---Part Two

My last post was about a part of Guelph's budget that most people don't know much about, the Boards that administer various government services through an "arms-length" relationship with Council. I'm continuing this story here with the Elliott, the Downtown Guelph Business Association, and, the Guelph Police Service Board.

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The Elliott

Like, I suspect, many people, I didn't know that the city of Guelph was involved in the management of a long-term care facility for the elderly people who because of either financial or physical disabilities need a place to stay. But the government of Ontario in the "Long-Term Care Homes Act of 2007" has mandated that all "upper" or "single-tier" municipalities "shall establish and maintain a municipal Long-Term Care home or help maintain a LTC home with another municipality" (from a press release by from our local MPP Liz Sandals' office in 2014.)  Up until 2014, Guelph was involved with Wellington County to support Wellington Terrace in Centre Wellington, but after that date it decided to end the partnership with the County government and take on responsibilities for its own long care facility at "The Elliott".

The Elliott was originally started as "the Guelph Home of the Friendless" in 1903 and was initiated by a legacy left by a Mr. George Elliott in 1903. To put this time in context, this facility was built at roughly the same time that Guelph applied for, debated about, and, built the Carnegie library. This was an insanely busy time for the city, as in a short period of time it dealt with public transit, intercity transit (street cars and what became the Guelph Junction Railroad), sewers and water treatment, electricity and telephones, a public library, the armoury---lots of Council meetings went on into night, just like now!

This is the original "Guelph Home for the Friendless", Delhi St.
Picture c/o the Elliott Community website. 
The Board of the Elliott, which is defined by "The Elliott Act of 2002", consists of between five and eleven people---one of which is the Mayor of Guelph, or, someone he appoints to represent him. Currently I don't see the Mayor listed on the Board of Trustees, so I can only assume that Councillor Andy Van Hellemond is acting in his stead. In addition, there are nine other people, all of whom seem to be qualified in one way or another to manage a large not-for-profit corporation. Even though only one position on the Board is appointed directly by Council, the other members are approved by it from nominations forwarded by the existing Board. And if none of the nominations meet with Council's approval there is a process where Council can eventually appoint their own people. Moreover, Council also has the right to remove Trustees that it feels are not doing a good job. So while the Elliott Board is separate from Council, with a little effort (and a lot of political will), it could become a creature of local government. But I cannot think of anything short of a truly enormous scandal that would force Council to take on that responsibility.


The Modern Elliott Community on Metcalfe St.
From the Elliott Community Website

Looking through the Canadian government's registered charities site, I can see that the Elliott had a total revenue and expenditure of $15 million in 2016, 37% ($5.7 million) of this came from the Government and 63% ($9.5 million) came from "other sources" that specifically excluded "receipted" and "non-receipted" donations (there was a statistically insignificant amount, $16,005---0%), and, "gifts from other charities". I can only assume that the 63% in question came from investments and fees paid by residents (even the poor elderly get pensions from the government.) Since Guelph gave the Elliott $1.5 million in 2016, that comes to 10% of the senior's community's yearly budget, or, 26% of its direct support from all levels of government. For Guelph Council, this money comes to .4% of the 2016 city operating budget. There is an increase of $5,000 over last year, but that only comes to a .34% increase. 

While it could be argued that what Guelph spends on the Elliott doesn't mean much to Guelph (.4%), it means a very great amount to the Elliott (10% of total revenue.) In my own personal opinion, this is money well-spent if it helps people maintain a minimum of dignity while living out their last years of life.

One last thing, however. I have been restricting my discussion about Boards to the operating costs (mainly because I want to talk about the capital budget and city debt separately.) It turns out that the debt of the Elliott in 2014 (when the city took over supporting it and walked away from Wellington Terrace) was $11.6 million, or, about 9% of Guelph's capital debt. And, in 2017 the percentage of Guelph's operating costs for debt servicing is set at slightly over 8%. (More about this in a future post.) So this would suggest that servicing the debt on the Elliott amounts to something like .79% of Guelph's operating budget.  This is worth mentioning because this is another case of the Ontario government imposing a significant cost on Guelph that Council has little say over. (Still, put in percentages instead of numbers, it is a much less threatening figure.)

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The Downtown Guelph Business Association

I sometimes hear people complain bitterly about how much attention Guelph Council devotes to the downtown. They say "why doesn't the city put more attention into the rest of the city?" Well, there are several reasons why.

First of all, the province has mandated that the downtown area needs to expand and should intensify because it believes that it is the area where people can live while having the lowest environmental footprint. Primarily, this is because this is the densest part of the city, and the more people who live per kilometre of frontage, the cheaper the servicing cost per unit.  (I've explained this in a previous post, so I'll just mention it in passing. If anyone wants learn more, see it there.)

Secondly, the downtown core is very different from other commercial areas---like shopping malls and "big box" centres---in that it is built around public instead of private space. This has a profound effect on human activity in the area. Shopping malls restrict access to specific times of business, and, only allow a limited number of activities on their premises. This means that public assemblies, petition drives, protests, marches, etc, are almost always banned from shopping malls so the only place that they can happen is in the downtown core. This is also why bars and cafes congregate in the downtown---malls don't want to deal with problems associated with public intoxication, so they usually close so early that they discourage these sorts of businesses. It is also why you see so many beggars and people with "issues" in the downtown---the "mall cops" chase them out of the privately-owned commercial plazas.

The third point most people don't know about is that because the downtown is so dense it is also the part of the city that provides the greatest amount of tax revenue per square metre. Consider this graphic (click on the image to get a bigger picture):
Guelph map of tax density.
Graphic c/o Guelph City Hall
The bumps on this map represent the revenue that the city gets from each specific piece of land in the city. The colour of the individual bumps tells how much each area is valued for tax assessment. The various shades of green represent up to $2 million in value. The white through to light orange are from $2 million to 7.5. The light and dark orange are $7.5 million to 20. Red is $20 million to 30. And purple is $30 million and over. A lot of the orange is downtown, plus all of the red and purple. It's easy to see that the downtown core is tremendously important as a source of tax revenue for Council.

Because the downtown is so tremendously important to the environmental, social, and, financial well-being of the city, Council has mandated a special arms-length body to help administer it. This is the Guelph Downtown Business Association.

People might be interested to learn (I was) that organizations like the Guelph Downtown Business Association---generically called "Business Improvement Districts"---are an invention by the Ontario government. In 1970 a group of business people approached the Ontario government and got it to approve legislation to set up the first one in Toronto's "Bloor West Village". According to an official Ontario government handbook, in 2010 there were 270 in Ontario and a further 500 across Canada, over 2000 in the USA, and, many thousands more in the rest of the world.

Unlike the other boards I've mentioned, the Downtown Guelph Business Association pays for itself through an extra levy added to the assessed taxes for a commercial property. In 2017, that came to .39%, and (interestingly enough), .27% for unused space (empty stores, vacant lots, etc.)  A pamphlet put out by the Association gives the following real examples:
  • Medium size coffee shop: $31.06 monthly
  • Medium size restaurant: $219.27 monthly
  • Specialty retail store: $290.92 monthly
  • Small fashion retail store: $66.17 monthly
  • Large professional office building: $928.25 monthly
  • Large office tower: $3506.00 monthly (guess who this is!)
This added up in 2016 to $472,000, which may seem like a lot of money, but really only comes to something like .1% of Guelph's total gross expenditures---and self-financed at that. Not a bad price, considering how much of Guelph's total tax budget comes from the downtown. 

One last thing to consider. In June Council decided to expand the boundaries of the Business Association area, which means (among other things) that some businesses are now expected to pay the levy and receive the benefits that come along with membership. 

New (and old) Boundaries for Guelph Downtown Business Association
From a pamphlet by the Business Association
(Click on the image for a larger picture.)
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Yup. It's time for the big blue type. I heard a lot of "bo-ho, bo-ho" when the "Guelph Mercury" went under. Now we only have a "community paper" that comes out once a week and an on-line news site where journalists are only allowed to write extremely short "he said, she said" stories. If you want in-depth, fact-based stories about local issues, you have to go elsewhere---like here. And, to be honest, some of you are going to have to pay for it. Ask yourself, 'how much did I pay for a subscription to "the Mercury" or any other newspaper?', and, 'why won't I pay any money at all to read an on-line news source?'

If you are young, and have never paid for news, ask yourself 'How do the other places pay for their staff?' If you won't pay for the product on-line---YOU are the product. Your personal information is being sold to marketing agencies, political parties, the Russian mob, etc. Is this the world you want to live in?

If you can afford it, consider making either a one-time donation or sign up for a monthly micro-payment through Patreon---even one dollar a month helps. It is a vote for local, fact-based journalism in a world increasingly dominated by fake news. Also, something everyone can afford to do is share the "Back-Grounder"'s link on social media with your friends. I know that I'm not writing click-bait, but maybe learning how city hall actually works is more important than pretty pictures of kittens or the latest atrocity from Trump-land.

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The Guelph Police Services Board

Police services are pretty much the most "hot button" of the boards and shared services that I'm going to discuss. Primarily, this is because they are by far the most expensive thing that the city deals with through the stand-alone board structure. It is also because the police are a unique service in several different ways. 

In order to understand how policing is structured, it's important to remember that in Guelph the police have a monopoly on the use of violence to pursue government policies. When modern police forces were first organized in the United Kingdom, this was acknowledged physically on the "billy clubs" that were issued to policemen. Take a look at these examples of 19th century British police weapons.

19th century Edinburgh police clubs,
photo by Kim Traynor, c/o the Wiki Commons
As you can see, all of them have a Royal crest on them that shows that these are official instruments of government authority and that the constable who wields them does so under its authority. Indeed, this was understood to be the officer's official "warrant card" that gave him his special status as a police officer. 

Ultimately, this monopoly on the use of force is why the police have a special board that manages them by setting local policy and appointing the chief, instead of the American practice of either direct rule by an elected Sheriff or a chief appointed by Council. The Canadian system doesn't want local politics to get involved in controlling the use of force because there are far too many ways in which this power could be abused by either corrupt politicians or "mob rule" that tramples on minority rights. 

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If people have a hard time imaging just how badly things can "go wrong" in police management, consider the example of Ferguson Missouri. Most readers will be aware of the rioting that took place there as a result of the shooting of Michael Brown. I don't want to deal with the specifics of that case, but rather the context that led to the scary confrontations between police and demonstrators after the fact. Instead, I'd like to refer to a report titled "The Municipal Courts Whitepaper" that was released by a group of volunteer lawyers called the "ArchCity Defenders" shortly before Michael Brown's death. 

[anger at the police is] the product of a disordered, fragmented, and inefficient approach to criminal justice in St. Louis County. Municipalities are failing to afford indigent defendants legal counsel and refusing to make reasonable bond assessments. The municipal court system fans the flames of racial tension, oppression, and disenfranchisement by allowing municipalities to appropriate the courts to act as governmental debt-collection agencies and implicitly charging courts with ensuring the municipalities’ fine-generated revenues are sufficient to maintain an inefficient governmental operations.
Pgs 4-5, "Municipal Courts Whitepaper", ArchCity Defenders 

What was happening in the town of Ferguson was that the city police force was---on the direction of city Council---acting as a revenue generation tool for the city. It was going out and getting as many fines as possible from the citizenry, not only to pay for the police force, but also to support other local government activities too. These included the usual "petty offenses" like jay walking, but also more Byzantine regulations such as a municipal bylaw that required all households to purchase permits for garbage pickup---whether they put any trash out on the curb or not. And if someone received a ticket and didn't show up to pay it, they were then fined even more for being a "no show". (The ArchCity Defenders documented that the local municipal courts would encourage no-shows by doing things like posting a time on a ticket when the doors to the Court House weren't even open.) If someone was put into jail for not paying a ticket, when they were released they were still expected to pay the fine---and could be jailed again for not paying it.

The effect of this revenue generation system was especially hard on the poor because it was often extremely hard to not only pay the fines, but having to show up for court dates---let alone being put into jail---often resulted in people losing their jobs. Moreover, the blatant illegality of much of this meant that officers were not encouraged to enforce these regulations on middle-class individuals (ie:  white) because anyone who could afford a lawyer could easily beat any of these fines.

In effect, the police in Ferguson Missouri were being used as an occupying army against the poor in order to extract as much money as possible so the local city Council could avoid raising taxes on anyone else. This created a powder keg of resentment in the community that exploded when Michael Brown was killed. The individual actions of Mr. Brown and the police officer who shot him were pretty much irrelevant---the killing was just the straw that broke the camel's back.

Police at Ferguson Protests, Voice of America photo.
Public domain, c/o Wiki Commons
This sort of problem will probably never happen in Guelph---because our police force is governed by the Police Services Board. And I, for one, believe that that is a very, very good thing.

(Incidentally, if you've ever had a hard time understanding what the term "institutional racism" means---this is a pretty much textbook case of it.)

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The reason why I say that what happened in Ferguson Missouri cannot happen in Guelph is because the province has mandated that the police force be managed by a five member board that consists of the Mayor, one other member of Council, a local person who is independent of Council but appointed by Council, and, two members appointed by the provincial government. The two provincial appointees are tremendously important, because they provide "eyes and ears"---plus two votes---that ensure that the local police force doesn't become dominated by some sort unsavory local political agenda. Moreover, Ontario sets out very clearly a great many aspects of how police boards, police chiefs, and, police in general, are expected to behave. As long as those two appointees from the province are doing their jobs, there is no way that a city can "go rogue" and make its police into something of a local occupying army.

This isn't to say that there aren't problems with policing in Ontario. Problems exist in every aspect of human endeavour.  But the way the board structure is set up, the majority of potential problems in policing are Ontario-wide instead of city specific. Since this article is primarily focused on financial issues, the province-wide issue that I'd like to discuss refers to the cost of policing. When you talk the price of policing, you are basically talking about the wages of people who work for the police because the salaries and benefits account for 91% of the police budget ($36.6 million out of $40.1 million in 2016.) 

The problem isn't that police officers don't deserve to get paid a decent wage, the problem is that because of the specific role they play in society means that they cannot participate in collective bargaining the same way as other labour groups. They are forbidden to strike, and, city Council cannot lock them out. This means that the whole frustrating, idiotic game of negotiating "chicken" that most other people go through is denied them and their management. As a result when negotiations head into an impasse they end up going to arbitration. And arbitrators have a tendency to "split the difference" between the two sides.

So what's the problem? Compromise is essential to life, isn't it?

Wage increases by sector and year, plus Consumer Price Index (CPI)
Graph c/o Association of Municipalities Ontario (AMO)  2015 report,
"Building a New Public Safety Model in Ontario"

As you can see from the above, wage increases for police officers in the top 12 cities in Ontario have never been lower than the rate of inflation or wage increases in for either other municipal workers or the private sector. Take away the ability to lock out workers and take everything to arbitration, and it appears that workers get larger wage settlements.

Well, so what? Well, looking at the police department website you can see the following pay scale
  • Staff Sergeant:  $116,596.69
  • Sergeant: $105,211.43
  • 1st Class Constable: $94,877.39
  • 2nd Class Constable: $82,543.31
  • 3rd Class Constable: $72,865.82
  • 4th Class Constable: $62,239.56
For the rank of 1st Class Constable, Sergeant and Staff Sergeant, the rate of pay increases with years experience to include:
  • In completing 8 years experience add 3%
  • In completing 17 years experience add 6%
  • In completing 23 years of experience add 9%
Just to put these salaries in a national, demographic context, according to a 2013 CBC Business article, the median salary in Canada was $27,600/year. When you talk about incomes, it's really important to differentiate between median, average, and, household incomes. A median income means that just as many people make less than this income as make more than it. An average income mixes everyone's income together and then divides by the number of people---which tends to be much higher than the median income because of the astronomical amount of money a very small number of super-rich individuals make. Also, it is important to understand that because of the massive change in society that resulted in most women entering the workforce since the 1960s, that for many people the household income (both members of a couple's combined salaries) is just as important as both average or median income.

A government report from 2013 that the Globe and Mail got it's hands on suggested that in 2013 the "middle class" could be roughly defined as a household that earns between $54,160 and $108,300 per year. Since most couples do have both spouses working, it appears that being a police officer with a few years experience is a pretty well paid job. So much so, that probably a fair percentage of officers have actually progressed beyond the status of "mere" middle-class into the realm of wealthy.

What does this all mean in the context of city finances? Well, last year Guelph's total city budget came in at $396.1 million, so $36.6 million dollars for police wages comes down to 9% of the city operating budget---not an inconsiderable sum. To quote again from the AMO report:
Ontarians pay the highest policing costs in the country. This includes both provincial and municipal expenditures. In 2011, Ontarians spent $320 per capita on policing. We estimate it is at least about $35 more than Albertans, $56 more than British Columbians, and $24 more than Quebecers. Nationally, Ontario’s share of municipal policing costs is 48%, although Ontario only makes up 39% of the Canadian population. Some may say that half of the national problem with the cost of policing is owned here in Ontario.
"Building a New Public Safety Model in Ontario", 2015 AMO report, p-9.
  
This isn't just a question of how much officers are paid under arbitrated labour settlements. Cities often complain that the existing board structure keeps Councils from being able to structure workplaces in more efficient ways. For example, Guelph used to have police officers enforcing noise bylaw complaints, which is not a terribly effective use of a highly paid police officer's time. Now we have a separate class of people---"blue hornets"---who enforce city bylaws. This frees up officer's time for other duties, results in much better enforcement of things like noise bylaws, and, saves the tax payers money.

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Another part of this issue that really needs addressing is the emotional component. A large fraction of the public tend to view police officers significantly differently from other municipal employees. This means that while other people like bus drivers, garbage truck drivers, sewer workers, etc, are "fair game" when it comes to saving money through hard bargaining or even privatizing service---the police are "off limits".

I suspect if you asked most people who think this way why this is, you would get the answer that police have a dangerous job. Some people think that police officers routinely get killed by criminals. The problem with that point of view is that it is simply not true. According to Statistics Canada, the top most dangerous jobs in Canada are:
  • Mining and quarrying: cutting, handling, and, labour
  • Construction: insulating, labouring, pipefitting and plumbing
  • Flying: pilots, navigators, and, flight engineers
  • Timber: cutting, hoisting, sorting, and, moving
  • Fishing: net, trap, and, line
  • Truck drivers  
If you want to look at the objective truth, here's a graph of police homicides by year in Canada:

Police homicides by year, 1961 to 2009,
Statistics Canada 
Not only are these killings very rare, they seem to be getting rarer as time goes on. Of the police who do die, the vast majority are people who get killed by much more mundane things---like traffic accidents. Why is there such a disconnect between the perception and the reality?

First of all, people's perceptions have been warped by television and movies. Violence is an easy way to get audiences to pay attention to a plot, script ideas are often easily obtained simply by reading court documents, and, the work-place nature of policing makes it easy to craft individual stories for a weekly series. As a result, Hollywood has created an huge number of shows about policing---shows that suggest that being a police officer today is more dangerous than manning a trench in the Western Front in WWI. 

Secondly, police funerals are public spectacle that project the image that the deaths of police officers are somehow "worse" than those of anyone else. This tugs at the heart strings of most people, and, because it is a funeral and someone has died, it is usually considered horribly impolite to draw people's attention the point that this is---at least unconsciously---a form of propaganda. It is, in effect, a way of building the impression that what is not an actually a terribly dangerous job is very dangerous indeed. What would people think about logging, mining, construction, etc, if the downtown core was taken over and a mass spectacle organized every time one these workers was killed on the job? 

Finally, it is without a doubt true that being a police officer can be a pretty miserable job. They routinely have to deal with people at their very worst. And they also have the tremendously thankless task of processing people that they know they will see over and over again because society simply will not allocate the resources that would really be necessary to actually help them. Being forced to repeatedly intervene but not being able to actually help must be the most soul-destroying thing that a person can be called upon to do.

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But this raises a second issue, one that the author of the AMO report addresses.
Policing is not the only public service or profession which contributes to safety and security. In fact, there is an entire social safety web – from the quality of municipal water and waste systems, to the education system and the healthcare system – every single element of public service is geared towards safety and security. All play a part. If we spend too much on one and starve the others, we are just as likely to risk societal discord.
"Building a New Public Safety Model in Ontario", p-7

Money spent of police officers is money not spent on other social services, some of which might actually be able to stop the "revolving door" aspect of policing that makes being a constable such a frustrating thing. 

To be totally fair, however, to a large extent it can seem a lot cheaper to hire a police officer than to deal with the complex of problems that have created the problems that they find themselves dealing with. But having said that, I would draw people's attention to an issue that Malcolm Gladwell has identified in his famous New Yorker article "Million-Dollar Murray".  This is that
Malcolm Gladwell,
does he have the answer?
photo by Stemoc, c/o Wiki Commons
intervening in the lives of people in each individual crisis can cost a lot more money than simply supplying people with the means to avoid the re-occurring crises in the first place. I don't want to bloat this post anymore than I have to, but to summarize his point, it comes down to the three points of:
  • anything to do with either the criminal justice system or acute medical care is insanely expensive
  • there are actually only a very small number of chronically homeless people living on the streets
  • government could save a lot of money that it currently wastes on running these people through the courts and emergency medical interventions if it just gave them an apartment and a social worker with the time to work intensively with them  

A few months back I was at one of the "Breezy Breakfasts" that Councillors Alt and Gordon organize and got to hear a little talk by the chief of police, Jeff DeRuyter. (The fellow really impressed me, bye the way.) If memory serves, he said that the police spend more than half of their time dealing with people "in crisis" rather than property crimes. If this is so, it strikes me that our police services are increasingly spending their time dealing with issues that have arisen because of holes in our social safety net. Perhaps it's time we cut back on our emotional love affair with our "boys in blue" and instead thought a bit more about the big picture.

Saturday, September 16, 2017

Guelph's Local Boards----Part One

One aspect of municipal governance that people often don't think about are the local boards that control specific aspects of municipal life, but which are not directly under the control of Council. These came about for a variety of reasons, but I suspect the primary reason is to separate the day-to-day decisions that each of these institutions make from the messy sausage-making that is municipal politics.

Guelph is involved with the following bodies that manage important municipal services while at the same time keeping Council at arm's length :
  • Guelph Public Library Board
  • Wellington-Dufferin-Guelph Public Health Board
  • County of Wellington Social Services and Social Housing shared service
  • The Elliott
  • Downtown Guelph Business Association
  • Guelph Police Service Board
Each of these institutions has somewhat unique characteristics and has a special relationship with Council based on the nature of what it does. I'll discuss each in turn and try to explain what that relationship looks like and what the average voter should know about it. I will also refer to the proposed budget of 2017 to give you an idea of where it is at financially.

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Public Library Board

The Guelph Public Library Board is governed by the Public Libraries Act and its relationship to Council comes down to preparing a budget that Council can accept or decline, and, to manage the library as it sees fit. The great value of having an independent board is primarily that it removes Council from having to deal with the sorts of idiotic complaints that routinely come about in school boards about whether specific books should or shouldn't be available for perusal. Council appoints the board, the board hires a Chief Librarian, and, he gets to decide whether or not they are going to put A Catcher in the Rye on the shelves and loan it out to moody teenagers. This is a tremendously useful service as it protects Council from having any particular day-to-day decision of the Library staff being made into a political football.

Katie Saunders, Library Board Chair
c/o Library Board Website
As I pointed out in an earlier blog post, there are historical reasons why cities have public libraries, and, I would argue even more reasons to continue to keep them in the future. Having an independent board also allows the advocates of the public library an opportunity to advocate on behalf of the institution (e.g. lobby for a new Main Branch) without either compromising the "objectivity" of municipal employees, or, being forced to play-off that support against competing interests, like a politician would have to do.

The 2017 proposed budget for the public library is $8.8 million, or 2% of the operating expenditures (or $396,112,600) of the City in 2016. This represents a proposed increase of 3.27% or $279,560 over the year before in operating expenses. In addition, the Library board is asking for $360,000 for capital expenses in 2017. (This isn't for a new library, but other capital improvements---the proposed report talks about computer system upgrades and a new inventory control system.) That comes to 0.4% of the amount that the city paid for total capital improvements ($87,592,200) in 2016.

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I want to thank Charles and Al for their awesome donations in response to the last post in the Back-Grounder. This magazine is a labour of love, but every contribution I get helps me find the time to do more work on the next article. It also helps me with unavoidable expenses and some future projects that I want to pursue. So if you can, make a donation, sign up for a subscription on Patreon, and/or share with your friends on social media!

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Wellington-Dufferin-Guelph Public Health Board

This institution is quite different from the Library Board. For one thing, as the name implies, it is not just a creature of Guelph---it also encompasses Dufferin and Wellington County. It is governed by a 16 member board that has a very complex design structure---one that bears some effort to understand.

When human beings develop a structure to govern a complex institution, they have to take into account several completing demands. First, the people who manage the body have to have some sort of minimal expertise. This needn't be specific to the technical issues that the body deals with---it could be just a generalized ability to assimilate complex information, communicate well with other people, and, be able to negotiate workable compromises with them in order to generate a consensus. (To understand this issue, consider the sad example of Donald Trump. His failings as President of the United States do not stem from a lack of experience as chief of state or educational expertise, they come from his inability to do any of these three things.)

Beyond this basic level of competence, other issues come into play. Legitimacy flows from different sources. One is whether or not someone is elected by popular vote. Appointed board members are potentially the creatures of whomever decided to place them in that position. In the case of the Wellington-Dufferin-Guelph Public Health board, seven of the sixteen board members are provincial appointees and eight are elected politicians drawn from various municipal and county Councils.

Besides competence and who a board member is beholding to, there is the added element of geographic representation. The Health board has six appointees that represent Guelph (3 appointed by the province, 3 from Council), six from Wellington County (3 appointed, 3 from Councils), and, Dufferin County has three reps (1 appointed, 2 from Councils.)

The sixteenth member of the board is the "Medical Officer of Health" (MOH), who is appointed by the board and sits on it as an "Ex-Officio" ("by right of the office he holds".)

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The Medical Officer of Health is what the Public Health Board is all about, and the Ontario Health Protection and Promotion Act invests her with awesome powers. Here's a six minute "intro" video featuring the current MOH, Dr. Nicola Mercer, that will help explain many of the responsibilities that she has:

Just like the library board, one of the jobs of the public health board is to insulate politicians from the idiotic discourse that dominates important social issues. So, for example, when a board decides to hand out bleach kits and needles to intravenous drug users to prevent the spread of diseases like AIDS, no city Council has to listen to tedious presentations about how this was encouraging heroin abuse because the decision is beyond their control. Similarly, when a health board decides to promote vaccination in public schools, city councils were spared rants about how vaccination against mumps will cause autism. It also means that if Dr. Mercer decides that there is an epidemic disease, like SARS, rampaging in Guelph she can take action without worrying about whether the local Hotel and Restaurant Association is going to put her out of office next election because she damaged their business.

The mixture of provincial appointees and elected officials from various areas gives the Board the ability to at the same time avoid undue influence by any one specific political area, it also "spreads the blame" when it decides to do something unpopular. The province adds to this power by giving it the power to demand money from a local Council if it deems this necessary. The local Council has some influence over the board through it's elected reps, but nowhere near veto power. This means that no particular political entity has the power necessary to starve the board if a ideologically-driven political group were determined to "stop the gravy train" and cut taxes. This is an important consideration as public health units are one of the parts of government that it is easy to cut back on without anyone really noticing their absence---until all Hell breaks loose.

And in the case of the health board this independence from city council led to a battle between Guelph and the board when it decided to build it's own buildings. That's because the board has the right to decide what it's going to build and then tell the various Councils it serves that they are going to pay for it---whether they like it or not. In case of Wellington-Dufferin-Guelph, this meant that the board decided to build two buildings, one in Orangeville and another in Guelph, for a total cost of $22 million. Under the payment formula that existed in 2014, that meant that Guelph would pay $10 million for these two buildings. Under mayor Karen Farbridge, Guelph attempted to "push back" against this ability by the board to spend money and force the supporting municipal governments to pay the bill. But it lost.

Hey Guelph, we're building something new and your part of the cost is $10 million,
----you're OK with that, right?  Photo from Buttcon Website

The 2017 proposed budget for the health board is $4.213 million, which is 1% of the operating expenditures (or $396,112,600) of the City in 2016. This represents a proposed increase of 6.1% or $243,000 over the year before in operating expenses (this includes long term debt charges---which I assume is to pay off the recently built office buildings.) Still, isn't 1% of the operating budget money well spent if it identifies pandemics before the bodies start piling up on the streets?

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"County of Wellington Social Services and Social Housing" (Shared Service)

The next group to consider is the Social Services and Social Housing shared service. This group isn't a board at all. Instead, it is a standing committee of the County government. So it is not a "local board", but rather a "shared service" under the heading of "Recommended Local Boards and Shared Services Budget". Looking it up on the web can be a bit confusing because the County of Wellington doesn't call its committee by the name Guelph listed in the proposed 2017 budget (ie:  the title of this section), but rather the "Social Services Committee". This, plus a little less investment in the county websites than either the province or Guelph, means that it can be pretty hard for the average voter to understand what exactly is what with regard to social services in the city.

Minister of Community
and Social Services, Helena Jaczek
She decides who controls social services.  
Photo c/o Gov Ontario
Not only is it not a stand-alone board, it has no voting representation from Guelph council. Indeed, there is no official place for any representative from Guelph on the committee at all---although Mayor Guthrie often attends as a visitor so he can keep informed. This might seem a strange set of affairs, especially since between 75 and 85% of Wellington County's social service users are in the city of Guelph, and the fraction of the services paid for by local municipalities is based upon the need in the community. In effect, the guys who pay most of the local money aren't allowed to have any say in how it's spent.   Having said that, much of what used to be call "welfare" is strictly controlled by the Ontario Works Act, and it specifically states that the Minister of Community and Social Services gets to decide the geographic boundaries of a specific social services area and who the designated "delivery agent" will be. And in this case, Wellington county Council is who the provincial ministry wants handing out the dole.

The province pays out the lion's share of the money in our social services, which is why the actual cost of social services for the County Wellington Social Services in 2015 (most of which was Guelph) included $27.624 million in provincial grants ($13,280,000 for social services, $5,568,000 for social housing, and, $8,776,000 for child care.) Moreover, the fraction that the province pays is increasing.



As you can see from this table (taken from a provincial government website) the Ontario Works program (what used to be called "welfare") used to cost the County (mostly Guelph) a little over 17 cents on the dollar to give out. But the province has been chipping away at this cost and in 2018 is set to "upload" to the point where it will be paying 100% of the money. Moreover, in the same document you can also see that the same mathematical progression is at work with regard to the administrative costs for the same program. So by 2018 the cost of administering the program will be totally paid for by the province. In effect, Ontario Works will be a completely provincially-funded program that has been contracted-out to the County to administer.

Unfortunately, Ontario Works is not the only social service that the County (mostly Guelph) pays for. The other services do get grants, but the County (mostly Guelph) has to pay for about 50% of the cost for administering those programs. In addition, there are some local initiatives, and the County (mostly Guelph) has to pay for those in full. But having said that, the "uploading" by the province has had a beneficial impact on the bottom line, and if you look at the projected board and shared services budget, you will see that the projected cost to Guelph of shared services is $23.569 million (5% of the 2016 budget.)  This represents a decline of 3.1% or $750,000 over the previous year.

Of course, these figures are just estimates, not a hard budget.  Welfare and other provincially-mandated programs are based on following a set of guidelines that define who is or is not entitled to benefits---not in dividing up a set budget. So if, for some reason, hard times arrive unexpectedly and a lot more people need to get support, these numbers could be blown. Moreover, there is always the possibility that the province might bring in some new mandatory program that would have a cost-sharing element, which would mean that the County (mostly Guelph) would get stuck with an unexpected cost.

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This post is getting out-of-control for length, and I promised myself to start chopping up my huge posts into more bite-sized chunks that I can publish more often. So I'll do a "part two" version of this issue next time. I would like readers to remember, however, that if they want to keep reading real news about local issues that helps you understand exactly why things are the way they are in this city, that you might want to help me in my Quixotic effort to create a new business model for journalism. That means share this post on FaceBook, Twitter, and other social media. It also means, if you can afford it, to subscribe through my Patreon account or make a one-time donation using Pay Pal. (Heck, if you really like how I write, you might even buy one of my books---different subject, same great style.)