Republished on Request
July 2008
Please Note: Employee expense (2001-2007) at the City of Ottawa has devoured 81 percent of all new revenue generated since amalgamation.
Senior Staff and Councillors at the City of Ottawa must urgently explain.
(There are 11 detailed Tables available on request. To obtain the tables, request same at the address reflected at the end of this article.)
Information for the Resident Property Taxpayers of the City of Ottawa 2008
“What Each of You Should Know”about the financial position of your city
On January 1, 2001, residents in the 12 surrounding communities of Ottawa were incorporated into the new City of Ottawa.
Whether you receive a property tax bill directly or through your landlord or commercial enterprise, you are a taxpayer of this city and you owe it to good governance to keep abreast of the spending habits of the city managers and city councillors.
The amalgamation plan of these 12 legal entities was to provide efficiencies which would be translated into tax savings for all resident taxpayers. Well, this didn’t happen as you know. Let’s find out what went wrong.
This financial review of the City of Ottawa analyzes the largest expense, that being employee compensation. For reference purposes, the employee expense is compared with “Total” revenue.
Total revenue includes direct property tax, in-lieu-of property tax levies, user fees, grants from provincial and federal governments, license and permits, gas tax receipts, fines and penalties, cash return on city investments, sale of city owned assets, gaming and casino revenues and transfers from revenue of prior years accumulated in the capital account and/or other reserve funds. It does not include funds received (and spent) from any increase in borrowing authorized by city council. The borrowings just add to the debt of the City for you and future generations to repay.
Property taxes per se may not increase in any given year, but revenue from the many other resources of the city continue to increase. You pay the increase in one way or another.
Here is the summary position of Total Revenue and Employee Expensee from January 1, 2001 through to December 31, 2007.(Table 1)
2001 Total Revenue $1,697,836,210
2007 Total Revenue $2,297,280,941
35.31 percent increase during the period or an average of 5.9 percent per year.
2001 Total Employee Salary and Wages $610,700,643
2007 Total Employee Salary and Wages $884,415,199
44.82 percent increase during the period or an annual average of 7.47 percent
2001 Total Employee Benefit Expense $105,568,994
2007 Total Employee Benefit Expense $162,665,030
66.13 percent increase during the period or an annual average of 11.05 percent per year
2001 Total Employee Compensation $716,359,637
2007 Total Employee Compensation $1,059,949,916
47.96 per cent increase during the period or an average of 8.0
percent per year.
2001 is the base year so the above “change” occurred in the past 6 years
Now, calculate your personal salary and benefit increases over the past 6 years. If it fits into the above numbers, good for you. However, most of you will be substantially below the percentages expressed above. You will then begin to understand the problem at Ottawa City Hall.
Another glaring fact: (Table 2)
Since amalgamation on January 1, 2001, New Revenue has been generated and New Employee Expense has been incurred.
What percentage of the new revenue was expensed for employee compensation?
In order to find the answer, I used the “Base Year” of December 31st, 2000 for the financial analysis as this was the last day before amalgamation.
Note: The year 2000 financial data is taken from Audited Financial Statements. All other Data is from the Financial Information Report (FIR).
December 31, 2000 Total Revenue $1,743,269,000
December 31st, 2000 Total Employee Expense (Salary/Wages and Benefits) $665,004,000
Now, I froze these numbers in time and then calculated and new Revenue in 2001 through 2007 over and above the 2000 Revenue figure. I did the same for New Employee Expense.
As at December 31st, 2007, the Revenue in that year climbed to $2,297,280,941 and the 2007 Total Employee Expense in year 2007 was $1,059,949,016.
Now, here is the kicker!
From January 1st, 2001, through to December 31st, 2007 a total of $1,938,107,596 in New Revenue was generated by the City of Ottawa, while your Councillors and Senior City staff spent $1,578,834,671 of the New Revenue on Employee salaries, wages and benefits.
Other major Ontario cities have accomplished much better results in the same method of analysis as compared to Ottawa. This will be the subject of a detailed analysis next week.
Now, just to be sure that I wasn't dreaming in color, I used the Audited Financial Statements of the City of Ottawa for the years 2000 to 2007 to verify the percentages developed from the Financial Information Report.
Well, the numbers weren't exactly the same, but just as devastating. The same exercise with the audited financial statements reveal 72.24 percent of the new revenue generated was devoured by Employee Expense. It also reflects my concern that the format on the three major reports must be coordinated. No wonder taxpayers are confused.
Total New Employee Expense as a percentage of New Revenue generated since 2001 (Table 3)
New Revenue $2,385,610,000
New Employee Expense $1,723,462,000
The audited Financial statements reveal that 72.24 percent of New Revenue was spent on New Employee Compensation
Table 4 shows you the detail of the above calculation
If it wasn't discouraging enough to look at the increase in Employee Expenses as shown above, take a look at the accelleration of employee costs versus total revenue year by year. (Table 5)
In the year 2000, Employee Expense was 38.15 percent of Total Revenue and as at December 31st, 2007 it grew to 47.09 percent. (Based on Audited Financial Statements)
Another Concern:
Future Taxpayer Debt:
The charge to Unfunded Liabilities (Table 6) for future employee benefits for 2007 was some $50 million dollars, equivalent to a current 5% property tax increase. The amount, as extraordinary as it is, needs to be specifically explained to the taxpayer by senior management. You may not like the explanation. City Councillors must inform the resident taxpayers annually on the total “accumulated” unfunded liability charge at the end of each financial year. What is the total accumulated Unfunded Liability for the City of Ottawa as at December 31st, 2007? The City Manager should answer this question.
How Many Employees does the City Have?
Full time employees (Table 7) remained below the 2001 level except for a jump in 2007, the year that the general public raised concerns about the number of employees. Part-time employees declined and the number of seasonal employees is not a major factor in the number of “full time equivalent” employees.
In 2007, there were 13,461 full time employees, 1,634 part time employees and 50 seasonal employees.
Over the 2001-2007 period full time employees grew by 1.01 percent, part time employees declined by 62.13 percent and seasonal employee change was negligible.
Note: The increase in the number of employees does not account for the unreasonable increase in employee compensation as show in the first section of this report.
Employee “hours worked” including Boards (Table8)
In 2001, 22,950,219 hours were worked by City employees and this grew to 26,963,079 hours in 2007, a 17.49 percent increase. So, there still is an overtime problem at the City.
I have gone further into detail on the employee hours worked and reflect the data by Department for 2001 through to 2007. (Table 9)
Some of the more glaring changes are listed following:
Administration hours increased 277.57 percent
Public Works decreased 26.35 percent
Fireman hours increased 26.42 percent with no additional staff during the period.
Home for the Aged hours declined 41.78 percent
LLibrairies hours increased 225.96 percent
Now we will look at the Employee Compensation by Department:
Table 10 reflects the increase in Salaries, wages and benefits by Department.
Again, notables are as follows:
Program Support compensation increased 79.46 percent
Fireman compensation increased 44.22 percent
Police compensation increased 59.80 percent
Protective Inspections increased 414.70 percent
Winter Control increased 178.06 percent
Public Health Services increased 142.23 percent
Child Care increased 89.04 percent
Libraries increased 65.00 percent
For all Departments, salaries, wages and benefits increased ON AVERAGE by 47.96 percent
Now let's look at how Budget Data is compiled (Table 11) This information is included in this report as there is a difference in the presentation of the financial numbers compared to the Financial Statements and Financial Information Report. It is my opinion that this only confuses the resident taxpayers.
2007 City of Ottawa Budget Data on Compensation and Full Time Equivalent (FTE) Employees. The information format does not match the above Financial Information Return
The Table information provides authorized Department compensation dollars and authorized FTE in detail
The average FTE Employee Cost is $76,573, but this does not mean than the City Staff actually utilized the full authorized FTE. It is assumed that many positions have not been filled. The authorized dollars however, have been fully used, leading to the assumption that the average cost per employee is higher than the reflected $76,573.
eg: Average cost per FTE in the City Manager's Department is $111,800
The Housing Department has an average cost per FTE of $80,933
Fire Services has an average cost of $97,158
The Police Services has an average cost of $93,080
Information Technolgy Department has an average cost of $81,972
Employee Services has an avaerage cost of $84,295
The average cost per Department FTE ranges from a low of $55,984 to a high of $113,125.
Note: The 2007 compensation budget was exceeded. See FIR results.
Complete annual data Tables (2001-2007) are available upon request by email.
wmomalley@gmail.com
Next publications
1) New Revenue versus New Employee Expense for Major Ontario Cities
2) Ottawa Revenue Detail by Type and Department 2001-2007
3) Ottawa Individual Department Operating Expenses 2001-2007
4) Ottawa Complete Budget Information covering detail from base year 2001 versus 2006, 2007, 2008 and the proposed 2009 Budget
Look for them on this Blog. Sponsors are welcome.
Important:
The source of this data is from a report submitted annually to the provincial government called the Financial Information Report or FIR. The annual report is signed “as accurate” by the treasurer of the City of Ottawa. Every effort has been made in my analysis to reflect accurate recordings of the information contained in annual reports from 2001 to 2007. The year 2000 (prior to amalgamation) is based on the consolidated position of the 12 communities as reflected in the audited financial statements.
Some months ago a recommendation was made to Jim Watson, the Ontario Minister of Housing and Municipal Affairs, that all Ontario Municipal Budgets follow the format of the FIR. He did not reply.
In Ontario municipal accounting, there must be a clear, comparable relationship between the annual Budget, the annual Financial Statements and the annual Financial Information Report (FIR). Currently, the method of municipal reporting deprives resident property taxpayers of vital financial information and the spending habits of City Management and Councillors. It is labour intensive to compare financial data in a given department because senior management change (at whim) the sub groups within the department and the information available from three different sources are in different formats.. It is not cynical to question the motives of Senior Management.
If financial information was revealed in an easy to understand, and accurate, manner, you would have a much greater participation in the municipal electoral process than has been evident over the past twenty years or so.
Bill O'Malley
Ottawa
