‘City ran deficit’: Lawyer represents Vaughan ratepayers in $210 million lawsuit

'The comments in the statement of claim are without merit,' city says

Yorkregion.com
May 31, 2019
Dina Al-Shibeeb

Robert Karrass, a Toronto-based lawyer, says he is representing “all ratepayers in Vaughan” in a $210 million, non-criminal lawsuit, alleging the City of Vaughan “ran a deficit contrary to law.”

The lawsuit, filed on May 8 at the Ontario Superior Court, claims the City “raised a surplus of special purpose funds to provide for water and infrastructure, and then applied the special purpose funds to pay down the deficit,” Karrass said in an interview.

“This is a misapplication of taxpayer money resulting in a new tax to Vaughan residents,” added Karrass. “Vaughan residents are entitled to a refund.”

Municipalities aren’t allowed to operate in surplus or in deficit but need to maintain balanced budgets through funds raised through property taxes.

So far, in Vaughan the minimum invoice charge for water per month is $17 per month. In 2017, the approved budget at the time spelled out an additional $1.29 per month or $15.52 annually for water and wastewater, continuing the trend of near 10 per cent water bill hikes the past few years.

Also, in 2017, the water rates were $1.7159 per cubic metre, in 2018 $1.8858 per cubic metre and in 2019 $2.0725.

Karrass says he is representing Vaughan’s ratepayers as well as Frank Miele, who according to court documents is the plaintiff. Miele, a former commissioner of economic development at the City of Vaughan, ran for mayor in the 2018 municipal election but didn’t win.

According to a statement of claim filed with the Ontario Superior Court of Justice, the Council ran deficits ranging from $1.5 million to $41 million between 2014 to 2017.

Asked about the evidence so far for these allegations, Karrass said, they “are based on the City's own financial documents that form part of the public record.”

The lawsuit is rather filed under s. 424 of the Municipal Act which deals with Liability of members for diversion of funds. In addition to the city, the lawsuit has also named Vaughan’s Mayor Maurizio Mayor Bevilacqua, Deputy Mayor Mario Ferri. Six other councillors were mentioned including Gino Rosati, Marilyn Iafrate, Tony Carella, Rosanna DeFrancesca, Sandra Yeung Racco, and Alan Shefman.

However, councillor Linda Jackson -- former mayor from 2006 to 2010 -- wasn't mentioned since she wasn't on council during the time period in question.

Lawsuit 'without merits': City responds

In its defence, the City said it has achieved about $30 million in savings since 2015 and that its financial statements are “certified through a third-party audit, undertaken by the globally-respected KPMG LLP auditing firm.”

“KPMG reports on the actual resources used by the municipality and the full cost of the services delivered to the public in that year,” it said.

“The comments in the statement of claim are without merit. The City of Vaughan takes strong objections to such allegations. The City will defend itself vigorously.”

In response to comments about the City’s water rates, it said, “a significant portion of the City of Vaughan’s water rate is set based on costs determined from York Region. These funds ensure the City is able to provide sustainable water services, maintain current infrastructure, such as water pipes, and save for future infrastructure needs.”

The City, however, said, “Day-to-day operation and maintenance of the City’s water, wastewater and stormwater are funded by the water rates; this ensures reliable delivery of safe drinking water and proper management and disposal of storm and sanitary sewage.”

“City staff also evaluate the condition of its sewer and water infrastructure, for example, leak detection on water mains or internal camera inspection of the sewer systems.”

It gave one example of how one of the City’s water mains was replaced on Major Mackenzie Drive with a majority funded through water rates.

On the hospital question

The lawsuit also claims that the $20 million slated for a new hospital went to pay untendered, sole source contracts for other hospital infrastructure.

“In response to the Vaughan Healthcare Centre precinct, funding for the new Mackenzie Vaughan Hospital was approved by the Province of Ontario through the Ministry of Health and Long-Term Care,” it said.
“This project is being delivered by Infrastructure Ontario. In 2009, the City approved a dedicated, accountable and temporary development levy to support the land acquisition and development in the Vaughan Healthcare Centre precinct plan.”

So far, the “temporary levy” is not part of the City's operations that’s why it’s “shown separately on property tax bills.”

“These funds have gone directly to purchase the hospital precinct lands and prepare the site, which includes building sewers, roads and street lights on the land.”

The Mackenzie Vaughan Hospital is scheduled to open in 2020. It has garnered millions in donations.

In a related story, Miele is also suing the municipality of Erin for $750,000 after being fired in May 2013, saying that his termination was “illegal and not only contrary to the terms of the contract.”  Miele was hired as chief administrative officer (CAO) in the Town of Erin in October 2012.