Brampton’s skyrocketing staff payroll one of many financial woes

Brampton facing tough financial times if it doesn't get its act together reports former Ontario auditor general Jim McCarter.

Thestar.com
Jan. 27, 2015
By San Grewal

The City of Brampton has $215 million of debt, is depleting its reserve funds and may be grossly overpaying for a downtown redevelopment. Meanwhile, skyrocketing staff salaries are eating up more money than growing tax revenues are bringing in, according to a new report.

“Even though the city has collected 120 per cent more revenue in property taxes than it did a decade ago, you might say, well where’s the money going. Ninety-four per cent of the increase in the property tax has basically gone to the city payroll.” That was one of the stinging comments Tuesday by former Ontario auditor-general Jim McCarter, shortly after the release of his financial review of Brampton’s books.

The ballooning staff salaries are just one reason why the city’s balances are not keeping up with its explosive population growth, according to the report.

“It really addresses a need that I heard throughout the campaign, that we needed an external auditor to really tell us where the finances were,” said Brampton Mayor Linda Jeffrey, shortly after reading McCarter’s findings. She said large revenue increases going to city staff - while many of Brampton’s residents still struggle after the province’s manufacturing collapse - is one of the report’s troubling highlights.

McCarter’s cautionary financial review of the city’s books was released following a series of stunning revelations about the city’s finances during the last four years under former Brampton Mayor Susan Fennell.

After winning last year’s election, Jeffrey and her new council colleagues voted to bring in McCarter to pore over the city’s books.

His 23-page report also stated that:

Senior city staff have verified that Brampton’s capital reserves “are almost fully depleted.”

The city has a “growing backlog” of infrastructure renewal “estimated to be in the hundreds of millions of dollars.”

Brampton has a debt of $215 million, largely because of the $8.2 million annual payment over 25 years to a developer in a downtown renewal project, contrary to claims that the city is debt free.

Other municipalities across the GTA have been more aggressive than Brampton in addressing future infrastructure needs.

Brampton’s development charge reserve accounts, to cover fees that builders eventually have to pay, have been in a net deficit of $225 million to $325 million over the past year or so, while no other GTA municipalities reviewed showed any year-end deficit in similar accounts.

One of the most alarming highlights of the report is the financing rate the city is paying for the downtown development project, which was originally awarded to Dominus Construction in 2011 after Fennell pushed for the deal. Taxpayers are paying $111 million in financing costs for the first of three phases, on top of the $94-million cost of the construction, the report said.

McCarter’s report found that financing amounts to borrowing at a 7.2 per cent interest rate, adding that the city could have financed the project itself for no more than 4.8 per cent. Councillors who voted against the deal have stated rates available to the city at the time were around 3.5 per cent.

Jeffrey said she had to read that part of the report twice. “It was such a dramatic departure from what I would have thought was reasonable.”

McCarter also confirmed troubling issues surrounding the way staff lost track of spending on hundreds of millions of dollars worth of approved capital projects over the past decade or so, many of which were never “even started.”

“Over the years, there had apparently been inadequate ongoing followup of the status of previously approved capital projects until this issue was brought to Council’s attention by City management,” McCarter wrote in his report.

Last March a staff report revealed that $766 million in approved capital projects over about seven years was not properly accounted for, with many projects that taxpayers had been paying for either way behind schedule or, in some cases, not even started. It’s unclear what those projects will actually end up costing once they are finally completed.

Councillors told the Star last year that they routinely asked former City Manager Deborah Dubenofsky about overdue projects, but never got straight answers.

Other reports critical of Brampton’s financial management also came forward over the past four years, on top of the widely reported spending scandals surrounding Fennell before she lost the election with 12 per cent of the vote.

In 2011 the C.D. Howe Institute, a Canadian think-tank that often analyzes the financial status of governments and institutions, released a study on municipal budgeting accuracy in Canada that put Brampton at the bottom of the list. Brampton staff at the time, led by Dubenofsky and former treasurer Mo Lewis, as well as Fennell and longtime budget chair Councillor Gael Miles, disputed C.D. Howe’s findings.

In 2014 the city was again at the bottom of a C.D. Howe list, this time in a study on municipal fiscal accountability.
Despite the reports and the downtown development plan’s $8.2 million annual financing charge to taxpayers, Fennell continued to trumpet Brampton’s “debt-free” status and “triple-A credit rating.” As the critical financial reports mounted Fennell routinely pointed out how well the city had been managed, financially, under her 14-year tenure as mayor.

Jeffrey vowed during the 2014 municipal election campaign to find out if her political rival’s often-repeated claims were true. Shortly after winning the election she brought forward a motion to hire McCarter, Ontario’s auditor general from 2004 to 2013, for the just completed examination of the city’s books.

Its release comes days after the city announced the departure of Brampton’s top bureaucrat, CAO John Corbett, who replaced Dubenofsky in 2012, when she departed after council decided not to renew her contract.

Another report by Brampton’s interim auditor-general, George Rust-D’Eye, is expected by the end of the month. He is investigating allegations that the downtown development project was not awarded fairly by staff and other controversies that have dogged the plan, which is now more than a year behind schedule.

The Ontario Provincial Police is also conducting an investigation into Fennell’s spending and that of council members. Councillors voted for the police investigation after a forensic audit last summer by Deloitte Canada found Fennell and her staff broke spending rules 266 times over seven years, totalling $172,608.

Jeffrey said she hopes one positive behind all the negative news is the engagement of residents that are now paying attention.

“What I want the public to know is that council is going to be faced with some difficult decisions as we move forward ... I encourage the public to participate. We got a report today that addresses an issue that was raised by people during the election.”