Financial Accountability
and the Value of Public Services
Submission to the City of Quesnel
Presented by CUPE Locals 1050 and 3176
April 2004
Introduction
CUPE Locals 1050 and 3176 are pleased to have the opportunity to express their deep concern regarding the approach of Quesnel City Council to the fiscal management of our community. We believe the priorities of Council have led taxpayers down a dark road – one that is void of public consultation, responsible democratic decision-making, accessible governance, and value for high levels of public service.
Instead, this council has acted alone in implementing an approach to City Management that reflects highly questionable fiscal administration, as well as an objective of decreasing accessibility, increasing taxes, cutting jobs and contracting out services.
A number of significant actions are of concern. These include:
· conducting a Cost Leadership Program, or Core Service Review, on the premise that
‘efficiencies’ must be found in service delivery that includes job cuts;
· cutting close to one million dollars from city services over the next three years;
· prioritizing spending based on aesthetics and not badly needed infrastructure;
· purchasing the most expensive City Hall in all of the central and northern interior
without consultation with taxpayers;
· conducting budget meetings kept closed to the public;
· increasing residential taxes, while asking residents to carry out city services through
adopt-a-park, tree, road and garden programs;
· investing in projects that are not necessary or could be conducted for a lesser cost.
The 150 Quesnel city workers and members of CUPE Locals 1050 and 3176 provide quality community public services to the residents of the City of Quesnel and surrounding communities through positions with the RCMP, airport, arena and recreation centre facilities, museum, fire hall, City Hall, Public Works and landfill. We value our community and want to ensure that City Council is acting in the interest of all of its citizens.
We urge Council to re-evaluate the rationale on which their fiscal decisions are being made and to focus on both short and long term visions for the City of Quesnel. We look forward to assisting Council in this direction, and working towards the creation of a prosperous city through the development of more fiscally responsible, open and accountable means of governance that includes input from all the members of Quesnel’s community.
We ask you, as City Councillors, to work with us towards this goal.
Economic Challenges
The City of Quesnel, like municipalities across this province, but particularly in the interior and parts of the North, has faced severe fiscal challenges over the past few years. Problems in the forest industry have been coupled with a significant reduction of provincial services, and the associated employment. Grants provided to the City by the federal and provincial governments have declined substantially over the past decade. According to the 2004 City of Quesnel Preliminary Budget, these include the elimination of the capital grants program, discontinuation of planning grants, elimination of unconditional revenue-sharing grants, and reduced grants for community groups and agencies.
Difficult fiscal situations such as that faced by Quesnel City Council require creative, innovative solutions that will ultimately invest themselves in the betterment of the community as a whole.
Members of CUPE Locals 1050 and 3176 are also taxpaying citizens of this municipality and recognize the pressures that all of us are under together, to grow and manage the City responsibly and maintain the level of public services consistent with Quesnel’s position as a hub of community and business activity.
However actions taken by council have done little to reflect this approach or objective.
The 2004 municipal budget process is one that calls for a high level of collaboration and creativity to come up with solutions that will benefit all citizens of Quesnel. Conducting closed-door meetings while planning to cut jobs, contracting out public services, and increase residential taxes, all the while ignoring infrastructure needs to spend large amounts of money on overpriced projects like a new City Hall - these are not effective solutions for the future of this community. In fact, they are just the opposite.
Spending Priorities: Worth the Cost?
In December 1999, the City of Quesnel purchased Place St. Laurent, the site of the New City Hall. Rather than pay in full for the building, its purchase and cost of renovations were made through a five-year lease arrangement with On-Line Finance & Leasing Corporation (On-Line), an arm’s length private company of the Municipal Finance Authority of British Columbia (MFA).
As a result, the total City investment in the property is $8, 261, 818, making this the most expensive built in the central and northern interior.
According to the City, the intent of the project was, “to be an important civic development initiative by encouraging economic revitalization within the main business district of the City.” Instead, four years later, businesses in the downtown core have shut down in droves .
The City has now decided that they want to borrow up to $8 million to pay out the lease.
City Council has packaged this as, “the best option for Quesnel taxpayers,” and a, “real opportunity to save money and relieve some strain on the City’s operating budget.”
In order to do this, Council gave three readings to the John Ernst Authorization Loan Bylaw on February 2004 that would allow the City to borrow the money needed to pay out their loan.
However, under the Community Charter, the City is prohibited from incurring a liability for more than five years without the approval of the electors, and requires a counter-petition process that allowed citizens and property owners to submit their disapproval of the Bylaw.
At least 10% disapproval was required for the issue to go to a referendum. It this case, 23 % of Quesnel’s electorate registered their disagreement with the adoption of the bylaw that would allow the loan to be approved. A referendum is upcoming.
Citizens continue to express great concern regarding the long-term costs of the deal and are now asking for the City to consider walking away altogether at the end of the lease period.
The City has responded by stating that this is not a possibility as they have an agreement with the MFA and On-Line that they would not walk away from the deal. Council has stated that they have, “agreed in writing to buy the building or enter into a new lease.” The City also states that if they were to walk away from the project, “The MFA would have to consider legal action against the City to recover its losses after attempting to sell the building and lands at a distress price to recover their investment. Legal fees to defend the case could become extremely expensive.”
In reality, the City of Quesnel does not have an agreement with the MFA. Its only legal contract is with On-Line for the lease of Place St. Laurent. Therefore, the MFA could not take legal action, there would be no resulting legal fees, and there is no requirement forcing the City to renew the lease.
This is supported by a 2001 sworn affidavit in which the President of On-Line stated that the agreement between the MFA and On-Line specifically provides that there is no partnership or contract of employment between the two groups. He also noted that the legal title to Place St. Laurent was acquired by On-line in order to allow them to grant operating leases and an option to purchase, and that there was no agreement between On-Line and the City of Quesnel that extended beyond five years.
CUPE members have many unanswered questions surrounding this process.
Why were the taxpayers not consulted in the pre-purchase stages of the agreement to lease Place St. Laurent? Why are taxpayers now being told that the only option is to buy out the lease, claiming that there would be legal action taken against the City resulting in expensive legal costs – when this is clearly not the case?
Why have the citizens of Quesnel been subject to the burdens of rising taxes, job cuts and decreased services – methods the City has adopted to offset the impact of the City Hall project on the municipal budget? Are these methods ones that Council members feel will truly contribute to the growth of a healthy and vibrant community and economy? Perhaps they need to think again.
Opposition to the eight million dollar City Hall project has even been heard from within Council. If a referendum is called, Councilor Thapar has stated he wants further investigations conducted into whether or not the project should go through at all, suggesting the council should never have made the building a priority without first asking the taxpayers. Perhaps the same could be said of other projects, such as the $215,000 West Fraser Duck pond, the $640,000 Shiraoi House and the $1,000,000 Civic Plaza.
In the midst of the conflict surrounding its 2004 budget discussions, Council is also contemplating where and how to use surplus funds.
Along with the citizens of Quesnel, both Councilor Thapar and Councilor Sjostrom have drawn attention to a number of very serious infrastructure needs within the municipality that should take priority, such as the issue of land stability in West Quesnel. Other issues of great concern to CUPE and other Quesnel taxpayers include repairs to the Johnson Bridge, significant maintenance and paving of roads, and replacing substandard and aging equipment.
These, among others, are badly needed projects that have been lost in the shadow of debt cast by this Council. All at the expense of accountability, responsible fiscal management and democratic decision-making.
Cost Leadership Program
Quesnel City Council has been discussing the merits of Core Service Review for years as a potential method to justify job cuts as ‘cost savings’. In 2003, Council hired Dugal Smith of Dugal Smith and Associates to carry out the review process in conjunction with the City Manager, under the new title of Cost Leadership Program. This ‘repackaging’ of the Core Service Review did little to change the motivation behind the process.
According to the Cost Leadership Discussion Notes provided by Smith to Council in March 2004, the objective of the program is to, “improve costs, financial performance and value for money,” to, “cut services that are no longer valued,” and to ask, “should this be a public service?” The document also states that the ultimate goal of Cost Leadership is to make the City, “more effective, efficient and economical in its service delivery,” by exploring a reduction in services, contracting out, and sale of services, i.e. privatization.
This plan assumes that private sector contractors represent a more efficient way to deliver services. At no time have we ever been provided with any systematic research to justify contracting out of services.
The first stage, or ‘benchmarking’ of the Cost Leadership Program has already been carried out. This involved an ‘inventory of City services and their costs’ as compared to four other northern cities – Dawson Creek, Fort St. John, Terrace and Williams Lake. The next stages of the process will involve identifying ‘opportunities for improvement’ and deciding on a course of action to initiate the necessary ‘efficiencies’.
We only have to look to the City of Williams Lake to see what will unravel from here. In 2003, Williams Lake hired the same Burnaby consultant, Dugal Smith, to carry out an ‘Operations and Organization’ review of their municipality. Six municipal positions are slated to be cut by May 2004, as a result of the recommendations made by Smith, including the only full-time carpenter employed by the city, and a warehouse worker who has been dedicated to the municipality for sixteen years. Smith also recommended that Council consider contracting out City janitorial services, reducing parking and traffic control, and discontinuing sidewalk snow removal as a way of improving the City’s ‘effectiveness, efficiency and economy.’
The current philosophy that appears to be driving management decisions is that the fewer workers employed by the City the better. And the assumption flowing from that philosophy suggests that the City will be better off financially as fewer and fewer services are delivered directly by city employees. In this climate, driven by downsizing and contracting-out of services, one important issue is regularly forgotten – the delivery of quality services to the people who pay the bills.
For over two years, CUPE locals in communities across BC have been asking that the business case for contracting-out city services be presented in clear terms. There has been nothing provided by municipal employers to prove such a case. Instead, both city workers, the public and no-doubt, Quesnel’s elected City Council, consistently hear references to ‘effective and efficient delivery of service’.
Reduction of services and contracting out are not ways to manage and build a healthy community and economy. It is time to reconsider not only the individual components of the Cost Leadership Program, but also its underlying assumptions and philosophy.
Citizens Support Services Not Cuts
In November 2003, the City of Quesnel undertook a survey of residents to assess their satisfaction with city services. According to the final report, “the primary purpose of the survey was to determine resident attitudes and opinions regarding the quality of service presently being provided by the City of Quesnel,” and, “to identify:
· Service and budget priorities· New services that should be considered, and · Willingness of the public to pay for new and/or higher quality services.”From this survey, the City found that 94.5% of Quesnel residents were happy with the services and programs being provided. The highest satisfaction was registered with services including garbage collection (83%), water supply services (81%), and city beautification (92.5%). In addition, the survey found that 49% of respondents would be willing to pay more for policing and improved recreational or other facilities for youth.
The strong level of support registered by Quesnel residents for the level of services is also reflected in a recent Ipsos-Reid poll. The March 31, 2004 survey showed 70% of BC residents felt they received ‘good value’ for their municipal tax dollars, with 83% satisfied with overall program and services levels they receive from their local municipality. The same poll also stated that twice as many BC residents (60%) would prefer to see their property taxes go up than their municipal services cut (29%).
Taxpayers have clearly demonstrated their support for maintaining the high quality of services in the City of Quesnel. Council, in turn, has responded by announcing their plans to cut over one million dollars from city services over the next three years.
During the Feb 25, 2004 City of Quesnel Finance Committee of the Whole meeting, Council approved a three-year plan to cut services, starting with $480,000 in 2004, $260,000 in 2005 and $120,000 in 2006. On March 9, 2004 Council voted to find another $367,000 in ‘operational efficiencies’. Instead of taking this amount from the previous year's surplus listed at $2.155 million, these cuts will be in addition to the cuts already announced, bringing the total of the service budget to nearly one million dollars.
Charles Hamilton, Quesnel’s City Manager, presented the Corporate Business Plan on March 1, 2004. Under the Public Works Department one of the tasks listed was a review of the solid waste collection. The goal listed was to reduce the present six person, six day operation to a five day, one person operation. Not wasting any time in implementing their planned cuts to public services, City Council approved the plan. Council has also proposed job reductions through rotational days off without pay and the elimination of two full-time equivalent (FTE) positions through attrition.
Where is the level of accountability when it seems that Council has already made up their minds when it comes to valuing public services in the City of Quesnel, regardless of how their electorate votes?
How is this cost-effective, responsible management when Council has chosen to invest in overpriced buildings and not citizens and their families who contribute to the prosperity of the overall community? How does this reflect on how the City values its workers and the services they provide that directly contribute to the successful daily operations of Quesnel’s garbage collection, building inspection, recreation operations and City administration, to name just a few.
Public Services - A Wider View
We submit that the City needs to take a more global perspective of what ‘effective and efficient’ public service delivery includes. Council’s present definition of ‘efficiency’ is narrowed to trimming finances. CUPE challenges this definition – efficiency should mean taking into full account the quality and level of service.
There is also a wider public good that should be taken into account. As the British Centre for Public Services notes:
“Standards of Best Value practice should ensure that social equity, the importance of the environment and powerful democratic participation of all stakeholders, are part of effective service provision.”
Or, as the Auditor General of Australia has recently said:
“Unlike commercial entities, public service providers are required to simultaneously account for (among other things) client satisfaction, the public interest, fair play, honesty, justice, security and equity as well as striving to maximize ‘value for money’.”
As we have pointed out in the past, there are myriad potential problems associated with contracting out of services. The benefits are questionable and unproven.
CONTRACTING OUT OF SERVICES – THE PROBLEMS
Loss of Control
When the City contracts out services, it loses a great measure of control. It can specify levels of service, but loses direct control over the employees that deliver the service. It also loses control of the working conditions, the wages and the benefits for the employees of the contractor. When it loses control of the service, it also loses the flexibility to adapt to changing service requirements (caused, for example, by standard or other regulatory changes imposed by other levels of government or by a change of circumstances, such as population growth or unexpected events).
The City may have few back-up resources in the case of an emergency. The fact that you don’t have a dedicated staff member that you can turn to during the off hours or in unusual situations can also become a problem.
Accountability for Service Levels
Service contracts can become an obstacle to addressing problems such as inferior work, damage to property or accessibility. If control of the service is handed over to the private sector, the City still receives the criticism for poor service, at the same time as it is relatively powerless to remedy service gaps.
Unexpected problems can be dragged out as the City and the contractor negotiate over who is responsible. In some cases the process completely shuts down. If the City controls the service, employees can remedy the problem quickly and effectively, without working through a reluctant third party.
We hear of relatively minor deficiencies becoming bureaucratic headaches as municipal employees discover a problem, have to contact a supervisor or other individual in their organization, who in turn has to make contact with the contractor, who in turn has to instruct the employee to remedy the problem.
Despite an increased cost of contract supervision, service levels are a common concern with contracted out services. Increasing supervision to monitor service levels results in increased costs. But if the City decreases supervision in order to save money, service levels can decline. It doesn’t really matter how specific a contract is, with regard to the level of service, if there are continuing problems with enforcing that level of service.
The City workforce has a proven record of providing quality public service. Is the City documenting and accessing the performance of private contractors, particularly when public health and safety issues are at stake? Is the City tracking the extra cost of monitoring contract performance? Finally, is the City tracking the cost of handling citizen complaints about service in the contracted out services?
Supervision and other Non-Contract Costs
There are many costs associated with contracting out that are eliminated or reduced with in-house delivery. The contract price is just one part of the cost of privatizing services.
A huge cost item that is not reflected in the bills charged by the private sector are the contract administration costs. How much has the City had to pay (either through staff time or hiring lawyers or consultants) for drafting of legal documents? How much will it cost the City to monitor and inspect? How has the City paid for feasibility studies or impact assessment? What about the cost of advertising the Request for Proposals? The City of Quesnel has a history of having to issue tenders more than once, driving up costs before a project has even begun. Once private vendors respond to the Request for Proposals, bids must be evaluated and negotiations begin with one or more private vendors. Evaluations are not quick and easy.
Once a bidder has been selected, the City has to negotiate the terms of the contracts. This can be time-consuming and even litigious.
Elliot Sclar notes the following:
“Presumably, a public administrative structure must remain for contract supervision, maintenance of the contracting process and enforcement of the policy mandates governing the provision of a public service. U.S. transit experience suggests that, even when the direct service is contracted out, overhead costs remain substantial, ranging from 16 percent to one-third of total costs, depending on the system size and complexity.”
Lack of Accountability
Private companies are not as open and transparent as government bodies are. They are not subject to the provisions of the Freedom of Information Act. The public is increasingly frustrated with the lack of access to information about corporations and their dealings with all levels of government. Often, the public perception is that governments intentionally contract out or privatize services in order to avoid public scrutiny of the use of their tax dollars.
Comparing Apples and Oranges
One of the recurring problems of contracting out services is making a fair comparison of the level of service provided by a contractor, as opposed to civic employees. A contractor, concerned with the bottom line, may be unwilling, or not have the authority or training, to provide the extra bit of service that can effectively deal with a problem encountered during the workday.
Our employees go above and beyond the call of duty, for themselves, the employer and their community.
We also do not believe that the private sector can reduce the cost of public services if contractors are held to the same standards as the public sector workers they replace. However, Council, our locals and the public have not been provided with detailed costing information so that we can evaluate contracted out services. Frankly, our experience in CUPE is that the better the labour relations climate, the more accessible this information is. It is when the decision to contract out becomes political, that obtaining information in detail becomes difficult. Sometimes that fair and detailed evaluation has not even been undertaken.
Loss of Well-Paid Jobs – Hurting our citizens and hurting our community
The impact of contracting out services ripples throughout the community. CUPE recognizes that the City wants good value for taxpayer money. We agree, but we do not apologize, for seeking to ensure that our members receive a fair wage for the work we do. The return is a stable, reliable, qualified and loyal work force.
If the City contracts out services, it is not only our employees that lose. The community and its many businesses lose when well-paid jobs disappear and are replaced by close to minimum wage jobs. People buy less. Quesnel, already hard hit by the loss of schools and other services, are hit again by the loss of jobs and incomes.
Where do the Profits Go?
Profits made by large private companies is money that is lost to our community. The people of Quesnel need to ask themselves who should get the dividend from public services – the people of this community or the shareholders or owners of whatever company lands the contract? Those contracts are increasingly won by multinational corporations, headquartered in other communities, provinces or even countries.
Why should the citizens of this community be sending money away from our community, the community where it will do the most good? Further, even if a company is operated locally today, there is no guarantee it will not be bought up by a larger firm in the future. This is the increasing trend and the repercussions for communities are not fiscally positive. Further, there is frustration when a community member has to call a 1-800 number of an out of town, or even out of province, number to report service problems.
Change Orders
The costs of contracting out services rarely end with the signing of an agreement. Once a commitment is made, and the contractor becomes a monopoly service provider, change orders can often increase the price of a contract. Again, the flexibility and control associated with in-house provision of the service is lost. If the City wants change, or there is disagreement about what was expected from the contractor, it costs and costs dearly for those changes to be made.
In order to satisfy the taxpayers of this community that taxpayer dollars are being effectively spent, and as a good will gesture to your employees, we ask Council to track the true cost of all contracted out services, including the costs of administering contracted out services, the cost of change orders and all costs of remedying deficiencies.
We further request that Council work closely with Locals 1050 and 3176 in determining and informing us of those costs.
CONCLUSION
In conclusion, we urge council to review both short-term and long-term fiscal management of the City of Quesnel as part of the 2004 municipal budget process, and to recognize the responsibility of Council to provide greater accessibility and democratic inclusion of residents in related decision-making processes.
We ask that you question the spending priorities of Council and how they reflect those of the electorate. Do taxpayers feel that a new City Hall is more important that investing in badly needed infrastructure projects? Do they believe the way to balance Quesnel’s 2004 budget is to cut jobs out of the community, to degrade the provision of public services and to force citizens to pay more taxes while being told to adopt-a-street, adopt-a-road, adopt-a-park?
We ask that you reflect on the value you place on public services, particularly when high service satisfaction has been clearly stated by residents. Is spending taxpayer’s money to carry out a core service review process, that will likely result in cuts to employment in the service sector, a desire of Quesnel’s citizens? Are massive budget cuts the way to ensure present service levels, and build towards more ‘efficient’ and ‘effective’ service delivery?
Finally, we ask that you question an ideologically based assumption that contracting of services is good for the community and its taxpayers. We ask that you demand evidence of savings associated with contracting out and that you clearly track and evaluate the level of services being provided to the community.
Thank you for considering our submission.
