Citizens Budget Task Force:
Final Report to Council January 30,
We would like to thank the City of Waterloo, Mayor Halloran
and Council for creating the Citizen’s Budget Task Force. We’ve
learned a lot about our community and the challenges Council and
Staff face in managing city operations, city infrastructure, and
balancing community needs and wants.
We see ourselves as partners with Council representing the
taxpayer. We thank Staff for equipping us on a range of complex
issues. We are eleven passionate volunteers from a variety of
professions and industry experience. Our names are listed on the
slide. I thank each of these members for their commitment and
Tonight marks our final address to Council, and we are
encouraged with the recent steps Council is taking towards
adopting some of our recommendations. Our full report is
available on the City’s website.
This Task Force envisions a future where any average citizen can
understand the financial decisions of the City, as these decisions
are directly translated into taxation. We do not find this to be
the case today, having ourselves struggled with coming to an
understanding over ten months, with significant assistance from
Staff. Meeting the reporting requirements of the Municipal Act
obfuscates information in a way that often makes analysis and
trending very difficult.
When a change in property tax rates is being discussed by
Council, taxpayers will respond more favourably when they can
adequately understand the real-life meaning for both the actual
figures and the proposed budgeted figures.
When the City undertakes financial transparency, the Task Force
suggests that financial documents become easily accessible,
presumably on the City website, showing the true costs including
compounding percentages. For example, it would appear to the
average citizen that the MPI increase in year 2014 is 2.46%.
However, each year’s MPI is compounded, so the total impact to
the taxpayer is actually 9% by 2014.
A concerted campaign of information and engagement, will likely
require fresh ideas and a variety of mechanisms to encourage
citizen participation. This Task Force’s short mandate did not
provide for adequate research on this matter, creating an
opportunity for a future citizen committee to provide specific
recommendations. Citizen engagement and effective
communication are critical priorities to resource.
We recommend that the City of Waterloo:
a) Annually report, in an easy-to-understand format, a 10-
year trend table of balance sheet, income statement,
and total reserves, including a Management Discussion
b) Annually report operating performance, which clearly
matches actual to yearly budgeted items.
c) Create an ongoing capital expenditure tracking report,
with original budget, revised budget and actual
expenses. Itemize by project and include
d) Publish all collective bargaining agreements going
forward, and maintain on the website.
e) Publish (a), (b), (c), and (d) in a visible location on the
We are pleased with the motion that Council is taking toward
reconsidering the MPI.
Our primary concern with the MPI is that it is a non-standardized
index that creates a mechanism for budgeting whereby tax
increases are established first, followed by decisions on how the
dollars will be spent. The MPI is a circular calculation that
includes itself going forward, and at the same time, the MPI
publicizes a budget increase for compensation in advance of
The responsibility and the decision of setting property taxes rests
with Council, who talk with constituents and can consider a range
of socio-economic factors each time budgets come under
As such, we recommend:
a) Abandon the use of MPI for setting the annual property
taxes, beginning with the next budget cycle, as the setting
of rates is the responsibility of Council.
b) Direct Staff to investigate a more broad-based method of
setting tax rates, taking into account citizen affordability
measures, such as the changes in per household income in
the City of Waterloo.
c) Consider in the budget development process both the
previous year’s budget and also the actual performance.
The Task Force views the “Infrastructure Deficit” as projected
infrastructure maintenance costs. These costs originally belonged
to regular maintenance costs in previous councils’ operational and
capital budgets, but were deferred or inadequately budgeted,
creating a “deficit” to expected standards of maintenance that
grew exponentially over a period of many council terms.
When the budget was first released, we were surprised with the
massive increase in the infrastructure deficit from $165 million to
$250 million. The Task Force recommended deferring an
infrastructure levy, because it was our view that the $250 million
figure had not been fully analyzed and defined. We are pleased
with your decision against a levy at this time. Thank you.
The City should undertake a thorough and public review of the
infrastructure proposals. We’d like to see citizens and the elected
Council have direct input into the non-legislated infrastructure
quality goals based on projected costs and community outcomes,
so that priorities can be set effectively with costs and safety in
mind. When the level of projected costs are understood, those
costs should be addressed through the ongoing tax base, as
intended by municipal taxation.
The Task Force reiterates what we believe this Council knows:
that all future capital spending must be examined, at the time of
the decision, for the effect on infrastructure forecasts and ongoing
operating budgets. Deferring critical maintenance and other costs
to the shoulders of future councils represents an irresponsible
past practice that citizens trust the current council to end. Even
projects that are paid for by other levels of government still
require the citizens of Waterloo to cover ongoing maintenance,
and hence, require just as much scrutiny as City-funded projects.
In the end, there is only one tax payer.
We recommend that the City of Waterloo:
a) Defer any infrastructure levy until the projected infrastructure
requirements and costs are fully understood.
b) Establish a Citizens’ Advisory Committee on Infrastructure
with the mandate to evaluate and recommend infrastructure
maintenance standards in the City of Waterloo.
c) Ensure all new capital projects are considered for their “life-
cycle” impact on future operating budgets.
We’ve stated in our prior recommendations that it is important
for the City to become more efficient. This does not mean we
think there is purposeful inefficiency. We have found staff to be
professional, knowledgeable and committed to doing their best. It
is our experience that most organizations can undertake a
thorough approach to waste reduction using proven
methodologies and achieve significant cost improvements while
improving quality and often quantity of service. Despite internal
efficiency efforts, we believe significant cost-saving opportunities
still exist that will be difficult for those closest to the processes to
find without support.
Staff is working toward a 1% efficiency target, which is a step. An
internally-based approach that does not affect employee rewards
or provide widespread training and support cannot achieve
ambitious goals. 1% represents too low a target, and we express
concern with an approach that applies a percentage reduction
without transparent systems to track and encourage actual
ongoing operating savings. This is an approach that creates the
danger of slashing, which places strain on staff and the community.
There are better ways to approach costs.
When we analyzed the City’s budget, the 1% savings were not
clear. We saw the budgeted expenses rise from $140 million to
$150 million from 2011 to 2012. That’s a 6.5% increase over last
year. Members of the Task Force believe that management could
be focusing on double digit cost reductions over the 3-year
budget cycle, with regular reporting of achievements to both
Council and the public. The goal is a noticeable reduction in the
year-over-year budget expense.
I want to reiterate: efficiency does not mean doing less. Efficiency
means doing the same or more, better, faster and cheaper, by
working smarter. Reductions in costs come from innovative
approaches and finding more effective ways of doing things
systemically that reduce waste, not by cutting out services that are
currently offered or randomly slashing costs.
To this end, the Task Force reiterates its earlier recommendation
from October 17, that was neither adopted nor rejected by
council: establish a structured plan to embark strategically on an
internal culture shift to an efficiency culture that achieves
The Task Force identified Salaries and Benefits as a focus area
because compensation comprises 56.6% of the City’s Operating
Budget, and therefore could not be ignored.
Compensation includes highly tangible elements, such as pay and
benefits, but also includes those intangibles that can be hidden in
the budgets, such as perks, work hours, level of job security and
other elements employees value. Employees and employers
should consider the full range of compensation and ways to
provide employees with what they value while keeping costs
reasonable and encouraging continuous improvement.
The Task Force questioned the City’s practice of comparing the
compensation package to other municipalities without
consideration of local enterprises and the private sector. The
Canadian Federation of Independent Business looked at municipal
and private sector salaries across Canada in 2006. Although they
did not specifically study Waterloo, the City of Kitchener
reported municipal wages at 10.6% above the private sector.
The effect of binding arbitration, specifically relating to the Fire
Department, appears to significantly hamper the City’s ability to
meet its regular operational duties. A sub-set of the committee
undertook a closer look at Fire, and compensation practices seem
out of synch with expectations from the private sector tax payers,
and outpace the salaries and benefits of other City service
providers. A serious review of these practices appears important
when considering the City’s long-term potential. A summary of
our impressions is included in our full report.
A sub-set of the Task Force researched defined benefit pension
plans, and the OMERS plan in which the City of Waterloo
participates. The structure of the current employee pension plan
creates significant risk and vulnerability for taxpayers now and in
the future. One mitigation approach would be to work towards
agreements that end all future participation in the defined benefit
pension plan, while grandfathering existing employees. We’ve
already seen this trend in the local private sector, with companies
such as Manulife and Sunlife. The latest two companies to close
their defined benefit plans to new hires as of January 1, 2012 was
Royal Bank and Export Development Canada. These companies
will offer a defined contribution pension plan going forward. A
lower risk and lower cost option for the employer.
Due to uncertain markets, persistently low interest rates, and the
fact that OMERS has a large funding deficit, the City’s match in the
OMERS plan has increased from 5% to 12% in a very short time.
In essence, the tax payer is funding the retirement plans of Staff
and Council. In 2010, The City’s contribution to OMERS was
94% higher than it was in 2004, just six years ago. And in just one
year, 2010 contributions went up almost 17%. Employee Future
Benefit liabilities surged 68% since 2002, that’s a 6.7% increase per
If not addressed, the total lifetime costs of employee
compensation can be expected to continue affecting other City
priorities such as funding infrastructure requirements or creating
economic incentives to attract businesses.
While pension obligations and perceived compensation disparities
exist with the private sector, it will be difficult for Council to help
Waterloo citizens understand any tax increases or cuts to
services if compensation is not addressed.
We recommend that the City of Waterloo:
a) Compare compensation practices, including pensions and
benefits, against the local market and adjust practices to
reflect local market conditions across private and public
b) Investigate the magnitude of the City of Waterloo’s future
liability exposure from existing retirement plans, and
investigate options to mitigate any major exposure.
Our Task Force members enjoy the Library, along with countless
The Task Force established a sub-committee to review library
funding. The 3-year funding agreement, widely publicized as
Library Funding, only covers operating costs, not capital. Books,
furniture, and other capital costs are purchased by the City from
the Capital budget. At the same time the City is the landlord of
the Library and performs some maintenance activity for the
Library, not explicitly part of the funding formula.
The funding model is arbitrary. The Library expands or contracts
its services based on funding levels from the City, not community
Members found no clear relationship between the City’s strategic
plan and the Library’s funding. We were concerned to find little
indication that the Library is engaged in long-term planning to
address the flexibility and innovation required in the future of
information delivery technology. E-books alone represent a
disruptive technology that significantly changes the business model
for running a library. Members were unable to find evidence of
significant preparations for a new world of information
We found that the Library recognizes its critical role to provide
information access to all members of the community. In particular,
the Library focuses on increasing inclusion for marginalized
populations in a way that few other organizations can, an
important service in the community.
That said, we found no evidence of partnership with other local
organizations offering similar services, such as computer use,
language lessons, employment and early childhood programming,
to strengthen the fabric of our social systems through
partnerships rather than duplication. At a minimum, the Region
uses our tax dollars to employ a large employment and social
services organization that could support library patrons using
existing service providers, already paid for in our tax burden.
Similarly, the Task Force believes an examination should be
undertaken to determine if opportunities exist to reduce costs for
the Library by providing overhead services through existing City
Since costs are split between library funding and capital costs paid
by the City, citizens lack a transparent view into the cost of
running the library. Without a report-back on specific goals tied
to strategic planning, citizens cannot properly appreciate the cost-
benefit of important investments in the Library. While the 2.5
books per household funding calculation simplifies planning and
budgeting, it disconnects funding levels from expected outcomes.
With the current funding model and metrics, we believe the City
cannot know if the library is under-funded, over-funded or
appropriately funded for the outcomes the community seeks.
We recommend that the City of Waterloo:
a) Work in conjunction with the Library Board to prepare a
“long-term” strategic plan including specific service mandates
that encompass technological advancements, as well as
community social and literacy needs that are tied to city
b) Investigate operating synergies whereby the library and City
can integrate functions, such as HR, purchasing, and
c) Use the current funding period (three years) to research,
engage with citizens and staff, and establish a funding model
based on the service mandates required by the Library
Board’s “long term” strategic plan, as referenced in (a), and
our City’s strategic plan.
d) Require the Library to create an annual report card that ties
funding to operational performance, to increase public
transparency on the benefits of taxpayer spending.
e) Consolidate all operating and capital costs payable by the city
that are related to the library as a single cost item so the full
cost becomes transparent to Council and citizens.
The Citizens’ Budget Task Force is a made-in-Waterloo Social
Innovation, a brave and forward-looking approach not tried
elsewhere, and met with skepticism by some. The experience of
Task Force Members has been positive. We each have a better
understanding of the City’s operations, finances and restrictions as
a result of participating. We hope this level of engagement will
continue and expand.
We recommend that you:
a) Establish an on-going citizens’ budget advisory committee.
b) Encourage the Regional Municipality of Waterloo to
establish a citizens’ budget advisory committee.
c) Publish all Citizens’ Budget Task Force presentations and
recommendations to Council on a permanent easy-to-find
page on the City’s website.
As always, thank you for your time and attention, and once again
for this great opportunity.
I’m reminded of Waterloo’s vision statement which says:
“The City of Waterloo will be a leader in delivering stable, open and
responsible government that helps make Waterloo an even greater
Each member of the Citizens’ Budget Task Force has taken this
partnership with the City seriously, and invested considerable
time and attention into forming this report and recommendations.
We’ve received overwhelming public support in the form of
emails, conversations and local articles. We trust that Council
will appreciate the spirit of our unanimous recommendations as
forward-looking, meant to build on the work already done to
increase stability, openness and responsibility.
We are confident that Council will seriously consider each of our
recommendations with a willingness to bring about meaningful
I’m joined with vice chair, Cheryl Ives, and we’d be happy to
answer your questions.