City Budget Woes Might Mean Layoffs: BENN

Crisis? What crisis?

The City of Ottawa faces an operating budget shortfall. The same one that existed at the time that city council passed the not-balanced budget earlier this year.  At the time the city contemplated receiving tens of millions of dollars from the provincial and federal coffers to cover … well operating expenses. Except neither the provincial nor the federal budgets offer anywhere near the contemplated funding.

WoeC Transpo has a projected operating shortfall of $39 million. Nothing will be coming from Queen’s Park or Parliament Hill to cover that. Ouch. The city has cited a need for convoy related expenses of about $18 million. Isn’t that last year’s operating expense? In any event, the federal budget has a bucket of cash that might be available to cover some of it. Details to follow … much later.

So, what is a rookie mayor supposed to do? His not-balanced budget of just a month or two ago already promised tens of millions of dollars of unidentified efficiencies. Now he has several more tens of millions of dollars to find. So yes, council is facing a crisis, whether they choose to acknowledge it or not.

Where to start? What cost cutting model to follow or adapt? I have a few suggestions, guidelines if you will, for Mayor Sutcliffe to consider.

Who Or What Gets City Hall Axe? MULVIHILL

The starting point should be to identify the largest cost category in the operating budget.  A one or two per cent cut in a very large expenditure is often greater that the sum of the bottom two or three items in the budget.

Mayor Mark Sutcliffe won’t find it in the budget overview documents, but here is a hint. Compensation is the biggest single cost element of the city’s operating budget.

The city recently won accolades for being a best employer. Awarded by whom? Doesn’t matter. But the promotional material states that the city has 12,899 full time employees, with another almost 7,900 part timers.  A conservative estimate of the fully loaded cost per full time employee would be $100,000. Fully loaded includes payroll taxes such as CPP and EI. Add in group insurance and pension contributions. Does $100,000 seem high? Well 45 per cent of the city’s employees were on the Sunshine List of earning over $100,000. My order of magnitude arithmetic shows that full time employee compensation represents about 29 per cent of the $4.5 billion operating budget. Let’s round that to 30 per cent when we factor in compensation for part timers.

Every one per cent cut in the $1.3 billion compensation expense line represents $13 million.

A long since discredited cost cutting model involved slicing the bottom off the organization chart. Terminate a large number of low-cost-per-unit employees. This saves the jobs of the middle and senior managers. Except it is the rank-and-file who do the daily tasks. They cut the grass in the city’s parks. Plow the snow from the bike lane onto the sidewalk. The sort of thing that needs to be done on a regular basis. The sort of things that the city is required to do.

A cost-cutting model that came into vogue about three decades ago was to trim the sides of the organizational chart. Cut one executive, two or three mid-managers, five or six entry level managers and then a dozen or two off the bottom of the organization. This assumes that their workload can be spread over the survivors. It works for professional organizations – law firms, public accountants, engineering companies. For the city? Not sure it would work where there are so many disparate departments.

That takes us to the model used successfully by technology companies. They retrench, refocus on core capabilities, and carve out the product lines that no longer fit the tightened corporate vision. Once those cuts are made, they focus on the bloat within the remaining departments, and identify the under performers.

This model may work for the city. The city is required, by statute to perform certain functions. That is the core. Everything else fits into the nice, but not necessarily necessary to have category.

Start with the programs that are focused on the self-interest groups. For instance, the we-need-more-green-paint lobby that is focused on enhancing the safety of the cyclist. That’s not to say enhanced safety for cyclists is not a good thing. However it fits the nice, but not-necessarily-necessary category. The savings are not limited to the cost of the green paint, or to the rank-and-file staff who apply it to the asphalt. There are low-level managers to whom the street-painters report. There are mid-level managers who are tasked with preparing RFPs for green paint. Others who are tasked with managing the identification of the next stretch of pavement to receive green paint. You follow my drift. There are many more such examples. If Sutcliffe needs any other ideas on superfluous departments, he should call former mayor Bob Chiarelli.

Next up. Which departments are over-staffed relative to the expected workload? Consider the planning department. Now that the Official Plan is in place, do we need as many concierges to shepherd zoning variances through city hall? With the land near every LRT station, present and future, zoned to 40 storeys, the development industry won’t need to seek as many variances. Sure, there will be a handful who want 50 storeys, but isn’t that just high-rise envy?

For some small but signal generating, cuts, examine the group responsible for failing to draft bylaws that actually work. That Taggart could clear cut a reported 25,000 trees from not-agricultural land that they want to have zoned as residential without even having to ask for a permit raises the question of competence. A loophole big enough to drive several log-laden 18-wheelers through is Exhibit A. No need for Exhibit B.

Who should be tasked with this effort? The big municipal consulting firms have a vested interest in not disturbing too much of the accumulated dust at Ottawa City Hall. Recommending significant cuts will be remembered by the survivors, and it will be held against the consulting firms when the next RFP is drafted.

Consideration should be given to someone who has had an inside view of city hall. A retired chief administrative officer. Not the most recent city manager Steve Kanellakos.  There isn’t a pole long enough to keep sufficient distance from him. I am thinking along the lines of Merv Beckstead.

It’s worth stressing that terminating the employment of anyone should not be taken lightly. The negative impact on that individual’s life can be profound. The impact on the morale of the remaining employees can never be over-estimated. The actual cost of termination settlements will increase the operating expenses in the short term, but the long-term gains can last for decades.

Ron Benn, a finance executive, has been a member of the Centrepointe Community Association for the better part of three decades.

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