City Chose Extravagance Over Good Sense: BENN
We are where we are because we spent money that we didn’t have, but hoped we might get, later.
That pretty much sums up City of Ottawa deputy treasurer Isabelle Jasmin’s remarks to council earlier this week. “The situation we’re in is the equivalent of buying a new house based on a salary that you were expecting to earn and a mortgage you can afford and then losing your job and living on a reduced income when at the same time interest rates are going up,” Jasmin told councillors.
Let’s parse that quote.
Buying a new house. Why? Was it because the old house no longer met our needs? Or was it because we wanted to show off to our friends and family? Showing off. With visions of a world-class city dancing in their heads, previous councils chose, note the intent of that word, to spend money that they didn’t have on an unproven LRT system designed to win awards. Showing off. With visions of matching, dare I say exceeding, the architectural wonders of central libraries that Halifax and Calgary had built a decade or more earlier, to replace the functional but aging existing central library.
Based on a salary that you were expecting. The city overspent with the full knowledge that the current revenue levels were insufficient to cover the mortgage payment. Council imagined what was possible if only they were paid what they wanted to be paid. Now there is a disconnect from reality that is rather sobering. Fiscal management fueled by fantasy.
Then losing your job and living on reduced income. That is a reference to the pandemic. In fairness, that one came out of the blue. It is not fair to criticize council for not anticipating a worldwide event that changed some long standing planning fundamentals.
When at the same time interest rates are increasing. Let me get this straight council. A few years ago, pre-pandemic, interest rates were at generational lows. In which direction did you think interest rates would go? Let me shorten that question. Did you think?
So here we are. A city that is facing what it acknowledges is a financial crisis. Not because they chose, again a word of intent, to spend money they knew they did not have on high-end products when more practical, lower-cost alternatives were available, using low-interest debt when the only reasonable expectation of direction was up.
But it’s not their fault.
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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I was hoping for more comments.
Generally I like whay Ron has to say.
The problem of overspending is not going away by itself…but thesr councillors were voted in fair and square. Only the voters can remove them.
Is it hurting enough yet?
I do not think so. Hubley got back in!
What will it take to sway voters?
You have to start now..but what does one say…”stop spending?”
No! Spend smarter, save harder, work longer, and appeal to common sense.
Its still no guarantee in our dumocraceeee!
I wonder if Isabelle Jasmin saw the irony in her comparison of the City financial position to a person with a job and a mortgage. There were staff people sitting in that room and watching from their offices who are inevitably going to be swept up in the reckoning that is coming. As a result of years of poor management and terrible decision-making at the City, they will find themselves on the curb when the axe falls on staff members across the City.
Will they step back and look at their situation and ponder Mme Jasmin’s understanding of the dire straits of their former employer? I find it hard to believe that she couldn’t have found a less fraught example.
They is lots of money (taxes) to be saved if the city would actually concern itself with just how inefficient city staff are. Around 70% of the budget pays staff costs. That is in the realm of companies that have little capital expenditures….software creators, designer firms etc. Cities have massive infrastructure obligations. Small wonder the well is dry. Let’s compare 2 notoriously poorly run organizations; The city of Ottawa and the National capital Commission and the condition of the Sir John A Mac Donald parkway now Kichi Zibi Parkway. The pavement was always in fairly good condition under the NCC but when Ottawa jumped into LRT with both feet they cut a deal with the NCC to allow buses on the parkway as the transitway was planned to out of commission until what 2025ish. Ha, Ha but that’s yet another issue. The deal was the city assumed maintenance responsibility for Kichi Zibi (asphalt work, plowing/salting) , Island Park dr (asphalt work?, plowing/salting). and the Champlain Bridge (plowing and salting). Anyone notice that the standard of what is acceptable for roads of the parkway is as bad as every other road in the city. It’s time the city got their/our monies worth out of city staff. We pay a premium price for them but do not get an equivalent degree of labour from them. There are exceptions but there is a reason that this old joke is still valid. What’s yellow or organge (I forget) and sleeps 6? A city crewcab pickup. For those new to Ottawa pre-amalgamation the city’s colour was different than today.
Ron,
To add to your comment about spending money they didn’t have, the City also spent money they didn’t need to spend. As an example, the Transitway was outfitted with stations along its route, many of them located in the same place as the LRT stations and most of them in not too bad shape. Instead of adapting the existing stations to serve the LRT, they were, for the most part, torn down to be replaced with expensive structures that were not as secure or comfortable as the Transitway version. Most of them are open to the elements and there are few washrooms or other facilities available. But they shure are purty in some people’s eyes!!
The decision not to utilize the existing stations added millions to the cost of the LRT for no added benefit to customers. It also demonstrated that, in their pursuit of “world-class” standing, Council and their servants were not interested in fiscal responsibility. Had the money thrown away on new stations been spent on cars or rails that worked, we might have avoided considerable expense down the road.
I had cause to be at the Cyrville Station the other day which is the one closest to the City’s Election Office. While it’s glorious to behold, the purpose it serves could just as easily have been served by upgrading the pre-existing Transitway station.
To respond to Isabel Jasmin’s new house/mortgage analogy, when your current house is no longer meeting your needs you have more than one option. You can upscale and build a new house with a mortgage to match as she says the City did. Or you can look again at your existing house and see if you can adapt it to meet your needs. That might entail adding an addition or finishing the basement, either of which will generate costs but nowhere near what a new build would bring. The prudent homeowner considers all the alternatives first before deciding on an option. The new-build option only gets chosen if other options, taking into account practicality, cost and convenience, don’t make the grade. Going the new-build route (or any other one, for that matter) also means that you have examined the potential risks of each option including possible income loss or changing family situations such as health issues. Those potential risks are one of the reasons that our prudent homeowner takes out mortgage insurance to protect themselves and their family from a calamity.
They prioritized the ‘nice-to-haves” over the “need-to-haves” to the detriment of the system and we will be paying for those mistakes for years to come.