Monday, 11 November 2013

Remembrance Day; but politicians forget

On this day of remembrance, it is unconceivable that Canadians do not take some time to examine the financial plight of our veterans. Over the years governments of every stripe have been responsible and responded to the call to arms with when required. Our young men have been thrown into the battlefield on several occasions to respond to attacks by our enemies. World War One and Two come to kind but we must not forget the other campaigns of Korea, and more recently the two wars in Iraq, and the continuing one in Afghanistan.

Despite President Obama’s stupid declaration that “the war on terror is over”, we shall continue to have skirmishes and perhaps even greater conflicts in the future.  The bigger issue that we should consider, on this day, is not only how we honour the heroes of the past but how we treat the survivors of all these wars. It is apparent that once these heroes return home they are quickly ignored and left to their own devices to survive in a world which they sometimes feel they do not belong due to mental and physical illnesses suffered on the battlefield.

Today with advances in medicine there are more survivors, but alas many of them survive without limbs and mental problems. Today we acknowledge ‘Post Traumatic Stress Disorder’ which once was diagnosed as ‘shell shocked’. Yet we still do not do enough to re-integrate these great men into normal life.

In addition, governments try to ignore the financial plight of these men. We talk a lot about their bravery but we do little to compensate them adequately for their service. This is not a partisan issue as governments on different political spectrum treat these men with the same disregard. The Conservative government in Canada and the Democrat and Republican leadership in the U.S share the same blame.

We remember these men’s and women’s sacrifices, but we do not compensate them appropriately. Yet governments get bigger and salaries and union wages keep growing and increase the taxpayers’ burden. But we do not find enough funds to make sure that these heroes have a future life devoid of the financial loads they face.

For the past couple of months we have seen the Senate travesty of politicians defending the alleged misuse of taxpayers’ money by three Senators. We debate whether they should retain their health benefits and pensions, and yet we do not debate how we can better look after our soldiers.  Mental health is difficult enough to treat, but financial help should be easier. It takes only a change in Legislature and Congress to remedy the situation.

On November 11 of each year we have ceremonies around the world to honour the fallen, but the following day we do not discuss how to look after the survivors. New generations are reminded:  “Lest we forget’, but it seems that politicians of all stripes do forget what we owe the fallen and the survivors. Politicians should cut the rhetoric and provide the survivors of all wars with adequate support.

Marcel Latouche

Wednesday, 30 October 2013

Kabuki, or dance of the seven veils?

The senate debacle is bad, not only for the Conservative Party but for the country. For too long this establishment has taken Canadians for granted. As appointed members of the Upper House they not only enjoy many perks but  it seems that some of them may also enjoy a different form of justice.

The case of Mike Duffy, Pamela Wallin and Patrick Brazeau has shed a light on how  brazen these people can be in their use of public funds. It seems that the rules can be interpreted in many ways so as to extort as much as possible from  the public purse.

The rules which has sunk these three senators is about the expenses claimed, among other things,  for the use of an address used to claim their main place of residence. It appears that on top of some other expenses which have been deemed to be out of line, the main problem is that these senators claimed that their place of residence was in the constituency they represent. That is P.E.I, Quebec and Saskatchewan. But it seems that all three of them rarely spent any time in these abodes and more importantly were rarely seen to be in the residences.

The more important question is why the delay and high drama theatre being used to deal with this matter. In the private sector people who are found to have breached rules of employment are summarily dismissed. They are also allowed due process if they so wish and address their grievances in court, post dismissal. Here what is interesting is that these people get the opportunity to waste time in the senate to argue their case in front of their peers. Who in many cases may be suffering from ‘cold feet’ because they may be found to have perhaps broken some of the rules themselves.

As a result all three senators are using their membership in the senate to release information about their treatment at the hands of the PM and the Senate majority. These bits and pieces of troubling information may or may not be true. The result of the RCMP investigation is yet to be released. At this time it seems that it may well be a case of ‘he said and I said’. The somewhat daily revelations are like the ‘dance of the seven veils’. While Mr. Duffy’s performance may not be erotic it is certainly very revealing on how the system works and how entitled the performer feels.

The Prime Minister who appointed these senators finds himself in a very precarious situation, since he did not take immediate action when these troubling facts were first released. The role of the PM’s staff is even more troubling. Did they or did they not inform the PM when the $ 90,000 and legal expense fees transactions were taking place? If not what else do they not divulge to the PM? Or is it that the PM is so embarrassed by his decision to appoint three persons that I would never consider as true conservatives to the Senate.. Or is fighting an internal move by the Progressive Conservative members in his caucus to assert themselves before any change in future leadership? Because it seems to me that the reluctance to punish these alleged culprits is coming from senators from the East rather than those from the West,who express their opinion, may be not publicly, but want to deal with this issue as soon as possible.                                                                                             
 Furthermore it is clear that the public is taking a very dim look at the PM’s performance as is reflected in the latest polls, which now places him behind the two other leaders of the opposition. There are far more important issues to discuss and this is a distraction of enormous proportion that may lead to the demise of the government, which as a result may derail the economic gains that Canada has enjoyed over many of its competitors. Politics continues to be a theatre, that citizens do not want to pay for with their hard earned money.                                                                                                        
Get rid of the three senators, and let them fight it in court if they so wish, but get rid of them now. May be this incident may give rise to stopping the ‘Kabuki’ and the dance of the seven veils’ by abolishing the Senate . Canadians have had enough.

Marcel Latouche

Monday, 22 July 2013

Ignorance is no excuse; or is it bliss?

Political scientists and economists, often discuss Agency Theory which is the relationship between a principal and an agent. In this relationship the principal (Council) delegates (the Administration) to perform work. The theory deals with two problems:  the first is that the goals of both the principal and the agent are in conflict, and it can be difficult for the principal to verify the agent’s work. The second is the risk sharing issue, because the principal and the agent have different risk tolerances.

In light of several recent reports from Council dealing with costs overruns, it may be time for Calgarians to take a good look at the Agency Theory to explain the reasons for some if not all the costs overruns of Calgary's capital projects.

The latest of these audit reports address the costs of the West Leg LRT. While the line is in operation we still have additional costs not yet accounted for. In 2007, Council approved $700 for vehicles, construction design and land purchase. In 2008, due to several revisions to the original plan, Council approves and additional $121.4 million. Between 2009 and the 2012 opening of service Council adds an additional $389.7 million, including $142m for land. In 2010 the budget is reduced by $5 million but the cost of landscaping is yet to be included in 2013.

As you can see, it seems that this project never had a full analysis before approval. Council seemed to be eager to move on with the project despite the fact that there were many unknowns. One fact that is not very well known is that the former Mayor owned two properties on the proposed line.  Of course after the audit, Management accepts all the recommendations made to improve the Corporate Project Management Framework. What else could administration do, say No to the recommendations? Unfortunately for the taxpayers , as usual the horse had already bolted.

This is not the first time that projects at City Hall have suffered the same results and audit scolding. We had the debacle of the East Village, the widening of 16th Avenue, the Crowchild bike path, the problems with the Centre Street Bridge, the lack of a budget for a kitchen in the Telus Convention Centre, and of course the yet to be resolved costs of the Peace Bridge among other projects.

If it is not coincidence it must be a clear pattern of the agency theory problems; one either Council does not have a grasp of what administration is doing, or that the risk taking differences are so large that they cannot be reconciled. Either way, the costs of the consequences of bad management falls directly on the taxpayer who in the end always pays for the mistakes.

It seems that Council has the problem of fulfilling its promises to the electorate without looking clearly at the risks of undertaking such promises. The other issue is that administration is willing to low ball the costs, and minimize the risks to please their masters and get the project going, despite the fact that the full extent of the project costs may not be known at the time of approval. It may be in the interest of administration to do so because it seems that the high ranked executives may have their bonuses attached to performance and the completion of these projects.

More importantly for Ald. Pincott, a Chair of the audit committee, and some of his colleagues to claim ignorance or lack of information is inexcusable. Clearly due diligence and oversight were missing. Given these past problems and the often un-scrutinized bonuses at City Hall, Calgarians should demand that we move away from the current practices of project analysis, budget management and lack of proper accountability. Although P3s may not be the panacea for better management, it seems that it could well be time to consider more private/public partnerships with strong and verifiable contract caveats, including penalties for non-compliance and late delivery.

A departure from current practices is more imperative now than ever due to the amount of reconstruction that will be required as a result of the 2013 Flood. Calgarians cannot afford anymore blunders, or bad budgeting for future projects, notwithstanding whether they are essential or nice to have. The latter of course should be completely discarded and ignored.

Marcel Latouche

Tuesday, 2 July 2013

Water Management

A recent report issued by the Federation of Canadian Municipalities estimates that to replace Canada’s water, stormwater and wastewater infrastructure will cost approximately $80 billion or more.
In Canada, municipalities and the public at large have taken water for granted, and as a result over the years the management of water may have been left to be desired. Either there was no long term planning or it was lucrative to charge users for water and wastewater treatment and pocket the surpluses instead of re-investing in infrastructure as may have been the case for some cities.

It is reported that all around the country infrastructure is crumbling. That as a result of growth and climate change the burden of water management will increase. There is no doubt that this may be true, but to call it a deficit for some cities without exploring all the facts is disingenuous.

Denise Deveau of the Natonal Post , reported that Paul Fesko, manager, strategic services for water resources with the city of Calgary commented :
“The only way we could grow as a city was to be more efficient in the way we use water,”... “Those rivers aren’t getting any bigger and no extra money is coming in. We just have to keep getting better at reducing per capita demand.” 
In the case of Calgary, there is no doubt that we need better water management, but to have an informed debate, the public must be given the true facts. First and foremost for years Calgary refused to have water meters, because a former Alderman Sue Higgins always opposed it. Over the years the policy has changed and we now have meters in new homes and increasingly older houses. The question is whether it is a deficit or poor management?
Case in point; the City of Calgary  recently had to postponed the opening of a multi residence apartment because it was found that the existing sewer system would not be able to accommodate the increase usage in that area. Furthermore, policies in Calgary have pushed for increased development in the downtown area, which has old infrastructure which needs upgrading. Although there has been an aggressive infrastructure replacement program over the years, one must remember that in the eighties the water utility operations had an estimated deficit of $2 million per year.

The perennial mantra for more money does cut mustard in Calgary. In a report done for then Ald. Ric McIver –The Case for Controlling Utility Rates, It was found  that over the years, through a unique utility model and policies, the City had been siphoning out millions of dollars from the utilities by charging a 10% franchise fee and a 10% dividend payable by both water and wastewater utilities. These charges were in the range of $50 million per year. All the money was diverted to general revenues which were then spent on other services. I termed this policy ‘vicarious taxation’ because unlike some other cities, the price of utility services is not included in property taxes; hence the claim that Calgary has one of the lowest property taxes in Canada.

The policy was changed to cap the yearly payment to $25 million. Had the revenues been placed into a replacement reserve, millions could have been spent on both new infrastructure and maintenance costs, and rates would not have to be  increased to build new facilities.

For years the Institute for Public Sector Accountability has called for a different governance structure for Calgary’s utilities, one more in line with the structure used by Edmonton for Epcor, who serves 50 other communities. The model is not privatization, but an arm’s length operation which forces them to have better long term planning, and as a result produces a more efficient use of resources.

In Calgary, the diversion of revenues generated by the utilities to the general fund is one of the reasons why we may have an infrastructure deficit or a lack of money for maintenance. And a policy to increase density in old areas will definitely acerbate the problem.
Any Canadian City using the same utility model and policies as Calgary could find themselves in the same wanting situation. But is it lack of funds, or is it lack of management foresight? Should we look at privatization as a long term solution?

Marcel Latouche

Friday, 31 May 2013

Dragon's Den produces More Taxes

For a number of years Calgary’s Mayors have been complaining about the lack of funding from the Province. This issue has been the constant mantra of both Mayor Bronconnier and Mayor Nenshi. Their argument stems from the fact that approximately 40% of the property tax collected in the city goes to the provincial education portion.
Their argument, on the face of it, seems to be fairly simple; if the province vacated the education tax, Calgary would be entitled to 100% of the property tax collected in the City. Hence Calgary would be able to provide more services or infrastructure for the benefit of its citizens. Creditable argument, one would agree.

However there is more to this argument than meets the eye. Over the years both the current Mayor and his predecessor have made no attempt at cutting or even controlling rising costs. Instead they have continued to obfuscate the financial issues by implementing bogus budget systems which have no transparency.

First it was the three year budget. This process was nothing more than a business plan with tax increases for three years. The budget, unlike previous years was subject to public participation only in the first year. The following two years’ budgets were summarily discussed by only members of Council. To that effect Calgarians have seen no change in the proposed taxes, despite changes in the economy.

Enter Mayor Nenshi, a former ‘non-profit finance’ lecturer, who promised change. He puts into place another City designed budget system called ‘zero-based-reviews’, which promises to give Calgarians what they ‘want’. Problem is that this system coupled with the ‘Municipal Price Index’ is once again not transparent, and results in no real savings that can be vetted by Calgarians. Instead any ‘savings’ are quickly spent somewhere else.

In addition when the Province decides to return the education portion of the tax collected, the amounts are quickly appropriated and spent. This appropriation causes the true rate of property tax for 2013, to be 13%, another double digit tax just like the previous year.

In the midst of an outcry by both the media and the public, Mayor Nenshi, instead of returning the money to Calgarians in the form of a tax reduction, decides to have a bogus public consultation in the form of a popular TV show’. He invites one of the show’s hosts to chair a discussion among himself and other Aldermen to decide how the $52 million given back by the province should be spent.

Among the proposals are:
Money for transit, reduction of the business tax, revitalization of communities, reduction of the debt, and lastly give it back to Calgarians. Therein lays the management problem. Do we need a gimmick to make an important decision? One would have thought that the great business plan or ‘zero-base- review’ process would have a priority list which Council could use without any organized publicity stunt masquerading as a public consultation.
The Mayor agrees that $52 million while not a large percentage of the City’s budget, ‘it is a lot of money’. Money I might add came from the taxpayers’ pocket and in all fairness should be returned in the form of a tax reduction and not further spending. By the way this money must be used for capital and not operating expenses. What we must consider is that any capital expenditure will generate future operating expenses;  resulting into future tax increases because  Council refuses to look at alternative ways of delivering services.

This so called windfall sheds a new light on the discussions for a new City Charter. When mayors ask for more power, it will result in only one thing – the ability to tax. While Calgarians have been let to believe that more money from the province will reduce their taxes, they must think very carefully before they agree to more powers of taxation. In addition the new four year term for Council may generate a four year budget, which may result in no public consultation for three years.
Since, in recent past, Council has not adjusted proposed tax rates to reflect economic realities, Calgarians will only face tax increases instead of good financial management.
 With more powers there will be no reasons for any cost cutting, but further excuses for ‘investing’ citizens’ money. Calgarians should beware what they wish for.

Marcel Latouche