Municipal overspending proves costly, says watchdog
Excessive city spending took $ 8,500 extra dollars from each Calgary household over the past decade, according to the latest report from the Canadian Federation of Independent Business ( CFIB).
The study, which focused on 14 major cities, found widespread overspending, where operating costs far outpaced the reasonable benchmark of inflation and population growth between 2003 and 2013. But in Alberta’s big cities, it was significantly higher than even the national average.
Operating spending ballooned by 80 and 74 per cent in Calgary and Edmonton respectively, even after adjusting for inflation, which is more than three times the rate of their population growth over the past decade, according to the report.
“Cities have to start making better decisions around planning over the long term,” said Amber Ruddy, Alberta director for the CFIB.
“We keep hearing about cities having a ‘ revenue problem,’ but it is clear that it’s a spending problem they are dealing with,” added Laura Jones, CFIB’s executive vice- president.
But Coun. Ward Sutherland, head of the city’s finance committee, argued that a city like Calgary, which has seen unprecedented growth over the last 15 years, is just now starting to catch up.
“When you have the growth we’ve seen over the long term you’re just starting to meet demands, especially in areas like infrastructure, or transit growth. And these are very high spending costs where you don’t always get much of a return,” he said.
“We have literally seen 40,000 people come to this city, every year, over the last five years. It’s only in the last year, it’s slowed down a bit.”
But the CFIB report, entitled Canada’s Municipal Spending Watch, goes on to claim most of the cities studied allocate over half of their operating spending to employee wages and benefits.
Spending on municipal employee compensation has grown drastically, in part because cities, large and small, have expanded the size of their workforce more rapidly than the private sector during the past decade. On average, cities across Canada overspent by $ 5,200 per household, or a total of about $ 68 billion between 2003 and 2013.
On top of that, a municipal government worker in Canada is paid 22 per cent more in wages, salaries and benefits than someone in the private sector doing the same job.
In Calgary, Ruddy said, city employees are earning about 19 per cent more than their counterparts holding similar positions in the private sector.
But Sutherland refutes that data as well, saying the city’s human resources department researches private sector wages regularly to ensure city wages are comparable.
As well, since many senior employees were hired during better economic times, the city is now faced with paying them higher wages. Whereas private companies whose employees aren’t unionized may have more leeway.
Sutherland added that the city signed four- year contracts with its major unions back in 2013 when times were still good in Calgary.
“We are heavily union- based, and that is a problem. But what can you do — if you maintain a hard line, you force a strike. And then you still have to pay legal costs, and the wages of the workers that do the work while they’re out.
“And by the time its all over, you’ve spent so much, you may as well have given them the raise anyway.”
But Ruddy argues the city needs to do better at planning for wage hikes in the long term, and wage freezes, layoffs or contracting out more services should not be ruled out.
“It’s unacceptable to just say ‘ these wages were negotiated in good times.’ There really need to be some readjustments.”
While Calgary and Edmonton were high on the overspending spectrum, Victoria was the nation’s worst offender as inflation- adjusted operating spending increased by 36 per cent, six times the rate of population growth from 2003 to 2013.
Cities that showed some signs of promise include Ottawa, which kept its inflation- adjusted operating spending close to the population growth benchmark, Montreal, which made progress with reductions to personnel costs, and Toronto, which reduced spending in recent years to meet the benchmark.