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Analysis of City of Analysis of City of Hamilton ExpensesHamilton Expenses

Civic League Financial Sub-team

January 8, 2013

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Truth in NumbersTruth in Numbers

Present information that informs and motivates citizens to increase involvement in municipal affairs

Identify topics to become issues in 2014 municipal election

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MethodologyMethodology

Obtained data from the Ministry of Municipal Affairs and Housing website for Financial Information Reporting (FIR) and Municipal Performance Measuring Program (MPMP)

Used data from reports for 2002 to 2011◦ Amalgamated city’s first year was 2002

Looked at data for ◦ Salaries, wages and benefits◦ Materials◦ Contracted services◦ Number of employees◦ Number of citizens and households◦ Fire, Police and Waste Management

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Consumer Price Index (CPI)Consumer Price Index (CPI)

CPI has increased by 19.9%◦ from 100 in 2002 to 119.9 in 2011◦ 2.2% / year

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Population and Number of Population and Number of HouseholdsHouseholds

City’s population has increased by 8.3%◦ from 490,270 in 2002 to 531,057 in 2011◦ 0.9% / year

City’s households have increased by 9.3%◦ from 194,155 in 2002 to 212,262 in 2011◦ 1.0% / year

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Number of City Employees

5,895 5,930

6,296

4,631

1,870

1,618

838

19578

0

1,000

2,000

3,000

4,000

5,000

6,000

7,000

2002 2006 2011

Full-time funded positions

Part-time funded positions

Seasonal employees

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Number of employeesNumber of employees

City’s full-time funded employees have increased 6.8%◦ from 5,895 in 2002 to 6,296 in 2011

City’s part-time funded employees have decreased by 65.1%◦ from 4,631 in 2002 to 1,618 in 2011

City’s seasonal employees have decreased by 90.7%◦ from 838 in 2002 to 78 in 2011

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Compensation Expenses

$0

$100,000,000

$200,000,000

$300,000,000

$400,000,000

$500,000,000

$600,000,000

$700,000,000

2002 2006 2011

Total Salary and wages Benefits

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Compensation SpendingCompensation Spending

Total salaries, wages and employee benefits have increased by 61.2%

◦ from $388MM in 2002 to $625MM in 2011◦ 6.8% / year

Salaries and wages have increased by 37.6%◦ From $354MM in 2002 to $487MM in 2011◦ 4.2% / year

Benefits have increased by 310.8%◦ From $33MM in 2002 to $137MM in 2011◦ 34.5% / year

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Compensation Expenses Actual annual compensation

$0

$100,000,000

$200,000,000

$300,000,000

$400,000,000

$500,000,000

$600,000,000

$700,000,000

2002 2003 2004 2005 2006 2007 2008 2009 2010 2011

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Compensation Expenses Actual annual compensation and CPI-inflated compensation

$0

$100,000,000

$200,000,000

$300,000,000

$400,000,000

$500,000,000

$600,000,000

$700,000,000

2002 2003 2004 2005 2006 2007 2008 2009 2010 2011

Actual annual compensation

CPI-inflated compensation

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Compensation Expenses Cummulative premium of actual verses CPI-inflated compensation

$0

$100,000,000

$200,000,000

$300,000,000

$400,000,000

$500,000,000

$600,000,000

$700,000,000

$800,000,000

$900,000,000

$1,000,000,000

2002 2003 2004 2005 2006 2007 2008 2009 2010 2011

Actual annual compensation

CPI-inflated compensation

Cummulative difference

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CompensationCompensation

If compensation had grown at the same annual rate as the CPI, spending on compensation would be 32% less than it is today

For 2011, this equates to $153MMTotaling the annual differences from 2002 to

2011, actual compared to CPI growth, the City has “over compensated” by $892MM

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Compensation and TaxesCompensation and Taxes

Net taxation available for municipal purposes in 2011 was $720 MM

86.8% of net taxation is used to pay for salaries, wages and employee benefits

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Materials and Contracted Services Expenses

$0

$50,000,000

$100,000,000

$150,000,000

$200,000,000

$250,000,000

2002 2006 2011

Materials

Contracted Services

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Materials and Contracted Services Materials and Contracted Services SpendingSpending

Materials have increased by 43.0%◦ from $163 Million in 2002 to $234 Million in 2011◦ 4.8% / Year

Contracted Services have increased by 102.2%◦ from $89 Million in 2002 to $181 Million in 2011◦ 11.3% / Year

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QuestionsQuestions

Why are expenses increasing faster than the population and households?

Why are expenses increasing faster than the CPI?

Why are employee benefits increasing so fast?

Why are contracted services increasing so fast?

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Police Expenses and Crime Rate

$214.82

$244.42

$269.27

62.987 61.27453.041

2005 2008 2011

Operating costs for Police service / citizen

Total Crime Rate (Criminal code offenses less traffic)

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Policing Services SpendingPolicing Services Spending

Policing operating costs per citizen have increased by 25.3%

◦ from $214/citizen in 2005 to $269.27 citizen in 2011◦ 4.2% / Year

Total crime rate has decreased by 15.8%◦ from 63 in 2005 to 53 in 2011◦ 2.6% / Year

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QuestionsQuestions

Why is the cost of policing increasing faster than the population and households?

Why is the cost of policing increasing while the total crime rate is falling?

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Fire Services Spending

$55,928,268

$66,327,398

$80,551,308

$0

$10,000,000

$20,000,000

$30,000,000

$40,000,000

$50,000,000

$60,000,000

$70,000,000

$80,000,000

$90,000,000

2005 2008 2011

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Fire Services SpendingFire Services Spending

Fire Services operating costs per have increased by 44%

◦ from $55.9MM in 2005 to $80.5 in 2011◦ 7.3% / Year

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QuestionQuestion

Why are Fire Services costs increasing faster than the households?

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Waste Management Tonnages

0

50,000

100,000

150,000

200,000

250,000

300,000

Total tonnes Collected from AllProperty Classes

Total tonnes Disposed of fromAll Property Classes

Total tonnes Diverted from AllProperty Classes

Total tonnes Disposed of andTotal tonnes Diverted from All

Property Classes

2005 2008 2011

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Waste Management Costs

$0

$2,000,000

$4,000,000

$6,000,000

$8,000,000

$10,000,000

$12,000,000

$14,000,000

$16,000,000

$18,000,000

$20,000,000

2005 2008 2011

Operating Costs for Garbage Collection

Operating Costs for Garbage Disposal

Operating Costs for Solid Waste Diversion

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Waste Management CostsWaste Management Costs

Collection costs increased 69% from 2005 to 2011◦ 11.5% per year

Disposal costs increased 102% from 2005 to 2011◦ 17% per year

Diversion costs increased 60% from 2005 to 2011◦ 10% per year

Combined costs increased 77% from 2005 to 2011◦ 12.8% per year

Total tonnage handled decreased 12% from 2005 to 2011◦ 2% per year

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ConclusionsConclusions

City of Hamilton’s expenses are too highHigh salaries, wages and employee benefits costs

make the City increasingly dependent upon higher taxes, higher user fees and funding from federal and provincial sources

City of Hamilton needs to improve efficiencyCity of Hamilton needs to understand their cost

driversCity of Hamilton needs to review their

procurement practices

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Possible Solutions

Pension plan going forward converted from defined-benefit to defined-contribution

Eliminate banking of sick daysRestrict vacation carry-over to 2 weeksReduce number of employees through attrition,

i.e. do not hire to replace all retireesRe-deploy employees to highest prioritiesRequire retirees to pay 50% of their medical

benefitsApprove expenses based on efficiencies and

service levels