Your January 2012 Executive Committee Preview

Rob Ford at an Executive Committee meeting, presumably telling a deputant to live long and prosper. 

So Tuesday brings us another Executive Committee meeting and there's several items on the agenda that will generate interest. There's also one item that will be introduced at the meeting, as Michelle Berardinetti will put forward a motion to encourage local businesses to apply proceeds from the five cent plastic bag fee  towards protecting Toronto's tree canopy. 


The item that will generate the most interest is on selling TCHC homes, and there are also motions on Dave Meslin's Fourth Wall and Occupy Toronto that are of note. 


TCHC Motion:


The TCHC motion to sell 675 standalone homes will begin at 1:30pm and will be the most contentious of the day. 


The administration argues that there is a backlog of capital repairs ($650M) to be done on TCHC housing and the standalone homes are the worst of the lot. These homes are also relatively high-value (they're right around the city averarge for home values in the mid-$400,000s). City staff figure that selling 675 homes would generate somewhere in the neighbourhood of $330M after fees. 


But there are significant downsides to the plan. While a number of the existing houses are in dire need of repair, some are perfectly fine and so amount to a decrease (or cash-in) of the existing housing supply. 


This comes at a particularly bad time. There are currently 81,000+ on the waitlist for housing and this grows each year. Over the past three years the number of new tenants coming into TCHC housing has declined from 4,266 to 3,733 to 3,300, indicating that lower turnover will cause the waitlist to grow longer. The reduction of the proposed sale units (as current tenants will be relocated) will further exacerbate this problem. 


Moreover, there are questions as to how much such a big sale will actually help. The proposal at hand suggests using the $330M as an endowment of sorts to be invested in a a safe investment like an annuity that would protect the principal. The interest earned would then be used for capital repairs, but this is paltry next to the city's claim of $650M needed for repairs.


The assumed discount rate of 5% from an annuity would generate an estimated extra cashflow of $12M, hardly the big dent in $650M that is needed. 


$12M is a decidedly optimistic number, even if the document refers to the 5% discount rate as 'conservative' (the Bank of Canada currently has the 30-year bond yield at 4%, which is a big difference). The sale proposes a phased approach to sell homes (which makes sense) but assumes the real estate market will remain as robust as it currently is. Given that Toronto is the hottest market in North America, it might be prudent to price in a correction as well. On the other hand, if you ever wanted to sell fixer-upper homes, then doing so at the top of the market makes most sense.


Additionally, many of these homes are in clusters (like wards 30 and 32, which combine for more than 200 of the 675). This creates further problems in selling as there is limited demand in any given area which will cause prices to drop in the area, and not just for TCHC homes.  


Lastly, the $12M number is derived by mixing operating and capital budgets together (sound familiar?), as seen in the table below:

A hat tip to reader Rowan Caister for pointing out question marks here. 

The problem with mixing up operating and capital in this case is that the capital expenses (like capital repairs) are declining and terminal while the assets like rental income from the property are ongoing and growing (within limits). This has the effect of further exaggerating the net value of the cash flow in the table in addition to the above points. 

If the annual income derived from selling 675 homes is in the neighbourhood of $8-12M (to be conservative), then legitimate questions do arise about whether the sale is really a remedy for repairs or a way to decrease housing in the spirit of 'smaller government,' as the City Hall letterhead says.

There are structural problems in TCHC homes, but moreso there are structural problems in the relationship the city has with funding housing (both with the province and tenants). Having an extra amount of money on hand sounds enticing, but it's not the detailed blueprint the TCHC needs to build a better foundation for public housing in Toronto.

TO Hydro Privatization:

When I covered the Scarborough budget town hall a couple of weeks ago for The Grid, I was surprised at the turnout to oppose the proposed 10% privatization of TO Hydro. 

Scarborough receives a disproportionate amount of brownouts and residents were concerned these would increase if a private company would focus on profits more than people. 

TO Hydro is in a tough spot. The Ontario Energy Board recently ruled that they could not raise their prices in response to what TO Hydro felt were growing fiscal challenges (TO Hydro has since asked them to reconsider). To reduce costs TO Hydro has fired hundreds of contractors, as they need the money to invest in infrastructure. 

However, this motion does not propose that the proceeds fund TO Hydro. Instead, any money from a sale would go to the Capital Financing Reserve Fund to offset future debt issuance. In other words, it's taking money from one area that needs it now to save it for a rainy day. 

Knowing what kind of return TO Hydro would generate is difficult. The Committee doesn't discuss that kind of financial information in public, but utility companies have relatively low and stable price to earnings ratios and are comparable to bonds in some respects (a steady stream of reliable income). However given TO Hydro's state its discount rate would be lower than usual. 

A number of councillors- including centrists- have expressed reservations about selling 10% of TO Hydro, so it could be a hard sell at Council. There's also the legitimate concern that without investment in the organization TO Hydro's dividend will freeze (which has been budgeted for) or even fall (which rarely happens at companies and is a sign of big trouble). 

Josh Colle, with his newfound superhero status, background as an energy executive and board position on TO Hydro, could play an interesting role in this. 

Dave Meslin's Fourth Wall/Civic Proposals:
I'm planning on writing more about this later, but this is a motion that is heartening. For the past couple of months activist extraordinaire Dave Meslin has hosted a collection of proposals at 401 Richmond to promote civic engagement. They run the gamut from ranked balloting to voting on weekends to wifi in Council (already achieved, woot!) 


Meslin's motions are being forwarded by Paul Ainslie, who visited the Fourth Wall exhibit (several other councillors have too). I tend to deride Ainslie a bit as being too much of a follower and not enough of a leader, but on this he deserves credit. It's easy to say you think an idea is interesting but it's harder to attach your name to it, and he followed through. 


Of course credit goes to Mez too, who continues to work within and outside of institutions to great effect. This motion will study a variety of the proposals without a commitment to them, but it's still an example of the political process working. 


Plastic Bag Fee Motion:
Michelle Berardinetti has been looking for additional revenue sources and she will add this item to the agenda tomorrow. The item is to encourage businesses to direct the five cent bag fee toward the city fund to protect the tree canopy. 


The five cent fee has been a pet peeve of the Toronto Sun for some time, and they've done favourable reporting on Berardinetti's idea.


No business could be forced to comply due to the fee's legal structure, so this would just be a case of moral suasion. That's a good enough tool to use when you need to although it's pretty difficult to pull off too. 


After all, companies either like to keep the money or donate it to existing charities that fit in with their existing branding. 


So the challenge for Berardinetti's idea to be successful would be to package the branding of directing money towards the city's tree canopy as something that's appealing and noticeable for company's to take part in. Whether this is leveraging the idea of supporting local goods and the environment or connecting the idea of trees and healthy living, there's some room to work with there but it's not an easy task. At council, the challenge for Berardinetti will be to frame it in a way that all sides will like, something like, 'We need to give the private sector the opportunity to contribute to the public good.' 


Additionally, the five cent bag fee is something that Rob Ford mentioned in year end interviews he might like to get rid of. So if there's little take-up on Berardinetti's idea it could be used as a further argument to cancel the fee by saying, 'See, companies just want to keep the money.'


It's worth mentioning that the fee has been incredibly effective for its purpose of reducing plastic bag use. Reports have bag use at 70% less than before the fee, as this Toronto Star editorial points out.   


Motions that will Likely Fail
There's also two motions that were referred to the Executive from Council, and so they will die here. Those are Gloria Lindsay Luby's motion to declare EMS an essential service (currently in lockout or strike situations only 15% can be off the job at a time, but this hurts response times). 


Another motion is to 'endorse the peaceful protests of Occupy Toronto.' It might make for some interesting deputations and responses from the Executive but will go nowhere. 


And lastly, there's a motion from Kristyn Wong-Tam and Glenn de Baeremaeker to exempt Toronto from the implications of Canada-EU trade talks. It won't pass, but de Baeremaeker outdid himself on an awesome prop once again, this time a gift left outside City Hall:

Council Snack (sized news)- Photoshop Edition

Reddit had lots of fun with its Ford photoshop challenge. 

City Hall may have banned council snacks for its elected officials, but that doesn't mean us plebians should suffer. So here are your City Hall (news) snacks for Day 2 of the November session:


The big news of the day is the information coming out on the previously announced layoffs. Sue-Ann Levy feels the elimination of 2,338 positions including 1,190 firings is overdue, citing the struggles in the auto sector and media over the past few years as a parallel. If you follow that logic, you probably don't read this blog anyway. For bonus fun, see if you can find the glaring error/typo in her article (which has been part of the article for far too long). 


These layoffs and vacancies will have a direct impact on service and that's particularly bad for a mayor who has promised to improve 'customer service' so much. When they change the dispatch target times for emergency personnel and have a looming crisis with a firefighter shortage you're prioritizing your numbers over reality (more on this later).


Now also might be a useful time to remind Rob Ford of his campaign promise for no layoffs. 


In response, Adam Vaughan said these cuts are entirely avoidable and represent voodoo economics being driven not by reality but ideology. 


The other big news of the day was the proposal for a private-public partnership on the Eglinton crosstown LRT. There would be no problem for that on the construction side, but this includes looking at the operational side too. That is, that a private company would run the Eglinton line while the TTC would be publicly run. This sounds like it would have a lot of problems (Same pricing? Tickets? How to transfer? What about standards for employees?) It might also be worth mentioning that Ford's top strategist and policy adviser argued on his personal blog during the campaign to sell the TTC entirely.


Late last night the Toronto Star's chairman announced via an editorial that the paper intends to lodge a complaint with the integrity commissioner for the mayor's refusal to include them on press briefings and notifications of conferences. As they should. The administration's Star freezeout is juvenile, embarrassing and wrong. In spite of this, the Star provides the best coverage of City Hall of the four dailies and good on them for it. 


At council there were some key items. Most notable was a late-night vote to sell Enwave, which passed handily. It's a profitable city-owned enterprise but it makes sense to sell it. It's well positioned for growth but is under-capitalized, making it a good opportunity for an outside investor. Additionally, further expansion could help with providing strong environmental options for downtown tower energy use. The debate for Toronto Hydro is a different story and that will come up in January. 


There was debate on the city's naming rights policy and there are significant changes to it. Most importantly, city staff have discretion for naming rights on contracts up to $500,000 whereas previously it was a tenth of that, $50,000. Little to no naming rights go for more than $500,000 so it looked like it was intended to be a way for the Mayor's office to take power from council by having 'staff' make all the decisions. 


But a motion from Paul Ainslie nixed that and likely unintentionally. His motion expands the policy to city agencies, boards and committees, meaning that they will eventually go to Council. We all know from Ainslie's Twitter account how much he loves corporate ads, so this has to be unintentional. But there were some bad items too. Adam Vaughan motions to not sell sponsorship targeted towards children (a position Public Health supports) and not selling naming rights on heritage properties both failed. 


Mary Margaret McMahon's motion to allow backyard hens was referred to the Licensing and Standards Committee meeting on January 25, where I'm guessing it will be voted down. Twitter produced many successful puns on the subject though.


Council also voted to support sideguards on trucks in principle. I say in principle because they have no authority on this. Rob Ford was one of three votes against. Ford was also one of three votes against another Lawrence Heights project vote. 


My vote for worst vote of the day goes to Denzil Minnan-Wong, who was the sole vote against receiving a petition from 20,000 people in support of arts funding. Voting against receiving a petition? What the fuck is that? 


I don't really give many hat tips to Speakers Frances Nunziata and John Parker because they have been aggressively partisan in their rulings and the former consistently loses control and or track of the meeting. But both rightly admonished Ford ally Giorgio Mammoliti for abusing points of order and unfairly berating staff for not producing a document on short notice (Layton was criticized for this yesterday). So good on them. 


And good on Giorgio Mammoliti (weird sentence is weird). After a couple councillors, particularly Gloria Lindsay Luby, worried that some street names might be 'too ethnic' for people to pronounce, Mammoliti hammered this argument. To paraphrase, he argued: This is who we are and if these people are part of our history then they deserve to be represented. Have trouble pronouncing their names? Then learn them. Failing that is a slap in the face to immigrants. 


I don't get to write this much so I will- right on, Giorgio.  


I don't follow the theatre community, but I'm told a big-name producer was in attendance this morning and is looking at doing a production based on City Hall, which is great theatre in and of itself. It sounds good if this is better than the reportedly lousy fringe plays produced on Ford this past summer. Goldsbie, Nicholas Hune-Brown and Cityslikr are all much bigger theatre buffs than myself and seemed excited.


Over at Reddit, the hivemind went to work on photoshopping our Worship in a thread that has more than 500 comments and the results are pretty great. I posted my favourites on Twitter, but here they are again. 

Checking Out the Library Cuts

It’s really easy to lose sight of context when dealing with large budget numbers; It feels overwhelming and lends itself to information paralysis.

Luckily there are libraries and librarians and information resources to help us with that affliction. Unluckily, there may soon be fewer of those resources in Toronto if the mayor is able to usher through the proposed library cuts. 

Initially the Ford Team wanted to close libraries (insofar as Doug speaks for them), but in the face of an embarrassing public backlash that idea was subsequently dropped. Instead, the city faces significant service reductions, less staff and fewer acquisitions. To understand what these cuts mean and how we got here, here is some context:

“I will assure you services will not be cut…guaranteed”  -Rob Ford, October 2010.

“Ford told the Post in a sit-down interview that closing a library on a Sunday, never mind entirely, constituted a major service cut in his mind” -Chris Selley, National Post 

Toronto libraries are popular among residents:

• In the KPMG consultation, 86% of residents felt that maintaining the quality of library services was more important than lowering the cost. 
• 97% of residents identified the library as being necessary for the city to be livable and prosperous.
• 70% of residents were against reducing services and hours in a September Forum poll. 

Libraries have been pretty efficient:

• Since 2001 library use has increased 28%. 
• In spite of this increased use, staffing is down 10% since 1998. 

Doing more with less.

• According to several studies, libraries in general show a good return on investment too. The median study concludes that libraries return $4-5 for every $1 invested. 

The library cuts:

As the map below shows, the library service cuts will impact every region of the city:

• 100 staff were eliminated at last night’s library board meeting. Ford had promised in his platform to achieve savings through attrition and pledged not to fire anyone.     
• The 19,444 proposed hours to be cut is the equivalent of closing down nine of the smallest libraries full time.

• The cuts would include reducing circulation acquistions by 106,000 books (11%). If that baseline is maintained with minor increases over four years, it would be the equivalent of one less book in circulation for every Rob Ford voter.  
• The two above library cuts could be paid for by the cost of two small coffees at Tim Horton’s from each resident.

The rhetoric:

• Asked if he would close a library in his own ward, Doug Ford said, “Absolutely I would. In a heartbeat.” Hours will not be cut in Doug Ford’s ward.
• Ford ally Paul Ainslie was in favour of library closings so long as they weren’t in his ward. Instead, he suggested downtown locations might be more appropriate candidates. His ward’s newly renovated Cedarbrae Library faces a 9.5 hour service reduction.
• The newly appointed Library Board chair, Ainslie voted last night against consulting the public on the cuts. The vote passed and the public will be consulted.   

Team Ford faces many obstacles to pass this particular package of cuts. Libraries are very popular with voters, cutting them contradicts campaign promises and individual councillors know they'll receive an earful on the issue. All of this makes it difficult to be an ally of the mayor on this issue and open to a lot of negotiation.