Marcel Latouche is with the Institute for Public Sector Accountability and has been on my radar for a while. He spoke at a campaign event for United We Roll organizer Glenn Carrot, who is running to be the mayor of Innisfail, Alberta. At the event, he explained how municipal budgets are not budgeted the way you think they are, and just how much of your tax dollars are going to salaries and benefits at the municipal level.
00:04:23.520Joining me now from his home in Calgary is Marcel Latouche.
00:04:42.320Marcel is with the Institute for Public Sector Accountability.
00:04:45.520And I heard him speak on Monday night at Glenn Carrot's campaign event in Innisfail.
00:04:52.760Glenn's running to be the mayor there and one of the few politicians that I like and trust in the entire world.
00:04:59.080And Marcel, you've been on my radar for a little bit, but you were saying some things there that I think a lot of politicians need to address,
00:05:09.300especially during this municipal election cycle.
00:05:12.440But before we get into that, why don't you tell us a little bit about yourself, your background and the work that the Institute for Public Sector Accountability does.
00:05:20.700My background is in finance and economics, and I have been in the public and private sector as a financial manager for over 50 years.
00:05:33.560I worked at the City of Calgary for 17 years as a senior financial accountant.
00:05:38.680And after that, upon retirement, I moved on and I started lecturing at both Mount Royal College and not university.
00:05:49.500And I want if people want to know why, I will tell them later.
00:05:53.100And I went to SAIT where I designed a program called the Public Sector Finance Program.
00:06:00.860So it's all accounting about the public sector, because most people don't understand that the private sector accounting standards and the private sector accounting standards are totally different.
00:06:13.720And this is where we have this problem with people understanding what happens in the public sector.
00:06:22.220Mostly, I will discuss those issues from a municipal point of view, because we have a big election coming up at the municipal level in Alberta.
00:06:31.460The key with that is that we have a problem in Alberta.
00:06:37.500Most, if not all, local authorities and municipalities have a major component of the operation dealing with salaries and benefits.
00:06:51.220And within those benefits is something called the overcap pension, which councillors of large municipalities are entitled to.
00:07:03.420It was started in Calgary, very nicely done by administrators who wanted to boost themselves and their pension fund to go over and above the amount that they could not contribute to their RRSPs.
00:07:22.140So what they did in Calgary was very simple.
00:07:24.860And we disclosed this in my book, Take Back City Hall in 2004.
00:07:29.620Oh, and we told people about this overcap pension, but nobody paid attention, because they didn't really understand it.
00:07:38.120When we talk about it, the media, it totally ignored it until Farkas, the new young councillor in Calgary, brought it up again.
00:07:48.180And what that means is, these councillors have an additional pension fund, which was passed by saying, the administrators told them, if we get it, you will get it too.
00:08:03.140So what has happened now, this has proliferated to the big municipalities.
00:08:07.700And my point of view is, if the big municipalities are doing it, local authorities are going to say, why not us?
00:08:17.060So this is going to be a burden that is going to be on all taxpayers if this proliferation continues.
00:08:24.280The problem we have is that, for instance, right now, there is a PAC that has been started by a retiring councillor, Keating, who's leaving politics.
00:08:38.280But he started a PAC, and today I found out he's supporting Cara, Collier-Cartre, Demong.
00:09:24.520They want to continue what they've been doing for years.
00:09:29.240The policies that have hurt Calgarians and taxpayers for years.
00:09:35.480Why would you vote for somebody who you don't want to vote for, despite the fact that his left politics is supporting the same people that he worked with to continue this proliferation of tax and spend that they've done for a number of years.
00:09:55.640And in effect, this is why part of what we do at the institute have been to monitor the finances of municipalities.
00:10:05.720There are excesses all over the place in municipalities.
00:10:10.340They get into things outside of their jurisdiction to create political legacies.
00:10:16.400And what happens is it is always passed on to the taxpayer because municipalities don't produce anything that they can sell.
00:10:26.940What they do is they produce services that they deliver to you.
00:10:31.020But the increase in taxation from the property tax does not really reflect an increase in your services.
00:10:39.640It's the same services at a higher price.
00:10:42.180So I just wanted to, before we keep going here, I wanted to go back just a second to talk about these insane pensions, because the second politician, a local politician says, let's bring these perks, benefits and pensions back in line with the private sector.
00:11:01.600You're being accused of, you know, wanting mass layoffs and completely destroying the public sector, when all you want is a little bit of accountability and to bring it in line with the people who are paying the bills, the private sector.
00:11:17.760What portion of a municipality's budget is going to pensions, salaries and benefits?
00:11:25.360It's over 50% in most of them, in the majority.
00:11:29.700Over 50% is of your operating budget is in salaries and benefits.
00:11:40.080When they issue their report at the end of the year, they never break it down in the components of the budget.
00:11:48.900What they tell you is the amount of money being spent on police, fire, streets, and so on and so forth.
00:11:57.720But what the public should really find out when they examine the finances of a municipality is to find out what are the components, salaries, consultant fees, outside contractors.
00:12:14.380These are the things that we are going to have to tell people that these are the elements you should be focused in.
00:12:48.260And you just briefly touched on something there that one of the things that really annoys me about municipal governments doing is these legacy projects that they do.
00:12:59.920Ugly public art, solar panels in Edmonton's River Valley that serve no purpose.
00:13:05.200And Calgary very nearly ended up with a very expensive, in the realm of, I think, probably $10 billion in Olympics would have been.
00:13:14.600And all of that would have been a legacy project for Mayor Naheed Menchi.
00:13:19.140How do we as taxpayers, I guess, put the pressure on our municipal politicians to say,
00:13:28.160this is not what you're supposed to be doing.
00:13:30.500You're supposed to be making sure the garbage is picked up and the potholes are fixed, not putting up massive art installations that look like garbage left along the side of the road.
00:14:18.280But I have proposed from the Institute's point of view, there is a better way of doing it.
00:14:23.400Instead of using taxpayers' money to promote art, why don't you give an incentives to the number of great people we have in Calgary who are philanthropists, who would give money to make art, to give to the art center, to give to the art projects in Calgary.
00:14:47.600You take what they give and you ask them in your property tax or your corporate taxation, we will reduce your taxation or your contribution to your property tax over a number of years when you donate.
00:15:02.780So it's an incentive for them to give, it's an incentive to get better art, and as opposed to legacy art from a political point of view.
00:15:12.720The other thing that we have proposed is, we don't mind international artists, we don't mind international cooperation, but we must have transparency in the selection of the artists.
00:15:24.120And that has changed a little bit, and that has changed a little bit, we've been successful in doing this.
00:15:28.920The other problem we have is the way we finance projects.
00:15:33.320Let's look at the entertainment center and the entertainment arena.
00:15:39.600The institute has opposed the funding of the arena, which, by the way, the arena is now going to be 1,000 seats less than the saddle dome.
00:15:51.820The community rink promised that was going to be part of the project has disappeared, and we have another additional contribution from the city.
00:16:01.960The problem we have is certain projects and certain facilities should have an element of public sector, but how we finance it is totally ridiculous, straight from taxpayers' money.
00:16:17.520We have proposed that new projects of large expenditures should also have an element of financing for tax-free municipal bonds.
00:16:34.740That will give the ordinary taxpayer an opportunity to take part in the investment of that particular project.
00:16:44.140What they need to do is lobby the provincial government and the federal government to allow the tax-free municipal bonds, and that would be part of the financing.
00:16:56.300So the burden would be less on the taxpayer, as opposed to just creating debt to be repaid in future years when the taxpayer has got to bear it.
00:17:07.000So many taxpayers cannot afford their property tax, let alone new taxes to pay for legacy projects.
00:17:17.460And that's why we've always said we need tax-free municipal bonds.
00:17:22.340You can put it in a TFSA, you can have a contribution that will be part of what they always talk about, engage the public.
00:17:31.340That was the way that we think that will be total engagement by the public.
00:17:37.140We will be part owner, we will be investing in the project.
00:17:40.580Now, Marcel, you said something on Monday night that I think surprised a lot of people in the audience when you were at Glen Carrot's event, and that was that municipal governments, though they keep raising our taxes, they're not actually as broke as they let on.
00:17:58.440And you pointed out that this has a lot to do with how they calculate their budgets and do their accounting.
00:18:09.280The financial statement is done on an accrual basis, meaning it's on a historical accumulated basis.
00:18:18.280When you do the budgets, they just tell you, this is the amount we are going to spend to provide your services, including our big pensions.
00:18:27.340So then we are going to look at this amount, and we are going to say, we need to raise that amount for taxation, either property taxes from residential or non-residential taxes to pay for what we have.
00:18:43.340Included in this is always the fact that they tell you that we don't have the right to have a deficit in municipal government.
00:19:26.940We have reserves in Calgary right now, which is about half a billion dollars.
00:19:31.940And suddenly with an election, we can see all sorts of expenditures coming out of those reserves.
00:19:37.360And this is what I call political legacies or buying votes in an election year.
00:19:42.420All these years that they've told you we don't have any money, they've been accumulating surpluses.
00:19:48.520And they've been purchasing or accumulating assets over the years.
00:19:53.840We've been telling people about this for 20 years.
00:19:57.140Finally, the CD Howe Institute produced their own report and came up with the figure of surpluses in Canadian municipalities of 11 billion dollars.
00:20:12.700And since municipalities don't create any wealth and all the money comes from taxpayers that has been created through overtaxation, this 11 billion dollars of surplus is your money being used by politicians to create political legacies.
00:20:32.700So it is important for people to look at new ways of doing budgets.
00:20:39.920And this is why at the Institute, we are pushing forward the idea of zero-based budgeting for municipalities, meaning you start every year when you do your budget with the idea that you're starting afresh.
00:20:57.340With technology today, so many things can be done differently.
00:21:00.480If the private sector is putting rockets in the air now instead of NASA, I bet you we can collect our garbage by a private company.
00:21:13.040So by doing zero-based, you're going to look at the best way of doing and providing services for the taxpayer.
00:21:20.200So when you start afresh, you say to yourself, where do we go from here?
00:21:24.280So now that we've reviewed how we can deliver services better, we will need a new level of taxation.
00:21:33.100Hopefully, it will show that technology has brought down the amount of taxes required to provide the same services or better services.
00:21:42.180Then, if you have a surplus at the end of the year, we propose one thing.
00:21:49.380What you do is you look at the surplus and you say, maybe we should have no more than 5% of our operating costs as reserves.
00:21:59.460The remainder of what you have left as a surplus should be returned immediately in the following taxation year.
00:22:08.820Then you will start having accountability.
00:22:11.820But we need transparency first for us to have accountability.
00:22:16.160And that's one way of doing it, by having zero-based budgeting.
00:22:19.460You know, it's funny, Marcel, that you brought up garbage collection and private garbage collection.
00:22:25.040Because in the county that I live in, I can get garbage pickup to my rural, very rural house, thanks to the county.
00:22:33.920However, I've opted out of that and I use a private garbage collection service because it is cheaper, more efficient.
00:22:41.120And I think that has a lot to do with those public sector union pensions and benefits that I don't have to pay the guy tossing a garbage bag in the back of a truck, you know, an overinflated salary coupled with overinflated benefits.
00:23:00.280And so, just even for me as my family, I can see that as a practical thing that we're already saving money on.
00:23:05.580So, multiply that across the entire county that I live in.
00:23:20.860When they first put this on the agenda at council, we made a presentation and we warned people that putting the garbage under the jurisdiction of the municipality was the wrong thing to do.
00:23:35.560Because the first thing was, they put three businesses out of operation.
00:23:44.180Now, the absurdity of it all, having been warned that this was not going to work and there are better ways of doing it, the city of Calgary decided we're going to have a pilot project to see if we can get it from the management.
00:23:58.860And this is the garbage we have nowadays.
00:24:01.860You know, we get to do a pilot project after the fact.
00:25:36.400We've started a political action committee to advise and listen to people, select candidates, and provide a platform for the next municipal election in Calgary.
00:25:55.100And we are already interviewing candidates.
00:25:57.640At the end of August, but now perhaps a little bit later because of the upcoming federal election, we are going to issue a list of candidates with a series of ideas and ask them to be part of a new way of doing business at City Hall.
00:26:20.500So, leadcalgary.ca, and we are on Facebook at Lead Calgary.
00:26:28.540Well, you know, it seems like, at least in media sometimes, I'm a bit of a lone wolf in driving home the point that conservatives should not really walk off the field of municipal politics.
00:26:39.360This is where all those bad ideas are so often born and then they grow up towards the federal level because they start off with all those pilot projects you point out that happen after you start the project itself.
00:26:52.500And, you know, municipal politics, they're the things that it's the thing that affects you first and the most.
00:26:57.660And that enormous property tax bill is one of the largest tax bills, single tax bills you'll pay all year.
00:27:04.860And so, it's important for us to be holding our politicians to account.
00:27:10.120How do people support the work that you do at the Institute for Public Sector Accountability and how do they find out about some of the things that you're doing?
00:27:18.520We have all our reports published on it.
00:27:21.180It's called theipsa.org, T-H-E-I-P-S-A dot org.
00:27:32.000Well, Marcel, I want to thank you so much for taking the time.
00:27:34.660I know I just sort of sprung this interview on you, but you know what?
00:27:37.820You're a sharp guy and you know your stuff, obviously.
00:27:40.380We'll have you back on again really soon because I'd be very interested to see the support, the sort of people that you identify through your PAC initiative.
00:27:49.780Actually, I would be delighted to have a platform like The Rebel to do this, actually, because we are going to seek social media support of all sorts to be able to reach people out there.
00:28:03.500One of the things I want to add, we have an idea that because the federal election has been called virtually at the same time as the municipal campaign.
00:28:15.800I wrote a book called Conservatives, Dead or Alive, and it is important for us to do this.
00:28:23.540To me, 2021 is a very big year for politics in Canada in general.
00:28:29.540At the municipal level, I ask conservative candidates to help conservative candidates at the municipal level campaign together, support each other, because if you have the same goals of freedom of speech and free market economy, you should have a complete joint platforms to talk about the same thing at the doors.
00:28:58.540So I'm requesting, I'm requesting, I'm requesting, I'm requesting candidates to work together, because otherwise we are going nowhere.
00:29:07.060This election 2021 year is extremely important.
00:29:17.060And again, I think conservatives, we forget what happens at the school board level.
00:29:22.260If we're concerned about the things that our kids are being taught in school, why aren't we getting involved in the school board elections?
00:29:28.680Why aren't we asking the people who are knocking on our door, what do you think about critical race theory?
00:29:33.480How much money do you think we should spend on recycling if it's the local town councillor running for office this year?
00:31:13.280Marcel's been at this a very long time, first uncovering the double pensions of Calgary's public sector way back in 2004.
00:31:21.220And yet, 17 years later, very little has changed.
00:31:24.820And I think the problem lies with us conservatives.
00:31:27.460You see, we mostly look at the big macro issues.
00:31:30.140Right now, we're so focused on Justin Trudeau that we're not focusing on the things that we can fix right in front of us at the municipal and local levels.
00:31:41.200It reminds me of something Jordan Peterson says, and boy, am I ever paraphrasing here, but he says something like, you can't change the world unless you start with your bedroom.