Emotional-Based Decisions as opposed to Business-Based Decisions
If a municipal council is prone to make decisions based on emotion or compassion and is not guided by policy, a Council of the day can make decisions that are not based on sound fiscal management and in the process tie the hands of future Councils. On the next few pages we will discuss three examples of Council making decisions based on emotion and misguided compassion rather than following sound business principles. They are; Renewing the contract for Transit Services, the Failed experiment to Incorporate the Art Gallery and spending money on a pre-feasibility study with a view to building a new $30 million building for the Art Gallery.
The Art Gallery Incorporation Experiment
I’ll be the first to admit that I don’t have a lot of the details on this one. To the best of my recollection a few years ago the Director of the Art Gallery came to Council and explained that the Art Gallery could secure more grants if it were not a city department. So a deal was struck to spin off the Art Gallery as a incorporated, charitable not-for-profit corporation, where the city would retain ownership of the Art Collection. This is another example of an emotional-based as opposed to business-based decision. There were no guarantees that any more grants would become available yet Council believe the Director and authorized the change.
A year or so later, in late 2017 it was recognized by the Board of Management that the incorporation business model was not sustainable in its most current form and efforts to incorporate ceased and the Art Gallery once again became a city department. This time Council really had no choice but to undo its previous emotional-based decision. Unfortunately, there was an added problem. The Art Gallery came back with significant accumulated debt that the city (the taxpayers) had to assume. I recall the mayor saying that it would not be a problem because the Art Gallery would pay it all back to the city. Well I invite you to take a look at the Art Galley’s 2022 budget, at Annex B and you will see a line item labelled “Debt Payment” with a $50,000 expense. That’s the Art Gallery paying off its debt to the city. But where does the Art Gallery get the money to pay off this debt? It’s in that entry just below with the line labeled “City Contribution” with a revenue entry of $495,000 and of course the city also picks up $10,482 that is labelled “Tax Burden” for a total cost of $505,244. Yes, the Art Gallery is repaying its debt to the city out of money it gets from the city. It has to – it has no other option because it is a Cost Center not a Profit Center. It doesn’t make money – it consumes it. So, essentially the taxpayer is on the hook for that emotional-based decision. The only question that is left is did the city audit the collection to ensure that the value of the collection didn’t change while it was essentially in private hands?