Hamilton gets an F in fiscal transparency report; Is that fair?

“Hamilton, at least since 2020, has sort of been deteriorating,” says Nick Dahir of the C.D. Howe Institute, which does these studies annually.

The F grade this city received for 2023 was matched by just two others, London and Windsor. Last year, we had a D+, which was also last, but, with a tweaked system used this time, we would’ve had an F then too. Making us the only city to land the dubious double.

Why did we do so poorly? Is this fair? And what does it mean?

There are really two main issues at play. The timeliness of getting the budget done and how easily people could understand our fiscal situation.

On the first point Hamilton loses marks because the 2023 budget wasn’t done until the second-last day of March.

“Which means that almost a quarter of the fiscal year has gone by before the city presented its plan for the fiscal year,” Dahir says.

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• Dec 31, 1969
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Some cities (Montreal, Quebec City, Regina, Saskatoon, Edmonton, Calgary among others) have their budgets wrapped by the end of the previous year.

But it’s clarity of numbers where the report really takes issue with Hamilton’s process. Because the budget and the financial statement at the end of the year don’t match.

Our budget was for $2.64 billion while our year-end financial statement says we spent $2.02 billion. Which sounds terrific. Possibly even suggesting we were careful with our pennies and saved a lot of dough.

Not so, Dahir says. It’s simply the result of using two different accounting methods for the two different documents. Which is something those with professional accounting training can wade through and understand but becomes totally baffling for the average person.

“The reason (Hamilton is) sort of anchored to the bottom is because they do that accounting discrepancy,” he says. “They’re counting the numbers different ways in their budgets, plans, and when they post their results.”

Mike Zegarac is the city’s general manager of finance and corporate services. He has no argument with the idea of being transparent and creating engagement. In fact, he says he wants the public to have access to all kinds of financial information.

But he says this report requires some nuance. Starting with the timing issue. This isn’t about being slow, he says, but rather about process.

The city relies on agreements and funding from the provincial and federal governments. Without that information, council could be taxing residents too much or too little. So it can’t really lock into what it’s going to do until it knows what money is coming.

Trouble is, the provincial and federal government have fiscal years that run from April 1 to March 31. So they’re not always ready to announce these figures until sometime into the new year.

“That disconnect has historically created a disconnect in terms of the timing for the approval of the city budgets,” he says.

It’s worth noting that none of the cities that finalized their budget prior to the start of the new year are from Ontario.

As for the two methods of accounting, Zegarac says they’re different on purpose. Financial statements are governed by official accounting standards and can be dense. Budgets are a reflection of council’s spending priorities and can often be easier to navigate for most people.

“My experience is that citizens would have a much harder time interpreting a financial statement versus a budget,” he says.

Either way, it’s an F on this report which isn’t new for us. We’ve finished at or near the bottom of this survey a few times over the years.

The big question is, does it really matter? Is this significant or just inside baseball for hardcore city hall nerds and municipal policy wonks?

Dahir argues it is indeed meaningful. This is our money being talked about and spent. Taxpayers are the stakeholders. Making it difficult for the average person to understand what’s going on isn’t helpful.

“We need people to be engaged with it,” he says. “This business of the city’s financial activities only being readable by the accounting cast is not at all in the spirit of representative democracy.”

Zegarac acknowledges receiving an F in anything isn’t fun and says there are some improvements that could be made to satisfy some of the report’s criticisms.

But he says the city has taken steps over the years to be more and more open about how it handles its money. Other factors are simply out of its control.

Meanwhile, as part of the process of checks and balances to ensure things are done right, the city is subject to an annual credit rating. Right now Hamilton has a AAA rating which is the highest score.

“I don’t agree that all the areas they are focused on really translate into improved transparency or accountability,” Zegarac says of the report.