From the Manitoba Provincial Ombudsman

For Release: October 24, 2007

Province Implements Ombudsman’s Recommendations To Improve Notice to Taxpayers About Proposed Borrowing By-Laws

Manitoba Ombudsman Irene Hamilton today announced that all recommendations made in her Report, issued August 27, 2007, regarding the Municipality of Killarney-Turtle Mountain Local Improvement Plan have been implemented.

“I want to commend the Council of Killarney-Turtle Mountain for their prompt attention to my recommendation that a public meeting be held, and the Department of Intergovernmental Affairs and the Municipal Board for implementing administrative changes that will improve transparency and accountability province-wide in the process of Local Improvement Plans,” said Hamilton.

The final report is available on line at: www.ombudsman.mb.ca (under “Ombudsman Division”, “Reports and Publications”) or in hardcopy form from Manitoba Ombudsman at 982-9130 (Winnipeg) or 1-800-665-0531 (toll free in Manitoba).

Hamilton concluded in her report that, “The process by which the residents of Killarney-Turtle Mountain have incurred the significant tax burden associated with this project (a new recreational centre), does not meet an acceptable standard of transparency and accountability.” She found that inadequate notice provided by the Municipality of Killarney-Turtle Mountain and a failure of oversight by Intergovernmental Affairs and The Municipal Board resulted in residents being denied the right to speak on an extraordinary expenditure of public monies, for which they are now responsible.

Local improvements are regulated by The Municipal Act and municipal councils are required to give affected taxpayers notice of public hearings into proposed plans. These notices must include a summary of the information included in the local improvement plan. After an investigation by her office, the Ombudsman found that the notice to the residents of Killarney-Turtle Mountain did not include enough information to properly inform them of the financial impact of the proposed Local Improvement Plan.

Hamilton issued a preliminary report recommending that the municipality hold a special meeting to hear residents’ concerns before proceeding. The municipality accepted that recommendation.

Local Improvement Plans are vetted by the Department of Intergovernmental Affairs before being sent to The Municipal Board for formal approval. To correct deficiencies identified by the investigation, the Ombudsman recommended that the Department implement and publish a standard requirement for public notices in its Municipal Procedures Manual for all municipalities. Further, she recommended that a standard method for bringing any deficiencies of notice to the attention of The Municipal Board be adopted.

These recommendations were implemented on October 10th with the publication of an amendment to the Municipal Act Procedures Manual distributed to all municipalities by the department.

For more information about this news release, phone
Irene Hamilton, Manitoba Ombudsman
at (204) 982-9130 or 1-800-665-0531 (in Manitoba)

Backgrounder To October 24, 2007 News Release

The following Summary provides a synopsis of the investigative report.

For many residents of Killarney-Turtle Mountain, the publication of the Killarney Guide on the afternoon of Thursday April 5, 2007 was the first indication that the cost of a proposed “new recreational facility” had increased from $6.5 million to $10 million. It was also when they learned that their municipal council would be meeting the following Wednesday morning to give third and final reading to a borrowing by-law for an additional $2.5 million of that cost.

On the morning of Wednesday, April 11, 2007, between 50 and 100 people attended the council meeting, some in the council chamber itself and others outside in the hallway or on the sidewalk in front of the building. They wanted to speak to their elected representatives.

One of the delegation present also wanted to present Council with 100 copies of a letter asking council to “…re-consider the financial cost, as per Killarney Guide dated April 6, 2007, of the proposed New Facility complex and the total burden it will place on the taxpayers of the Rural Municipality of Killarney-Turtle Mountain for many years to come. ”

Because the municipal office had been closed on Friday and Monday, for Easter, allowing residents to speak to council on the morning of Wednesday, April 11th required a motion to dispense with the rule stating that delegations to council must give five days notice of their intention to appear. Mayor Brian Moore proposed such a motion. It was defeated.

Moments later, councillors voted to give second and the third (final) reading to a “Local Improvement” by-law authorizing the borrowing of an additional $2.5 million, bringing the total authorized borrowing for the project to $6.5 million. By this point, the estimated cost of the project had risen from just over $6 million in 2005, to $10 million. Immediately following that vote, Brian Moore resigned as Mayor and left the table.

Killarney-Turtle Mountain is a municipality of approximately 3,000 people. Much of the money needed to build the new recreational complex will be charged directly to residents in the form of an approved special tax levy, known as a “Local Improvement.”  There will be a direct and substantial impact on municipal property taxes.

A “Local Improvement” is one means by which a municipality can borrow money for large capital projects and then raise the funds through municipal taxes to repay that money. Local Improvements are regulated by statute and supervised by both the Department of Intergovernmental Affairs (the department) and The Municipal Board. In some respects, the Local Improvement process is exceptional in the framework of democratic government.  It allows citizens, who feel a decision by their elected representatives is unreasonable, to exercise veto power when two thirds of potential taxpayers are opposed to a project and file objections to it in accordance with the provisions of The Municipal Act.

Provincial law requires that a proposed Local Improvement Plan must identify the cost of the project for which money is to be borrowed; who is to bear the tax burden; how that burden is to be distributed; and the details of the borrowing itself.

Provincial law also requires that citizens be notified of Local Improvement Plans and given a right to express their support or opposition, first to their municipal council at a public hearing, and then to The Municipal Board. Notice of the public hearing must be mailed to individual property owners affected or, if everyone is affected, published in a local paper. Notices must contain information about the plan.

In the case of Killarney-Turtle Mountain, the notices of public hearing to consider By-law 5-2007, were published in January and the public hearing was held in February. Unfortunately, a citizen (potential taxpayer) reading the notice, would not be informed of the cost of the project or the implications for their annual property tax bill. When the hearing was held in February, only two people objected.

The last information provided publicly to Killarney-Turtle Mountain residents about the cost of the new recreational complex, identified the cost of the complex as $6.5 million. That information was distributed in July, 2005. By February, 2007, the cost was estimated at $10.8 million.

On March 30, 2007 council gave the go-ahead for the project at a cost of $9.5 million. It was at this point that the cost of the project came to the attention of the local newspaper, published on April 5, 2007.

The opportunity for residents to speak for or against the passage of borrowing by-laws for the new recreational complex, should not have come down to a last ditch effort on the morning of April 11, 2007. There should have been three prior opportunities for citizens of Killarney-Turtle Mountain to express an informed view on the utility and cost of this project.

Because of inadequate notice provided by the municipality and a failure on the part of both oversight agencies, Intergovernmental Affairs and The Municipal Board, this did not occur.  The citizens of Killarney-Turtle Mountain were denied the right to speak about a significant and extraordinary expenditure of public monies, for which they are now directly responsible.

The process by which the residents of Killarney-Turtle Mountain have incurred the significant tax burden associated with this project, does not meet an acceptable standard of transparency or accountability.

Recommendations were made to restore the opportunity for residents of Killarney-Turtle Mountain to have their say on this matter, and to improve the oversight process to ensure that in the future, the rights of municipal taxpayers in similar situations are protected.

In a preliminary report, the Ombudsman made the following Recommendations. The municipality acted immediately to hold the public meeting recommended, and this month the department finalized and published the procedural improvements recommended.

Recommendation made to R.M. of Killarney-Turtle Mountain

While I can make recommendations about changing the process for the benefit of potential taxpayers affected by proposed local improvement plans, such recommendations would do little for the residents of Killarney-Turtle Mountain who were denied their right to object. The only recommendation I can make that would be meaningful for complainants, is one that would result in an opportunity for the public to discuss the plan with their elected representatives and express their support for or opposition to the plan in that public forum.

Accordingly, pursuant to subsection 36 (2) of The Ombudsman Act, I am recommending that the Municipality of Killarney-Turtle Mountain hold a public meeting to provide residents with information about the cost and financing of the new facility, including the Local Improvement Plan borrowing, and to hear residents’ views on the cost and benefits of the project.

Recommendations made to Intergovernmental Affairs

With respect to the process whereby municipal borrowing by-laws are reviewed by Municipal Finance and Advisory Services, I believe this process can be amended to achieve the due diligence it was designed to foster.

I do not believe it is necessary to change the statutory framework to enshrine the authority of the branch. For the most part the convention works well. There is no reason to recommend that a provincial civil servant have the authority to accept or reject municipal borrowing by-laws. That responsibility rests appropriately with the Municipal Board.

It is necessary for the Branch to obtain guidance from the Board, on what constitutes an acceptable standard for notice of public hearing; to include that standard in its review of proposed borrowing by-laws and to bring any deficiency of notice to the attention of the Board; and to communicate that standard to all municipalities so as to assist municipalities in complying with statutory requirements in the future.

Accordingly, pursuant to subsection 36(2) of The Ombudsman Act, I am recommending that the Municipal Finance and Advisory Services branch of the Department of Intergovernmental Affairs, in consultation with The Municipal Board, review and alter its practice of processing proposed borrowing by-laws so that the process contains a standard requirement for public notices and a standardized method of bringing any deficiencies in the notice to the attention of the Board.

I am further recommending, that the Branch include that standard requirement in the information it provides to municipalities in its Municipal Act Procedures Manual, and inform all municipalities of the change within 30 days of receiving approval from the Board.