WikiLeaks Sudbury

Released on December 01, 2012, 7:00 PM EDT
Tag #: 648

The city’s top bureaucrat had targeted Sudbury post secondary students to be a source of new parking revenues
The city council had approved by-law 2002: 251A in order to obtain this new revenue source

WikiLeaks Sudbury uncovered Doug Nadorozny’s controversial parking agreement at Laurentian university that would bring new revenues to the city coffers from Laurentian university students.

The city’s top bureaucrat Doug Nadorozny proposed that the city council adopt his parking revenue sharing scheme while targeting post secondary institutions. His economic development idea was to generate revenue from parking fines under the Provincial Offence Act from post secondary students. He proposed this controversial agreement when he was the General Manager of Economic Development and Planning Services. In order to implement his proposal city council therefore passed the by-law 2002:251 A. The by-law states: “the General Manager of Economic Development and Planning Department and Clerk are hereby authorized to execute Parking Revenue Sharing Agreements between the City of Greater Sudbury and Laurentian University and with other similar property owners who issue over 1,000 parking tickets per year”.

The by-law clearly stated that any organizations or institutes able to issue more than 1000 parking tickets meet the eligibility criteria to share profits from parking regulations fines with the City.

Furthermore, Nadorozny explained to the council if Laurentian university was to issue 3000 City tickets and of these tickets approximately 80% were paid by students, then the city could expect to get revenues of $48,000.00. It was recommended that a revenue sharing option could be entered into on a 50/50 basis with a Laurentian university according to the criteria below.

Tickets Issued	Share to the City	Share to the Institute
1-1000 tickets paid	100%	0%
1000 – 1500 tickets paid	70%	30%
Moe than 1500 tickets paid	50%	50%

Tickets Issued	Share to the City	Share to the Institute
1-1000 tickets paid	$20.00	$ 0.00
1000 – 1500 tickets paid	$ 13.67	$ 6.33
Moe than 1500 tickets paid	$10.00	$ 10.00

According to the proposal, the private property owner must issue a set minimum amount of parking tickets within a 12 month period. Therefore this framework can be seemed to have perverse motives behind them. This framework created an incentive to increase city revenues by increasing the parking fines disproportionately paid by Laurentian university students who have already been burdened by rapidly rising tuition fees.

The parking regulations set fines at $20.00 per ticket. This scheme would grant all the revenues from the first 1000 tickets ($20,000.00) to the city and the university would get nothing. For next 500 tickets issued city would collect 70% of the revenue and the university would get only 30%. Finally it is only when more than 1500 tickets are issued will a 50/50 revenue sharing agreement kick in for the university.

Doug Nadorozny maintained that Laurentian university had approached the City to implement this agreement. However the WikiLeaks Sudbury investigative team could not find any official request by Laurentian University for this parking enforcement agreement. The city clerk’s office also was unable to locate this request. However, it seems a back-door agreement was reached between Doug Nadorozny and Laurentian university to issue parking tickets and implement the revenue sharing program.

Following the agreement on shared fines revenues obtained with Laurentian university the following number of parking tickets were issued.

Doug Nadorozny has since been promoted to the position of the Chief Administrative Officer of the City of Greater Sudbury.

The original article initially published on Public Administration Review,71: (2), 232-242. Excerpts from the article as follows.

Waste in the Sewer: The Collapse of Accountability and Transparency in Public Finance in Jefferson County, Alabama

The Jefferson County case presents a troubling and vivid picture of systematic breakdowns in accountability and transparency. In this essay, we argue that numerous accountability and transparency failures contributed to a series of decisions and events that collectively led to what could become the largest municipal bankruptcy in U.S. history. In a society that is increasingly reliant on technical and specialized knowledge, governing becomes difficult as principals and their agents often operate in different domains. We argue that reduced bureaucratic and fiscal transparency and failure on the part of key agents in the public and private spheres to act ethically and responsibly conspired together to put the county in an extremely vulnerable fiscal situation. When the U.S. economy began its rapid decline in 2008, the conditions were ripe to bring about the county’s financial demise.

In many ways, the Jefferson County case serves as a cautionary tale for public administrators. Scholars in public administration have embraced the values of openness and transparency as keystones of accountable government. Transparency serves as a check on government officials’ actions, but complexity has strained traditional forms of transparency; open records and open meetings make information available, but the complexity of highly specialized fields such as civil engineering and public finance is rarely understandable to the average citizen, and even to elected officials in many cases. O’Brien, Clarke, and Kamieniecki remind us that “[t]he growth in the size of the bureaucracy and the development of immensely technical and complex fields of specialization have placed tremendous powers in the hands of public officials”.

It seems that with growing technical specialization, even “traditional” transparency is insufficient for issues of great complexity. Unfortunately, Alabama has lagged behind by traditional transparency standards. While the state has one of the oldest open records laws in the country (Code of Alabama § 36-12-40), an open meetings law with procedural requirements was passed only in 2005. As transparency goes, Alabama has improved, but the tradition of secrecy is strong. As a case in point, a 2003 study showed that Jefferson County and the city of Birmingham fared worse than the state average in handing over public records and worse than most counties and municipalities surveyed in the metropolitan area.

Jefferson County’s debt crisis provides fertile ground for illustrating the failures of both transparency and accountability. Our essay recounts the complicated story behind the debt crisis in Jefferson County. We identify and examine, in their context, the fateful steps that led the county along a path of rising indebtedness and risk. We suggest that a lack of local government oversight, insufficient local government capacity, and a lack of regulation in the financial sector, particularly as it pertains to interest rate swaps, are responsible for the current dilemma, and we suggest reforms to correct each.

Capital budgeting is a reality of modern governance, and public finance provides the framework for purchasing capital goods with long useful lives and hefty price tags. Two general approaches are used to finance capital projects: debt and cash. There are advantages and disadvantages to each. Cash financing, otherwise known as “pay as you go,” requires saving for large expenditures, placing the burden on past and current generations for future public infrastructure. Debt financing through municipal bonds, on the other hand, allows immediate purchase and distributes the cost across the useful life of the asset.

State and local governments are required to engage in capital budgeting under Statement no. 34 of the General Accounting Service Board. This process is used to identify capital needs and to set the capital budget. After considering available resources, a local government determines the amount of credit required and then issues a public offering, either competitive or negotiated, in which interested underwriters bid on the bonds. Local governments achieve efficiency by competitively auctioning debt for these projects to the bidding underwriter who pays the highest price (which usually translates into the lowest interest rate, although purchase at a premium or discount can cloud the prima facie true cost).

As a study in decision making, it is clear that no single decision was completely responsible for the debt crisis. Rather, several incremental decisions share responsibility, and context played an important role in shaping the result. The consent decree created the foundation on which the failure was built. While the extent of the project could not have been estimated perfectly, the court might have taken greater precautions to ensure the feasibility of the solution imposed and consented to by the parties.

Second was the expansion of the county sewer program beyond the mandates of the consent decree; though it supported political goals, the effort was starkly disproportionate to the community’s ability to pay. Maintenance was overshadowed by a desire to expand. Along the way, corruption and mismanagement affected the quality and cost of the work. Decisions to enter swap arrangements increased the county’s risk and broadened the sewer warrants’ impact beyond the enterprise to the county as a whole, even to the state of Alabama. Decisions made in an environment of uncertainty are often bad decisions. Probable and possible risks associated with each incremental bond issue were not considered or were underestimated; the county budget reports debt was needed for consent decree projects each year. If the long-term risks were considered, they were weighted less heavily than short-term sewer rates.

Of course, decisions are only relevant in their context, and changes in the larger national economic outlook provided the mechanism that moved the risk from potentiality to reality. The sub prime mortgage crisis caused uncertainty in the national bond insurance industry because of their decision to diversify into collateralized instruments. In this regard, the Jefferson County crisis is, at least in part, a casualty of the larger global financial crisis. Yet even without the precise foreknowledge of the macroeconomic events that precipitated Jefferson County’s local crisis, the commission should have had a more sober assessment of the attendant exposure to exogenous shocks created by its financial decisions.

It sometimes takes external forces to reveal the accountability failures that exist beneath the surface. As the global crisis deepens, failures, such as those demonstrated in Jefferson County may become commonplace as greater pressure reveals the failures in municipal governments nationally. The state and federal regulatory systems and local accountability structures in place will vary the amount of stress each system can bear before crisis reveals its shortcomings. This case reveals areas in which greater accountability enforcement should be directed at the local, state, and national level to prevent future crisis. It is our hope that the Jefferson County experience will serve as a cautionary tale to prevent similar financial ruin in other municipal contexts.

Reference:
Howell-Moroney, M.E., Hall, J.L. (2011). Waste in the Sewer: The Collapse of Accountability and Transparency in Public Finance in Jefferson County, Alabama. Public Administration Review, 71: (2), 232-242




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