6. COUNCIL-INITIATED LEGAL ACTIVITIES – MITIGATION PROTOCOLS

PROCÉDURES D’ORDRE JURIDIQUE ENGAGÉES PAR LE CONSEIL – PROTOCOLE D’ATTÉNUATION

Committee Recommendation

That Council approve the protocols described in this report to mitigate the costs associated with Council-initiated legal activities.

Recommandation du comité

Que le Conseil approuve les protocoles décrits dans le présent rapport en vue d’atténuer les coûts associés aux procédures d’ordre juridique engagées par le Conseil.

Documentation

1. City Solicitor’s report dated 27 May 2008 (ACS2008-CMR-LEG-0007).

Report to/Rapport au :

Corporate Services and Economic Development Committee

Comité des services organisationnels et du développement économique

and Council / et au Conseil

27 May 2008 / le 27 mai 2008

Submitted by/Soumis par : Kent Kirkpatrick,

City Manager/Directeur des services municipaux

Contact Person/Personne ressource : M. Rick O'connor, City Solicitor

Legal Services/Services juridiques

(613) 580-2424 x21215, rick.oconnor@ottawa.ca

City-wide / À l’échelle de la ville

Ref N°: ACS2008-CMR-LEG-0007

SUBJECT:	COUNCIL-INITIATED LEGAL ACTIVITIES – MITiGATION PROTOCOLS

OBJET :	procédures D’ORDRE JURIDIQUE ENgagéES PAR LE cONSEIL – PROTOCOLE D’ATTÉNUATION

REPORT RECOMMENDATION

That the Corporate Services and Economic Development Committee recommend that Council approve the protocols described in this report to mitigate the costs associated with Council-initiated legal activities.

RECOMMANDATION DU RAPPORT

Que le Comité des services organisationnels et du développement économique recommande au Conseil d’approuver les protocoles décrits dans le présent rapport en vue d’atténuer les coûts associés aux procédures d’ordre juridique engagées par le Conseil.

BACKGROUND

On February 8, 2008, the Long Range Financial Plan Sub-Committee (“LRFP”) began its consideration of the Operational Budgets for the Administrative Services branches. During the Sub-Committee’s consideration of the Legal Services Branch, it became apparent that a portion of the Branch’s outsourcing budget was aligned with specific legal activities initiated at the direction of City Council. The following comments, drawn from the Sub-Committee minutes (with emphasis added), provide some context for the origins of this report:

Mr. Kirkpatrick felt there were two issues: the amount of legal work being pursued and the need to provide better information so that elected officials might understand the implications and costs of some of Council's decisions; and the level of comfort with the efficiency and productivity target assigned in the base budget. … From an efficiency perspective, he felt this branch was doing a very good job. However, he went back to the issue of the amount of legal work being pursued and submitted Committee and Council had the opportunity to change what the Branch was doing.

Mayor O'Brien did not want this to take away from the bigger picture Council still had to deal with in terms of controlling Council-initiated legal activities because he felt there was a substantial potential for savings in this area.

A brief discussion ensued with respect to Council-driven legal activities and staff resources dedicated to responding to inquiries from members of Council. Mayor O'Brien asked that staff bring forward a proposal to address these issues before the end of March.

For further background on this topic, additional excerpts from the LRFP meeting can be found at Document 1.

DISCUSSION

As a prelude to consideration of what matters may be characterized as “Council-initiated legal activities”, it is important to appreciate the statutory roles of the Mayor and Council, as well as the duties undertaken in fulfilling these respective mandates. This knowledge can then provide a foundation for understanding the legal activities undertaken by the City Solicitor and how these can be affected by decisions made by Council.

(a) Elected Representatives’ Statutory Roles

In accordance with Section 224 of the Municipal Act, 2001, the statutory role of a municipal council included the following duties:

(a) to represent the public and to consider the well-being and interests of the municipality;

(b) to develop and evaluate the policies and programs of the municipality;

(d) to ensure that administrative practices and procedures are in place to implement the decisions of council;

(e) to maintain the financial integrity of the municipality; and

(f) to carry out the duties of council under this or any other Act.

With the implementation of Bill 130 on January 1, 2007, Clause (d) was deleted from Section 224 and Clauses (d) and (d.1) were added to further clarify Council’s statutory role:

(d) to ensure that administrative policies, practices and procedures and controllership policies, practices and procedures are in place to implement the decisions of council;

(d.1) to ensure the accountability and transparency of the operations of the municipality, including the activities of the senior management of the municipality.

As noted below in the section entitled, “City Solicitor’s Role”, Council’s mandate “to ensure that administrative policies, practices and procedures…are in place to implement [its]…decisions” has a corresponding duty imposed on municipal staff to not only implement council’s decisions but also to “establish administrative practices and procedures” in order to do so.

Furthermore, it is also worth noting that the reference to “any other Act” in Clause (f) above serves to recognize Council’s legislative mandate extends to matters arising under the City of Ottawa Act, 1999, the Planning Act and the Ontario Heritage Act, as well as a host of other provincial statutes.

In addition to Council’s collective responsibilities, the Mayor, as the statutory “head of council” and the City’s “Chief Executive Office”, has further legislative authority under the Municipal Act, 2001. Briefly, Section 225 sets out the following express duties of the Mayor, including the revised Clause (c.1):

(a) to act as chief executive officer of the municipality;

(b) to preside over council meetings so that its business can be carried out efficiently and effectively;

(c.1) without limiting clause (c), to provide information and recommendations to the council with respect to the role of council described in clauses 224(d) and (d.1);

(d) to represent the municipality at official functions; and

(e) to carry out the duties of the head of council under this or any other Act.

It is clear that the amendments arising from Bill 130 sought to further clarify the roles of both council and the head of council, as well as their relationship. For convenience, the statutory provisions with respect to the head of council are more specifically set out in Document 2.

Building upon the strict statutory references described in the Municipal Act, 2001, the Citizens’ Task Force on Council Remuneration set out more fulsome “role descriptions” for both the Mayor and Members of Council in its November 2004 report. Briefly, the policy role for all of Ottawa’s elected representatives was defined in the following terms:

· Develop positions and motions to influence the direction of policy/programs/services; determine level of support amongst citizens and colleagues, refine proposals and present and justify these at Committees of Council and Council meetings; and

· Assist in setting broad planning and service directions for the current and future needs of the City of Ottawa by reviewing and ultimately voting on the Official Plan, Visions and Directions and on the expenditure of funds for studies/assessments to evaluate the need for certain programs, projects and initiatives.

(b) City Solicitor’s Role

In contrast to the statutory responsibilities that emphasize the policy role of elected representatives, the mandate of the City Solicitor, as part of the broader “municipal administration”, is founded upon the operational requirements to implement Council’s decisions. In this respect, Section 227 of the Municipal Act, 2001, specifically describes the general role of the officers and employees of the municipality, including the City Solicitor, in the following manner:

(a) to implement council’s decisions and establish administrative practices and procedures to carry out council’s decisions;

(b) to undertake research and provide advice to council on the policies and programs of the municipality; and

This broad mandate is further refined within the City’s Delegation of Authority By-law, pursuant to which the City Solicitor is given the specific responsibility to commence and maintain legal proceedings before various Courts and Tribunals, and to initiate appeals or judicial reviews from their decisions. In addition, Section 27 of the By-law obligates the City Solicitor to “use the most efficient combination of staff and external legal services required to represent and defend the interests of the City.”

In order to make the most efficient and effective use of the internal and external legal resources available, the City Solicitor regularly considers the following criteria when deciding to initiate a claim or launch an appeal:

1. Will the legal action have a significant financial and/or operational impact on the City?

2. Will it affect one of the City’s public policies, by-laws, strategic initiatives, etc.?

3. What is the estimated cost of this legal action and can it be resourced accordingly?

4. Have alternatives to litigation been attempted? (e.g. negotiation, mediation, arbitration, etc.)

5. What is the probability of success for the legal action? and

6. Is there a strategic component to this legal action? (e.g. is it part of a broader effort to affect change from another level of government or third party).

Additional factors, such as the need for specialized legal expertise, serve to aid in determining whether any particular matter may be best handled by the in-house lawyers of the Legal Services Branch or by one of the external firms retained pursuant to the Strategic Standing Offer process.

It is trite to observe that the demands placed on the Legal Services Branch will increase in direct proportion to the scope of business undertaken by the City’s various operating departments. For example, it is entirely foreseeable that the construction of new roads and sidewalks will ultimately lead to more lawsuits arising from the public’s use of those roads and sidewalks. In a similar manner, it should come as no surprise that there are some City Council projects, initiatives, or decisions to which a considerable share of the City’s overall legal services’ cost can be attributed, such as the City’s no smoking or bilingualism policies.

It is these types of “Council-initiated legal activities”, arising from the Members’ statutory role, that have tended to be of considerable size, complexity and cost, as well as of significant profile to the general community or a specific group. Given the currently litigious environment in which public policy initiatives are made, the implementation of such Council decisions is almost certainly expected to give rise to some form of claim or legal challenge. More importantly, where City Council chooses to be a leader in terms of a public policy initiative, particularly one untested elsewhere in the province or the country, legal challenges to such an initiative may be inevitable. Recognizing Council’s traditional role in offering leadership on public policy matters, it may nevertheless be possible to adopt some modest protocols to mitigate the associated legal costs.

Due to a variety of factors, including the lack of early involvement by Legal Services in some City issues, the kinds of decisions and initiatives contemplated above often create unanticipated demands beyond the existing resources of the Branch. As such, these matters are referred to external legal counsel who can marshal the necessary resources and expertise in order to respond in a timely fashion. Various examples of Council-initiated legal activities that have cost more than $50,000 from 2001 to 2007 are attached at Document 3.

Generally-speaking, these types of legal activities tend to fall within one of two broad categories:

(i) Ontario Municipal Board (“O.M.B.”) appeals arising from Council’s planning decisions; or,

(ii) Litigation or other legal actions flowing from Council’s major public policy initiatives.

Each of these areas are discussed below in greater detail.

(i) O.M.B. Appeals

Recent experience has demonstrated that some O.M.B. appeals can place considerable strain on the City’s legal resources. This seems particularly so where City Council has elected to pursue a direction contrary to staff recommendations. While the reasons for such disparate approaches likely vary on a case-by-case basis, the key factor that remains constant is the statutory responsibility of councillors to represent the best interests of both their ward constituents and residents of the municipality. In these cases of divergent views between Council and City staff, the need to ensure that there is no perception of bias in the conduct of the appeals requires that external legal resources, and often professional, external experts, be retained, sometimes at considerable cost. During the last two years, Councillors have received a summary of the outcomes and costs associated with O.M.B. hearings and will continue to do so during the first quarter of the following year (i.e. 2008 summary will be distributed on or before March 31^st, 2009). A copy of the 2001-2007 O.M.B. hearings summary is on file in the City Clerk’s Office.

(ii) Litigation from Council’s Policy Initiatives

In addition to the O.M.B. appeals that arise from Council’s planning decisions, a parallel conclusion can be drawn with respect to Council’s major public policy initiatives. This is particularly the case when Council is undertaking more “cutting edge” approaches to counter existing challenges. For example, Council’s directions to implement various Public Private Partnerships has led to increased legal involvement with respect to contract negotiation and preparation and, occasionally, related implementation issues. Similarly, Council’s objections to certain provincial laws, including the Nutrient Management Act and the Employment Standards Act, are often undertaken by means of a court challenge, thereby resulting in unanticipated legal costs.

(iii) Protocols to Mitigate Costs

In response to the various “Council-initiated legal activities”, there may be some basic changes that could be implemented in an effort to reduce any unnecessary costs as they relate to Council’s decisions. First of all, the factors considered by the City Solicitor when determining a particular legal course of action may also be germane and useful for Council to review in conjunction with their statutory duties in the Municipal Act, 2001. A more focused risk/benefit review or analysis of the anticipated return on an investment of legal resources may assist Council to reach a balanced and informed decision on matters that may give rise to anticipated litigation. This is particularly true if the goal is to determine if a proposal will likely result in the best overall use of the City’s resources – including its legal services.

Secondly, it is suggested that Legal Services be involved as early as possible in the development of projects that could be described as “major public policy initiatives”. In this manner, Legal Services would be better positioned to build into such reports not only its professional advice but, also, an estimate of the costs that may ultimately be required to implement/defend the initiative. In addition, Council could be more fully apprised of the anticipated, or at least possible, legal implications and costs of particular decisions or policy initiatives.

The most difficult Council-initiated legal activities to predict may be those arising from planning applications when Council and staff have divergent views.

In the event that a Standing Committee rejects a staff recommendation on a planning matter, Legal Services would prepare and distribute a preliminary opinion on both the legal concerns of the issue and probability of success, as well as an estimate of the possible costs associated with an O.M.B. appeal. This proactive approach may allow Council to consider all of the relevant factors within the scope of its decision-making process. While it is obviously impossible to predict with any degree of accuracy the ultimate legal cost of any particular Council decision or initiative, by applying the kinds of analysis described above, it is possible that more balanced, well-informed decisions will result, thereby ensuring maximum return for the expenditure of City assets.

Finally, in an effort to better appreciate and monitor the extraordinary legal costs that may result from a particular Council decision, it is suggested that specific, one-time funds be allocated to the City Solicitor by Council when warranted. For example, in August 2006, Council received an in camera legal briefing from the City Solicitor with respect to various legal matters that had the potential to evolve from the Environmental Assessments for the Carp Road Waste Management Facility, as well as the Navan Landfill site. After returning to open session, Council unanimously carried a motion allocating $250,000 “for the retention by the City Solicitor of such external legal services as are deemed necessary.” The establishment of such specific legal accounts may constitute a further opportunity for Council to consider a major policy initiative with all of the relevant legal and financial information before it.

CONSULTATION

As this matter was internal in nature and arose during the 2008 Budget deliberations, no further consultation was required.

FINANCIAL IMPLICATIONS

There are no financial implications with respect to the consideration of this report.

SUPPORTING DOCUMENTATION

Document 1 – LRFP Sub-Committee Minutes, February 8, 2008

Document 2 – Sections 225 and 226.1 of the Municipal Act, 2001

Document 3 – Council-Initiated Legal Activities

DISPOSITION

If this report is approved by City Council, the protocols described herein will be implemented in an effort to mitigate the costs associated with Council-initiated legal activities.

OPERATIONAL BUDGET REVIEWS FOR ADMINISTRATIVE SERVICES - LEGAL SERVICES

EXAMEN DES BUDGETS DE FONCTIONNEMENT DES SERVICES ADMINISTRATIFS - SERVICES JURIDIQUES

ACS2008-CMR-CSE-0005 CITY WIDE / À L'ÉCHELLE DE LA VILLE

Mr. R. O’Connor, City Solicitor, spoke to a PowerPoint presentation in which he outlined his branch’s mandate, cost, structure, staff levels, service areas, performance results, cost comparators, efficiency targets, and savings opportunities. A copy of his presentation is held on file.

Responding to a question from Mayor O’Brien, Mr. O’Connor explained that although the hourly rate for external legal services had been reduced by 20%, this had not translated into over-all savings because the amount of work being done had increased significantly. However, he indicated he was working on controlling external billable hours now that the branch had implemented a new time docketing reporting system and was conducting bi-annual case reviews with its external law firms.

In response to a follow-up question from Mayor O’Brien with respect to the time management system, Mr. O’Connor indicated he was striving for the capacity to provide pictorial data showing the various combinations of statistical information, including external and internal information, but that he was not yet able to do it.

Mayor O’Brien asked if staff had looked at the number of hours spent in comparison with other jurisdictions in terms of the size of the municipalities and he wondered where Ottawa stood with respect to the amount of legal work being done. Mr. O’Connor indicated he was not able to do this through the OMBI statistics but that he would be pleased to take it back to the Municipal Law Departments Association of Ontario (MLDAO) to work out the population and workload statistics with them. He hoped to be able to report back on this when the City presented its OMBI statistics, in late spring or early summer.

Councillor Jellett wondered if the City had the right balance between internal versus external legal resources. Mr. O’Connor explained that with 2007 as a base line, staff would work through those statistics and he would be able to report on this issue going into the next budget process, in the fall of 2008.

He indicated, should he be able to identify an area where it would be more cost effective to transfer funding from external resources in order to hire another lawyer, he would come forward to Committee with that recommendation.

Responding to a question from Councillor Jellett with respect to the Legal Services Branch’s success rate in defending cases where Council disagreed with staff advice, Mr. O’Connor could not provide comprehensive data with respect to the number of such cases and the costs associated with them in 2007. Mr. O’Connor explained that Committee and Council were not directly involved in minor litigation matters, nor were they permitted by law to participate in Provincial Offences Act matters because members had signed a Conflict of Interest Agreement with the Province of Ontario in that regard. He indicated he would be prepared to come back to Committee with additional information. Further, Mr. O’Connor referenced the Ontario Municipal Board matters where Standing Committees made recommendations to Council that were contrary to staff’s advice and indicated in such cases, the success rate before the OMB was approximately 25%. By contrast, where staff, Committee and Council were all in agreement, the success rate before the OMB was 75%. Mr. O’Connor indicated he would be recommending that, when such reports went forward from Standing Committees to Council, members would receive a confidential legal opinion stating how much it would cost if Council supported the Standing Committee recommendation and what the City’s chances were in successfully defending challenges to such decisions. Furthermore, he suggested that on larger Council initiatives, the report format should include a section for legal/risk management implications. He felt Council needed this type of information when going ahead; either on decisions that were contrary to staff advice or on major initiatives.

In response to questions from Councillor Wilkinson, Mr. O’Connor indicated the legal costs associated with the Light Rail Transit (LRT) resided in the remainder of the LRT office, in the Planning, Transit and the Environment department’s budget. He confirmed that, with the exception of the LRT legal costs, all other legal costs were reflected in his branch’s budget because, pursuant to the Delegation of Authority By-law and the Procurement By-law, he was the only officer of the corporation able to hire external legal counsel.

Councillor Wilkinson wondered why last year’s Legal Services budget was overspent by $1M and what assurances Council had that this would not happen again in 2008. She also wanted to know the legal costs association with the LRT, even though these resided in a different budget. Finally, she referenced the reduction option outlined at page 5 of the agenda for $80,000 and 1.6 FTE and inquired about the impact this would have.

Mr. O’Connor advised last year’s budget was overspent solely because of external legal costs. He indicated the $80,000 reduction outlined at page 5 of the agenda would eliminate one of the branch’s claims investigators, which would cause a modest delay in services to people who filed claims with the City.

With regard to legal costs associated with the LRT, Mr. O’Connor provided a break-down for 2006, which he noted had been reported to Council on September 12, 2007, and he advised that for 2007, the total was approximately $450,000, almost entirely related to litigation.

Responding to questions from Councillor Desroches, Mr. O’Connor confirmed external legal support was competitively sourced and that, whenever possible and/or appropriate, the branch used mediation and/or arbitration to resolve matters as opposed to going through the court process.

Councillor Desroches referenced some work being done with respect to legal clarification on Provincial statutes and he wondered why the onus would be on the City of Ottawa to come up with an interpretation of Provincial legislation. Mr. O’Connor discussed enabling legislation under the Municipal Act and Bill 130 as well as 200 pages of revisions and he submitted that legal opinions were required by municipalities in order to go forward.

In reply to a final question from Councillor Desroches, Mr. O’Connor agreed with the Councillor that it was important to involve the Legal Services branch earlier rather than later on some matters and he submitted there was some room to improve in this area.

Responding to a question from Councillor Brooks, Mr. O’Connor explained that prior to this year, claims investigators were not yet on a time docketing system. Therefore, he indicated he was not yet able to quantify the delay that may result from the $80,000 reduction outlined at page 5 of the agenda.

Councillor El-Chantiry referenced Mr. O’Connor’s earlier comments with respect to implementing advice to Council relative to potential litigation and associated costs. He also commented on the costs associated with responding to inquiries from members of Council and options for dealing with this issue. In response to the Councillor’s comments, Mr. O’Connor indicated he hoped to implement the first issue (advice to Council relative to potential litigation and associated costs) as early as March and that, in the mid-term governance review, staff intended to bring forward options with respect to dealing with inquiries from members of Council.

Responding to a further comment from Councillor El-Chantiry, Mayor O’Brien indicated he also believed there were significant resources associated with responding to inquiries from members of Council. However, he felt the issue would be more appropriately addressed at the Corporate Services and Economic Development Committee (CSEDC) in terms of some immediate, remedial action.

Mayor O’Brien asked Mr. Plamondon his view with respect to the target savings of $30,000 on Mr. O’Connor’s $6.2M budget in terms of whether he felt it was reasonable. Speaking to the question of whether or not the target was fair and reasonable, Mr. Plamondon indicated this was not an issue in which he was involved.

Efficiency targets were allocated by the City Manager and he believed Mr. Kirkpatrick would be speaking to it. With respect to Council inquiries, he advised the review panel’s observation was that it was an impossible situation for staff to try to police requests from Council and therefore the protocol should be developed by Council, based on establishing budgets, accountabilities and/or thresholds.

Following up on the discussion, Mr. O’Connor indicated that from his branch’s point of view, about 6% to 7% of the budget was not spent on either compensation or external law firms. This amounted to approximately $400,000 from which he would have to find the $30,000 requirement. Therefore, he maintained this was a substantive amount and would have to come from such items as office equipment, supplies and mandatory staff training.

In response to an earlier question with respect to Council-driven legal costs, Mr. O’Connor advised he would like to provide a more substantive list for CSED Committee. However, he gave members an overview of items and their associated costs: School of Dance, $250,000; constitutional challenge to the City’s Bilingualism Policy; $240,000; constitutional challenge to the City’s Adult Entertainment Parlour By-law, $300,000; contractual and commercial legal advice on the source-separated organics project, $170,000; Ottawa Lynx litigation; $160,000. Adding to that, he referenced $95,000 spent in 2007 for employee and Council indemnification. He explained the 2001 policy relative to this item and indicated it was an unfunded liability. He believed this policy should be reviewed in 2008 and identified as a possible saving in the future.

Mr. Kirkpatrick felt there were two issues; the amount of legal work being pursued and the need to provide better information so that elected officials might understand the implications and costs of some of Council’s decisions; and the level of comfort with the efficiency and productivity target assigned in the base budget. With respect to the productivity target, he explained that on a gross expenditure basis, the Legal Services branch budget was up 1.6%. He noted that a large portion of the branch’s budget related to compensation, and he advised the $30,000 efficiency target would reduce this increase to 1.2%. From an efficiency perspective, he felt this branch was doing a very good job. However, he went back to the issue of the amount of legal work being pursued and submitted Committee and Council had the opportunity to change what the branch was doing.

At this juncture, Councillor Wilkinson introduced a motion to accept Option 1, as outlined at page 5 of the agenda.

Mayor O’Brien wondered if it was premature to move forward with Option 1. Councillor Wilkinson maintained the point of these meetings was to find administrative savings and, in the budget book, staff had identified this as a possible saving. She submitted that, should it come to fruition, reducing the amount of legal work generated by Council would be an additional saving.

Responding to a question from Councillor El-Chantiry, Mr. O’Connor expressed agreement with Councillor Wilkinson’s motion, noting that as he moved forward with a branch re-alignment, he would likely be able to achieve the $80,000 reduction in-house so it would be more of an efficiency.

Moved by Councillor M. Wilkinson

That the Legal Services budget be reduced by $80,000 (1.6 FTEs) as per the Budget Reduction Option – Risk Management.

CARRIED

Committee then approved the Legal Services Branch budget as amended.

That the Long Range Financial Plan Sub-Committee recommend Council approve the final 2008 Operational Budget of the Legal Services Branch, as amended by the following:

1. That the Legal Services Budget be reduced by $80,000 (1.6 FTEs) as per the Budget Reduction Option – Risk Management.

CARRIED as amended

Mayor O’Brien did not want this to take away from the bigger picture Council still had to deal with in terms of controlling Council-initiated legal activities because he felt there was a substantial potential for savings in this area.

A brief discussion ensued with respect to Council-driven legal activities and staff resources dedicated to responding to inquiries from members of Council. Mayor O’Brien asked that staff bring forward a proposal to address these issues before the end of March.