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FROM: MAY-JUN 2009 ISSUE | BY COLIN ELLIS
High above Nathan Phillip’s Square, in the east tower of City Hall, are the offices of Toronto’s top boss, City Manager Joe Pennachetti, CGA. Responsible for the delivery of more than 40 major services to a population of 2.7 million people in the fifth largest city in North America, Pennachetti can look out from the tall windows that span his floor and rightly conclude that the entire city would come to a stop if not for the oversight of his deputies and their divisions.
Streetcars would stop. Garbage would pile high. Water would slow to a trickle and the lights in Toronto’s towers would flicker and dim. Even the silent skaters, tracing elegant circles on the outdoor rink below, would disappear without the city workers who clean the ice and supervise the fun. Imagine pressing on a stopwatch that stops time itself. Then imagine the city in freeze frame. That might help you to grasp the magnitude of the Office of the City Manager.
A Quick Glance at the Organization Chart
If it takes a village to raise a child, it surely takes a formidable administrative structure to oversee a workforce of 50,000 and a budget of more than $10 billion. The city manager is assisted by three deputy city managers, one of whom is also the chief financial officer for Toronto (a position Pennachetti previously held under the leadership of former city manager Shirley Hoy). Each deputy city manager oversees divisions too numerous to catalogue, typically run by directors and general managers.
In addition to the manager and his three deputies, the Office of the City Manager comprises five divisions: executive management, human resources, internal audit, strategic and corporate policy, and strategic communications. The city clerk and city solicitor also report to the city manager for administrative purposes.
But a quick glance at the organization chart of the City of Toronto reveals another aspect of the city manager position. The only box above that of the city manager is that of city council, because the position of city manager is directly accountable to council for all policies and programs delivered by Toronto’s public service. It’s a position that Globe and Mail columnist John Barber recently called “the lightning rod for every stray charge of discontent” in Toronto.
A Hand-Picked Successor
When well-regarded city manager Shirley Hoy retired last summer, Mayor David Miller already had a successor in mind. Joe Pennachetti had joined the City of Toronto as chief financial officer in 2002 and was serving as deputy manager to Ms. Hoy. He had more than 30 years experience in municipal government, previously serving as treasurer and commissioner of finance at the Regional Municipality of Peel for six years and, immediately prior, treasurer and commissioner of finance for the Regional Municipality of York from 1990 to 1995.
His credentials were impeccable: in addition to his professional standing as a CGA, Pennachetti holds a bachelor of commerce degree, and achieved a master’s degree in business administration decades before an MBA was in vogue.
Nevertheless, when Miller announced his intention to put Pennachetti’s name alone before a vote of the executive committee, the squawking from some sides of the council chamber came loud and fast. Nothing against Joe Pennachetti, went the refrain, but the mayor was making a pre-emptive move to control the process, bypassing a full recruitment effort. Even so, Miller’s opponents could not bring themselves to criticize his hand-picked successor, grudgingly calling him the “right man” and “best candidate” for the job.
Said one city councillor, “There’s no doubt Mr. Pennachetti is going to be our city manager and he is going to be a good one.”
Perhaps their respect was borne from Pennachetti’s performance during the tempestuous term of Ms. Hoy, who had the misfortune of being at the helm during many of the city’s widely reported dramas: the garbage strike in 2002, the blackout and SARS crisis of 2003, troubled TTC negotiations, and a probe into the tendering process to redevelop Union Station, plus the fallout from the MFP computer leasing scandal, to name the most infamous.
During Hoy’s reign, Pennachetti was widely credited with ensuring the solvency of the city and simultaneously persuading credit agencies to raise their ratings of the city’s debt, and he, Miller, and Hoy were at the table together during sensitive negotiations with Queen’s Park over the uploading of social services costs.
His admiration for his former boss is effusive. “At Shirley’s farewell I had a lot to say about how she helped me,” says Pennachetti. “As a finance person you’re deemed to be cold-hearted and tougher at times, but the one thing I learned from Shirley in terms of being the manager of a large municipal corporation is having the heart and being a true public servant and always ensuring that you’re meeting the public’s needs first and foremost.”
In the end, the appointment of the CGA whom admirers call “imperturbable” and “unflappable” was approved without incident. For Joe Pennachetti, it was the culmination of a career that began with the family business in St. Catharines, Ontario – and the validation of a momentous decision to pursue public service.
A Family Flair for the Entrepreneurial
“When I was growing up in St. Catharines,” recalls Pennachetti, “my father was involved in a family concrete products business. When I was going to university I would work at the family business during the summer. Later on, I began working with the controller of the company while pursuing my bachelor’s degree in commerce. That’s what got me interested in finance and accounting.”
John and Dorothy Pennachetti passed on to their children a family flair for the entrepreneurial. Two of Joe’s brothers run Cave Spring Cellars, the grape grower and vintner located in Jordan, Ontario. A third brother is a real estate developer, and his two sisters are a marine biologist and teacher respectively. There was a time when Joe was certain that, like his father and brothers, he would pursue a career in business. In the 1970s he enrolled at the University of Windsor, first for his B.Com, then for a master’s degree in business administration, which at the time was in only its second year as a program.
“Bottom line, I wanted to know all the pieces of running a business and ultimately strike out on my own. But I picked the wrong time to graduate, because in the mid-1970s, the economy was in recession.” Slated for a position at the Bank of Nova Scotia in Waterloo, a summer vacation of hiking through Alberta changed Joe Pennachetti’s life.
“I fell in love with the mountains and the scenery. Even though I had the job lined up in Waterloo, I took a temporary job with the City of Edmonton, which was looking for MBA graduates. If it wasn’t for the unique municipal structure of Edmonton, I wouldn’t be in municipal finance, because Edmonton was a rarity in the world at that time, in that it owned and operated all of its utilities, including telephones.”
It was an unique opportunity to learn financial aspects of both the public and traditionally private sectors. “I hopped between public services and the municipal business of utilities. Within two years I was working on sophisticated consolidated financial statements, and the longer I stayed, the more I realized the similarities between running a private business and running a municipality.”
A CGA in the Public Sector
In the late 1970s, Pennachetti decided to pursue a professional accounting designation, and chose the CGA program for its unique combination of technical accounting training and broad business study. (Then in his late 20s, it also helped that he could continue working while studying on a part-time basis.) “The CGA designation was really starting to grow in the late 1970s in Alberta, and the flexibility of the program and its courses really appealed to me.”
Pennachetti served as a student representative on the Edmonton Chapter of CGA Alberta for several years. He believes strongly in giving back to one’s designation and Association. “The CGA designation made me a true financial professional. What I liked about the program was that it went above and beyond the usual case study method, and the commitment to lifelong learning has been an essential part of my career.”
Joe Pennachetti, however, is truly passionate about the career opportunities that exist for accounting and finance professionals at the municipal level. “It’s not as different from the private sector as people might think, because the management of a big city is like the management of a big corporation. Toronto’s budget is more than $10 billion. Municipalities are growing relative to expenditure levels – largely because of downloading – so we need the skills and expertise of professionals. There are tremendous opportunities for accounting and finance professionals at the municipal level.”
The culture of program delivery has changed as well. “Each of our 44 programs is literally viewed as a business,” Pennachetti explains. “We do everything from benchmarking and performance measurement to the strategic practices of private sector corporations. But at the end of the day, what appeals to me about the municipal sector is that you are serving the public and close to the people. You deal with residents, you deal with business. Daily.”
As Pennachetti warms to the subject, his passion for the public sector is clear. “To my mind it’s the best of both worlds. You do the same type of financial work that you would in a private corporation, but at the same time you serve the public. It’s very fulfilling.” He cites the influence of his parents for instilling a commitment to public service in their children. “My father was a board member and the chair of a local hospital in St. Catharines when I was growing up. He understood the importance of serving one’s community.”
That would include a community as large as Toronto. “One of the reasons that I really enjoy Toronto and will finish my career here is because, quite frankly, Toronto to me is the ultimate in terms of public service for municipalities and government in general.”
The Challenges and Potential of Toronto
As Joe Pennachetti stands beside the skating rink at Nathan Phillip’s Square, passersby greet him with a wave or a warm hello. He seems embarrassed by the attention, and quickly steers the conversation to the challenges facing Toronto in recessionary times. “Obviously the budget is one of the big challenges for the City of Toronto, and of course a hot topic recently was the introduction of new taxes that were not just significant for the City but broad-ranging for municipalities across Canada, such as the land transfer tax. But we also feel strongly that we should be receiving a share of sales tax. Quite frankly, we will not have a sustainable financial position in this city until that occurs.”
At a time of recession, Toronto will be in the difficult position of negotiating new collective bargaining agreements during 2009, negotiations in which Pennachetti will be involved. He takes pride, however, in the certainty that what he brings to the bargaining table is an ability to listen.
“I believe my personality somewhat reflects CGAs in general, in that we are trained to always keep in mind every aspect of any issue in which we are involved. That means an ability to listen, and as a municipal employee, you have to listen to all sides of the issue that you’re dealing with.
“We listen to residents and we listen to businesses, and oftentimes their views don’t mesh with the direction that city council and its administration might be taking. So you have to listen to the various aspects of any issue. The best example of that lately is the implementation of the blue bin program and the solid waste management program going totally user fee.
“Again, my training as a CGA helped me during this groundbreaking initiative. No other major city in Canada has gone the user-fee route with solid waste management. Most municipalities still use a combination of user fees and property taxes to finance solid waste management. Now, Toronto has gone totally user fee, similar to a utility. We listened, but we also had to make a decision. Some people didn’t like the user-fee idea, but I feel strongly that in five to ten years, every major municipality in Canada will follow suit.”
Seeming to usher in a new era, the tower clock begins to chime at Old City Hall. Joe Pennachetti, City Hall CGA, has to raise his voice above the din. “The challenges in 2009 will be significant. But the future of Toronto is one of limitless potential.”
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