A group of Vaughan ratepayers is demanding Mayor Maurizio Bevilacqua and city councillors repay $217 million they allege was misdirected to cover deep discrepancies in the city's budgets.

They also want to know what happened to $20 million that they claim "vanished" after being earmarked for a new hospital, according to lawyer Robert Karrass, who's representing the ratepayers.

"I think what we have here is an unbelievable breach of trust," Karrass told CBC Toronto Tuesday.

The notice claims the city of Vaughan is annually running deficits in excess of $100 million, which contravenes Ontario's Municipal Act. (John Lesavage/CBC)

But Deputy Mayor Mario Ferri, in the midst of campaigning Wednesday, told CBC Toronto the allegations are "fake news.

"Our staff will be responding, will be making a statement and I'm sure it'll be clarified," he said. "I believe there is no validity to any of those claims.

"It's ironic that it's happening now, two-and-a-half weeks before the election."

The allegations are included in a notice that was delivered to the city and its elected representatives Monday.

Karrass said Vaughan and its council members now have 30 days to respond. If they fail to do so, the matter will proceed to Ontario Superior Court, he said.

Karrass's letter notes that any councillors who voted to misuse funds could be prohibited from holding public office for two years. (John Lesavage/CBC)

"At some point, there is going to be an audit," Karrass added.

The letter maintains that for the past four years the city has been hiking water rates to cover what it says were increased costs of delivering the service, and to add new infrastructure.

$217M surplus

Over the years, those hikes produced a $217-million surplus, the notice says.

That surplus should have been returned to taxpayers, Karrass said Tuesday.

Instead, his notice maintains, the money was used to cover deficits in the operating budgets of at least eight city departments — deficits which amount to more than $100 million a year. He said that under the provincial Municipal Act, cities must operate balanced budgets.

The notice names all nine members of the current Vaughan council, as well as several city staffers and past councillors It demands that the council members who voted in favour of using the proceeds to cover deficits be held responsible for returning that money to ratepayers.

Not alleging personal gain

Karrass emphasized that he's not claiming any of the funds wound up in the pockets of any of the people named in the notice.

"An ordinary person looking at this situation might feel they've somehow been cheated out of money with respect to the amount they're paying for water," he said. "Whether it was deliberately done to cheat taxpayers I'm not in a position to say."

He also said it's unclear which, if any, of the people named in his notice actually voted to use the surplus to whittle down the city's deficits.

Karrass said he began his investigation several months after receiving complaints from a group of ratepayers. He said the information he's gathered was all gleaned from publicly accessible sources, like the city's website.

His notice also asks that the city to return tens of millions of dollars to the building fund of a hospital that's currently under construction. It also insists that the city stop running deficits, and conduct its financial operations in a more transparent way.

Vaughan Mayor Maurizio Bevilacqua and several other councillors named in the letter refused to speak with CBC Toronto on Tuesday.

Instead, they directed questions to Michael Genova, a corporate communications staffer with the city who issued a statement on Tuesday.

"The comments in the letter you reference are without merit," Genova wrote.

Raterpayers 'shocked'

"The City of Vaughan uses best practices to ensure fiscal sustainability and credibility, while at the same time safeguarding investments for the quality public services residents, visitors and businesses rely on each day," the statement reads.

"It should be noted that the City of Vaughan's financials are certified through a third-party audit and presented at public Council meetings on an annual basis. This helps ensure financial accuracy and integrity."

Vaughan resident Rob Kenedy, who also heads the McKenzie Ridge Ratepayers Association, said he was "shocked" by the allegations.

"We wonder why our bills are so high," he said, adding that he thinks the members of his association will be shocked, as well.

"This should not be happening. The transparency problem is going to be a major issue due to the fact that it's taking everybody off guard," he said.

If his allegations are proven to be true, Karrass's letter says, elected officials who voted to misuse the surplus could be prohibited from holding public office for two years.

