Shared Economy: Another incomprehensible project we are expected to accept

By Gerry Barker

August 17, 2017

This week the city sent a press release about “navigating the shared economy.”

It was long on jargon and these was a pathetic explanation by Mayor Cam Guthrie.

“I’m proud of the leading role Guelph has played in creating a tool that will help local councils and communities analyze the impact of various sharing economy services on their own residents and businesses so they can make decisions based on local needs.”

Some clarity please, Mr. Mayor. What kind of tool are you talking about? How will it help the cost of services to the citizens specifically, what are you talking about?

Perhaps Chief Administrative Officer Derrick Thomson can explain it: “Sharing economy initiatives are being shaped by zoning codes, hotel and taxi licensing regulations, transit and all manner of distinctly local policy. The Shared Economy guide is designed to help municipalities understand this new economy, what it means on a local level and how to respond appropriately.”

Does this Shared Economy include include tighter financial control of operating overhead and capital budgets? Particularly, in view of the huge losses incurred by the city management such as the $163 million wasted on the failed Guelph Municipal Holdings Inc? Part of that has been parked on the Guelph Hydro financial statement as a $94 million debt. The balance of the loss is the shareholder’s (all citizens) equity of some $67 million spent on a variety of projects, most of which were authorized and executed in closed-session meetings between 2011 and 2015.

Was this a shared economy issue?

This week the Association of Municipalities of Ontario (AMO) is meeting in Ottawa. The Guelph delegation composed of some councillors, led by Mayor Guthrie, has joined in support of a recommendation to the provincial government to raise the Ontario portion of the sales tax by one per cent taking the HST to 14 per cent.

The Ontario government rejected the proposal a few hours after the presentation. What were the municipal representatives thinking? Did they believe that the Wynne Liberals would approve increasing the HST before a provincial election June 7, 2018?

First, the provincial government funds the AMO. That gives it power to accept or reject proposals.

Second, excessive spending of the public’s money are the problems facing the 445 Ontario municipalities. Chiefly, in most cases it is repairing and replacing neglected infrastructure. A Guelph staff report pegs the cost of infrastructure in the city at more that $400 million.

In many cases it’s about cash management particularly, revenue from property taxes and user fees. In Guelph, there has been endemic abuse of boosting revenues from those sources to pay for misadventures in environmental projects with no return.

In most homes and businesses, revenues must balance spending. The use of credit to invest in necessary lifestyle issues such as emergencies, operating costs and capital projects, is practised in more than 90 per cent of property owners and businesses.

The corporation of the city of Guelph is no different. It is obligated by the province to supply a Financial Information Report (FIR) annually with no deficit.

What has occurred over the past ten years is that the budget forecasts have been exceeded because of overspending. It is an annual occurrence. The city does have a safety net called reserves. In 2009, Coun. Leanne Piper was quoted as stating that the city had $77 million in reserves. In 2014, an outside management consultant, BMA, said those city reserves had been depleted and used to balance the city books. Their report raised a “red flag” over the reserves’ depletion.

In 2012, a citizen’s activist group, GrassRoots Guelph, presented a petition to the Minister of Municipal Affairs and Housing. The documented petition, using the city’s financial statements, presented data that showed the discrepancies in the annual FIR’s. The petition requested an audit of the city’s finances. The Minister said the two parties should get together to resolve their differences. It never happened. The former CAO, Ann Pappert, claimed it was a waste of time.

This was a fight between two pit bulls in which there was no loser except the citizen’s of Guelph.

Guelph has become the poster city for failing to control spending on projects initiated by elected officials and staff of public servants with little public input.

For the past 10 city budgets, starting in 2007 until 2017, property taxes have increased annually by an average of 3.6 per cent. This has resulted in an exponential increase of some 45 per cent.. Now we are about to begin the 2018 budget negotiations spurred by staff recommendations.

Keep in mind this is an election-year budget so there will be debate about revenue and expenses. The council will end up approving budgets designed to please the electorate and lull us into believing all is well.

Instead, citizens are being fed another new management plan called the “Sharing Economy.”

Here is a capsule of the city press release’s explanation:

“The Guide provides a brief introduction to the sharing economy and then identifies the following six decisions to guide municipalities that are anticipating or reacting to a shared economy platform in their jurisdiction.

Ulp! Why is Guelph the instigator of this?

  • What type of approach is most appropriate?
  • Answer: Control spending and control of revenues is limited. That well has drained. Change the composition of city council. Reduce the number of councillors to nine from 13. Elect a single full-time councillor in each ward. Elect at large the Mayor, Deputy Mayor and an executive councillor with the key responsibility of overseeing city finances.
  • What are the primary public policy goals?
  • Answer: Fix the assets that are broken or are redundant. Stop buying the people with their own money such as the Well-Being handouts and miscellaneous city supported community projects.
  • What type(s) of sharing will be included?
  • Answer: Managing a city is not rocket science. We elect people presumed to be aware and competent and professional staff to manage the city.
  • What kinds of policy actions or tools are needed?
  • Answer: Control spending on consultants. Reduce staff and overhead costs. Work on developing growth in the manufacturing area to increase assessment and reduce the dependence on residential assessed properties. This will also provide jobs outside of the public sector.
  • Design considerations
  • Answer: The city council must enact considerations based on facts supplied by the professional staff. There must be a clear division between elected and professional officials to provide a system of checks and balances. In Guelph, there has been a serious lack of financial management and policies.
  • Implementation and evaluation
  • Answer: Most people in the city feel that there has been too much money spent on failed mismanaged projects. This is one program that should have full public input.

The Guide was commissioned by the Large Urban Mayors’ Caucus of Ontario, financially supported by the Province of Ontario and developed in collaboration with the Guelph Lab—a partnership between the City of Guelph and the University of Guelph.

A variety of other partners including the Guelph Chamber of Commerce and the municipalities of London and Mississauga contributed to the Guide.

We should be wary of this proposal, as we have just experienced a similar collaprative venture known as the Community Energy Initiative. It is important that we solve the immediate problems facing the city before launching into an academic exercise that may distract us from what’s needed today.

Too much money has already been wasted; it’s time to stop the bleeding.

Leave a comment

Filed under Between the Lines

Guess who the Progressive Conservative candidate in Guelph will be next June?

By Gerry Barker

August 14, 2017

Guelphspeaks has learned that the Guelph Provincial Progressive Conservative Association has been bypassed and informed that PC headquarters in Toronto has made a selection.

There is nothing illegal in this although one would naively expect that the choice of a candidate should rest with the local association. This is the second time the PC PooBaas have overridden the selection of a candidate. Anthony MacDonald was parachuted in to represent the Guelph PC’s in the last provincial election. We all know how that turned out.

My sources tell me that the PC Association has been hard at work vetting candidates and preparing to hold a nomination meeting. Then, there was the sudden withdrawal of trucking executive Tom Mooney, as a candidate, in protest of PC headquarters finagling with the process. Mr. Mooney stated that there was too much of this going on across the province where PC candidates were being chosen.

I asked one of my sources if the local PC Association cannot run a nomination meeting to select the best candidate, why is there an association? “It’s exists to raise money,” was the response.

So who is the anointed candidate to represent Guelph in the Ontario Legislature?

My sources say it is our Mayor, Cam Guthrie.

There is no doubt that Mr. Guthrie is well known in the city. He won the 2014 civic election by more than 5,000 votes, defeating a three-term mayor. However he was unable to persuade the majority of his council that property taxes had to be held to the Consumer Price Index rate as he promised his supporters. In March 2015, his first budget resulted in a property tax rate that was eventually 3.96 per cent after adjustments.

But he did put the brakes on the Guelph Municipal Holdings Inc.’s (GMHI) multi-million experiment. This failed to create a made-in Guelph self-sufficient in power generation and co-generation thermal underground water heating and cooling system.

In May 2016, Pankaj Sardana, then Chief Executive Officer and Chief Financial Officer for GMHI reported the Community Energy Initiative (CEI) projects in the Downtown area and the Hanlon Business Park, were financial disasters. What we didn’t know at that time was the extent of the losses by GMHI and Guelph Hydro that loaned some $94 million to GMHI in the form of two debentures.

Mr. Sardana said the two District Energy Nodes (pumps) and co-generation project should never have been started in the first place.

The former mayor, Karen Farbridge, who acted as chair of the GMHI Board of Directors for four years until her defeat in 2014, founded the CEI and GMHI. It is noted that Ann Pappert, the Chief Administrative Officer of the city, also served as CEO of GMHI for four years.

Ms. Pappert co-signed the devastating GMHI report to council and left the city ten days later, May 26, 2016. She received $237,500, plus a taxable benefit of some $6,300, a full year’s pay for five months work.

Mr. Guthrie was a supporter of Ms. Pappert and he attacked a citizen who wrote a scathing report of Ms. Pappert’s performance as CAO. He threatened the resident with legal action but never advanced his threat. In my case, he wrote a number of emails to his supporters not to believe me and pay no attention when I reported that council was reviewing Ms. Pappert’s contract.

Mr. Guthrie was no fan of guelphspeaks.ca

Then along came that December 10 closed-session meeting of council that approved $98,224 increases for four senior executives. CAO Ann Pappert, Deputy Chief Administrative Officers Al Horsman, Mark Amorosi and Derrick Thomson. Only Mr. Thomson remains and is now CAO of the city. Those four increases ranged from 14.7 to 19 per cent. There was no evidence of justification for these increases that were concealed until March 2016.

Guelphspeaks revealed, in late March 2016, just how much those four executives received as reported in the 2016 Sunshine list published by the province of every public employee earning more than $100,000.

Mr. Guthrie, as mayor, presided over that closed meeting. Attempts to have the minutes revealed have been denied. The public has no knowledge of which councillors approved or objected to the increases. The bottom line is why was it done in secret knowing full well that it would eventually be made public?

Was the Guthrie council so confident that people would soon forget the deception?

Now the result is a lawsuit initiated by a member of the executive group who was dismissed last February.

That procedure has not been brought to trial. If and when it does, the discovery process could involve testimony by those members of council and staff participating in that closed meeting. The delayed discovery of which, led to the lawsuit.

By choosing Mr. Guthrie to be the PC candidate, the PC party should be prepared for fallout of the Mayor’s support in the next ten months.

The question is: When does provincial candidate Guthrie resign as Mayor of Guelph? The civic election is not until October, five months after the provincial election June 7, 2018.

Which leaves us with two major party candidates having performance issues that will result in a tumultuous campaign and an opportunity for the NDP to win the election.

I shiver in anticipation.

6 Comments

Filed under Between the Lines

Is Linamar getting a fair shake trying to hire 15 foreign electricians?

By Gerry Barker

August 8, 2017

Years ago, I was employed by Magna International. I was named general manager of a venture to create a new Canadian business magazine titled Vista. In a few months I learned a lot about Magna’s manufacturing ability. The company was creating record business, making a wide variety of parts for new vehicles for the majority of auto manufacturers.

The concept of on-time delivery of those parts to the assembly plants located all over North America and Europe at that time was fairly new. Magna had many manufacturing facilities throughout Canada and the U.S. to meet the strict deadlines for each assembly plant. Their success in meeting those deadlines made the assembly operations more efficient.

I recall that the most pressing need was for tool and die makers. It forced the company to import trained personnel mostly from Frank Stonach’s homeland, Austria, to create the parts. If Canadian authorities had prevented the import of skilled technicians, Magna would not be the company it is today, a world leader in not only supplying parts but also assembling complete vehicles.

The parallels between Magna and Linamar are striking. Both companies were each founded by two skilled immigrants who had the vision of building great corporations.

That was almost 60 years ago and cultures change, people change and so do attitudes.

Last year, Linamar applied to the Department of Employment Social Development Canada to hire 15 foreign-trained electricians. The company argued that they could not retain Canadian electricians. Linamar stated that when they were successful hiring Canadoan electricians, they left for a number of reasons. Those reasons varied from shift work to low wages and benefits.

The department denied the request in 2016 so Linamar appealed to have its case reviewed by Justice Luc Martineau. He supported the decision by the federal employment department and last month rejected the application as published by Guelph Today’s reporter, Tony Saxon.

The Justice heard evidence from the Electrical Workers Construction Council of Canada, representing unionized electrical workers, that there was a high unemployment rate of electricians in the Guelph area. The source of that information was never revealed.

That seems to fly in the face of the claims by the city administration that Guelph has one of the lowest unemployment rates in Canada. Are the qualified electricians alledgedly the only worker group that is unemployed in the Guelph Area?

Keep in mind that Linamar emplys 6,000 workers in Guelph, none of whom are members of a union.

Also, keep in mind that Linamar is the largest non-public employer and taxpayer operating in Guelph with 19 plants to meet its contract obligations with auto industry customers.

When the importation of skilled foreign workers helped Magna grow and prosper, why is Linamar being denied the same right in 2017?

Now, Guelph is a city where there is a large number of unionized public workers. For example, the city employs some 2,100 of which 80 per cent are unionized and the balance belong to a management association. It is estimated that there are more than 5,800 employees in the city being paid from the public purse. That includes the University of Guelph, Guelph Hydro, Guelph/Wellington Public Health services, Guelph General Hospital and the St. Joseph’s Senior Living and Rehab Centre, Ontario service employees, and Federal government employees

The Ontario Liberal government has allowed the growth of these public unions, the number of which has grown exponentially in the past 14 years of the McGuinty/Wynne Liberal governments. Not only has public employee wages and benefits soared but their numbers have increased substantially. In that space of time, the growth of the public sector employees has far outstripped that of the non-union corporations.

The Saxon story generated a lot of comments, mostly attacking Linamar’s employment practices. The main beefs, according to the comments was the company’s shift times that were hard on workers, and also the average pay per hour was only $20. This shift system is described as the “continental” when workers are required to work 12-hour shifts and change starting times every two weeks. Based on that, it would appear that Linamar workers are working slighly more than three days in a 40-hour week.

Given the circumstances, it appears the Electrical Workers Council is denying a major Guelph corporation the right to hire skilled electricians from outside Canada. That is a striking example of a union-based organization protecting its turf. As a former union member and shop steward, I recognize the role of organized labour and the right of collective bargaining.

In this case, the eeelectrical workersw union council has stepped over the line and interfered with the operation of a major Canadian company that is listed on the Toronto Stock Exchange.

We’re talking here about hiring 15 skilled employees because the Canadian electricians don’t want to leave the cocoon of their trade union to work in a non-union shop.

The fact that a federal government department is supporting suppression of hiring skilled foreign workers, particularly when 47,000 Syrian refugees were allowed in last year, did the Trudeau government specify that no electricians would be permitted entry?

Just asking.

10 Comments

Filed under Between the Lines

Is the selling of Guelph Hydro already a cooked deal?

By Gerry Barker

August 4, 2017

For those of us who were around when former Mayor Karen Farbridge attempted to persuade us to merge Guelph Hydro with electric utilities in Hamilton and St. Catharines, even members of her council caucus voted no.

So, here we go again, with a public relations campaign amply financed from public funds, to persuade us to merge our electric distribution system with another as yet unknown utility. The city website features a list of pop-up information tables at six locations around the city starting August 3 to August 22.

The title of the web address is energizingtomorrow@guelph.ca.

The city is inviting the public to ask anything about the plan to “merge” Guelph Hydro with another utility.

Here is the administration’s reason for selling off our utility with an asset value of $228 million.

“Guelph Hydro is a high-performing utility company with a solid reputation. In light of changing provincial policies and global energy technology trends, City Council appointed a Strategies and Options Committee (SOC) to review options to help ensure customers to continue receiving excellent service and value from the City-owned electric utility company.”

It should come as no surprise that the leading contender to grab Guelph Hydro and control of its 55,000-customer base is, Hydro One.

Now, you will recall Hydro One, the operator of the entire hydro power system in Ontario, is owned by a private, publicly traded corporation. The former owner of one of the world’s largest power distribution systems is keeping a minority share. It was a $9 billion gain for the provincial government. Also it was a key maneouver leading up to a pre-election provincial balanced budget eliminating the deficit just in time for the June 7, 2018 general election.

Gee, that looks a lot like we’re being bought with our own money.

But there is more. Premier Kathleen Wynne has unveiled a plan to cut electricity costs for four years by as much as 25 per cent starting in 2018. Part of that 25 per cent is already affecting hydro customers with the government reducing the HST by eight per cent. So there is another decrease coming just in time for the provincial election.

With the Premier’s personal approval rating settling in deep freeze territory, below 20 per cent, the hydro gambit is essential for her government’s survival. The fact that the Progressive Conservatives are holding a 13 per cent edge over the Liberals, portends deep trouble over the next few months for the Grits.

So, here are some questions:

  •  If and when this sale is consummated, what’s in it for the shareholders, the people of Guelph and Rockwood, who are the owners and customers of Guelph Hydro?
  • If this happens, who will service the system when repairs are needed in the event of a major weather event or power outage?
  • What recourse have citizens got to reject the sale?
  •  If Guelph Hydro is sold, what will the city do with the proceeds?  *
  • Why does the city persist describing the disposition of Guelph Hydro as a “merger” and not a sale?

This is all about a sale of the city-owned utility. The argument that the sale is provincial policy is just not true. It has been discussed and municipalities have been told that the province wants greater efficiancy of power distribution. There has never been any debate about this or any specific directive from the province to merge with another utility.

The second argument speaks of advances in “global energy technology trends.” That’s partially true but why is Guelph Hydro being put up for sale? Why indeed, following the disasterous experiment by Guelph Municipal Holdings Inc., personally administered by the former mayor and her Chief Administrative Officer, Ann Pappert? Neither of whom is no longer employed by the city.

The record shows that the loss of GMHI was more than $160 million, according to the GMHI consilidated audit costing some $2.8 million, some of the loses have already been written off.

Still glowing in the dark are the two unsecured debentures with outstanding balances of $103 million taken out by GMHI. The only clue of who provided those debenture funds came from the Chief Administrative Officer of GMHI, Pankaj Sardana, who said the debentures, came from a group of unnamed investors.

In my opinion, I believe those investors were soured through or part of Guelph Hydro.

Ask yourself, if you were owed $103 million by a city-owned corporation that is virtually bankrupt, wouldn’t the only way of recovering the capital would be to sell your organization (Guelph Hydro)? Or in this case, demand payment from the City of Guelph.

One of the most interesting items in the Guelph Hydro’s financial statement is a $94 million debt.

If Guelph Hydro is sold, then the purchaser will retire that debt and the proceeds return to the city as part of the settlement.

No purchaser in his or her right mind would want to take on a $94 million debt of a corporation with $228 million in assets. These figures are takeb from the 2016 Guelph Hydro financial report.

These are just some of the reasons why I will oppose any merger or sale of Guelph Hydro. The citizens have been excluded from the entire GMHI disaster and have paid a heavy price for an attempt to make Guelph a world-class renewable energy provider.

In my opinion, I believe that negotiations are currently underway to sell Guelph Hydro. The SOC schedule calls for the final consummation of the deal next spring before the provincial election.

Unfortunately, that deal is already baking in the oven.

Council will still have to agree on any proposal to sell Guelph Hydro. This means that as the date approaches citizens should express their opposition to members of council.

This is no frivolous attempt but a well-financed proposal, using your money, to sell Guelph Hydro.

Is this the price we pay for five years of total incompetence?

4 Comments

Filed under Between the Lines

It’s time to put the brakes on policies favouring bicyclists

By Gerry Barker

July 31, 2017

This now the 10th year that city council has been controlled by a majority of members of council, followers of the former mayor, Karen Farbridge, and a supplicant cadre of senior staff managers.

If the Corporation of the City of Guelph were a private company responsible to shareholders, the former mayor and most of the board of directors would be fired. As a matter of fact, the former mayor and some of her council were fired in 2014. But Coun. June Hofland saved her seat by just five votes in Ward Three, delivering to the left its majority of seven out of 13 councillors. Hence the title: Landslide Hofland.

The city was taken over by a rookie Mayor, Cam Guthrie, who defeated the former mayor by more than 5,000 votes. Mr. Guthrie during his campaign, promised to keep property tax increases to match the Consumer Price Index.

His first budget negotiations started in December 2014. It didn’t take long for the council majority of seven and the city senior staff to demolish the Mayor’s tax plans and returns to business as usual as if an election never happened.

On March 25, 2015, the budget approved a property tax rate at 3.39 per cent that was later elevated to 3.96 per cent when the increase in assessment figures recalculated the property tax rate. There were a number of additional proposals, including increasing the staff with hew hires, spending money on projects and policies of the previous administration including $600,000 on bicycle lanes, chiefly on Woodlawn Road.

That project was never completed except to restrict vehicle lanes from Victoria to the Speed River Bridge; add bike lanes and a left turn centre lane. This was a hallmark of the Farbridge administration that whenever a major street was repaved, the same lane configuration reduced vehicle lanes. Today, the cumulative effect of these lane shrinkages are causing increased traffic jams on major roads in the morning and afternoon rush hours.

The millions that have been spent on bike lanes and trails has been a sacred plan to reduce greenhouse gases by stop using vehicles powered by fossil fuels. The expectation was that more people would use pedal power to shop, go to work and be healthy.

In fact, former councillor Maggie Laidlaw, boasted that within 20 years there would be no cars on Guelph’s streets. Well, the exact opposite has happened as the city expanded bringing more cars. Ms. Laidlaw was defeated in 2014.

This social engineering plan, supported by a tiny minority of bike riding advocates has been a disaster. Not only in terms of money being spent, but many of the lanes did not cover the full length of roadways. So a bike lane would appear and then disappear further down the road. Examples are Woodlawn, Woolwich, Silver Creek, Stevenson, Speedvale, Gordon, and soon Downey Road.

In many cases cyclists are forced to use sidewalks because there is no bike lane. In Guelph, that is against the law. Police report that some 18,000 tickets have been issued to bicycle riders.

The other day, I was driving west on Speedvale, about four in the afternoon, going down the hill toward Edinburgh. When a female cyclist, pulling a baby trailer, was on the road where no bicycle lane existed caused heavy traffic to slow down, give her wide berth and avoid a serious accident.

Instead of spending more money expanding bicycle lanes and paths, plan to spend that money completing the gaps in bike lanes on major roads. Now there are some heavily traveled roads that would require widening at a very high cost. An example is Speedvale from Woolwich to Manhattan court. That project alone was estimated to cost $14 million by staff that recommended not doing it.

The issue of stolen bicycles could be solved if the bikes were licensed so they could be traced. The very expensive and high tech bikes are targets and are sold outside the city making detection difficult. Perhaps using a cell phone, a small GPS device flipped on and monitored when parked would help protect the bicycles and their owners.

Another idea would be mounting a min-alarm system on the bike that would squawk if a bike wheel lock were tampered with.

A small annual licence fee would go into a special account and be used to improve bicycle access and usage. It’s time for those cyclists to improve their safety as well as those of other users of the road.

The city could offer incentive for the cyclists to register their bikes by offering a free flashing light, bell and luminous strips for rear fenders.

Ride safely out there.

 

 

14 Comments

Filed under Between the Lines

Some questions about funding of a downtown community centre called 10C By Gerry Barker

 

July 29, 2017

According to a report by Rob O’Flanagan in Guelph Today, a new downtown community centre is about to open in the former Akers Furniture building located at 42 Carden Street.

The tenants in the building are described as social purpose organizations and entrepreneurs, working across many sectors while engaging collaboratively to serve and enhance the community.

Some of these include the Chalmers Community Centre, functioning as a supplier of food and clothing programs for the city’s “marginalized;” Guelph dance, Out on the Shelf, Local Immigration Partnership and the Neighbourhood Support Coalition. The 10 Carden Street organization, founded by the Guelph Civic League, is the driving force behind the centre. It has already moved into the renovated space.

Not for profit organizations with a financial and social benefit can access the community bond program. The bond program has raised $1,325,000. Some 84 investors have invested in the two series offered earnings of three or four per cent.

In addition, some $500,000 has been raised through sponsorship with a program target of $700,000. It appears the city has donated $50,000.

Some questions:

What are the details of the business plan?

What has the City of Guelph donated and committed to guarantee repayment loans?

What collateral was provided to investors guaranteeing repayment of the bonds?

Can the bonds be traded or transferred?

How much is 10 Carden Street investing in the project?

What are the estimated rental charges to support servicing the bonds?

Who owns the building?

What are the terms of the contract to rent the building?

Did the city building inspector issue a building permit for the renovations?

Who is in charge of managing the building?

Is there any other debt including lines of credit and short term loans from a financial institution?

What are the terms of renting space in 10C?

The public has the right to know these details if any public money is involved.

The occupation by three tenants closely associated with 10 Carden Street demands careful scrutiny to avoid political action affecting city operations or civic elections.

Until these questions are answered then the public is being denied and the stated goals of 10C could be suspect in terms of use of public funds.

At a time when city finances are stressed due to the money invested in Guelph Municipal Holding Inc. This failed enterprise has cost citizens $161 million and will take time to clean up without depending on increasing taxes and user fees.

City council needs to report the situation following the independent audit of GMHI by the KPMG accounting firm.

Pouring money into corporations is not in the city’s best interests. While the culture at city hall has markedly improved in the past three years, there is still much to be done to lower the escalating property taxes imposed in the past ten years.

Next year, citizens will have the opportunity to express their views through the ballot box. In June there will be a provincial election followed by the civic election in October.

In view of the fact that the 10 Carden street organization has received public money for the 10C project it would be in their interests to carefully explain to the public details of the project. Particularly it is in those areas where city has skin in the game.

On paper, it looks like a worthwhile project but needs more explanation of the structure and execution of the enterprise.

 

 

 

 

 

 

4 Comments

Filed under Between the Lines

The GMHI Odyssey: Following the money leads to a staggering hit on city finances

By Gerry Barker

July 24, 2017

The epic unraveling of the Guelph Municipal Holdings Inc, (GMHI) affair is like watching a kitten untangle a ball of wool.

There are so many moving parts, bopping through a dense fog of spin, denial, obfuscation and malfeasance.

What people are expecting is how much did this excursion into a fantasy world of power self-sufficiency coupled with providing co-generated hot and cold running water to buildings actually cost?

Guelph Speaks used two official documents to reach its conclusion that GMHI cost the city $157.422 million most of which is not recoverable. The two documents include the audited consolidated balance sheet of GMHI and the Guelph Hydro 2016 financial report. By any definition losses can only be described as “staggering.”

The long-term effect is a severe restriction of capital and operational spending. That amount represents about 40 per cent of the total 2017 city operational and capital spending budgets.

In my opinion, it has jeopardized capital spending on the $63 million South End recreational centre and the Downtown library (again) of an estimated $60 million. Keep in mind that city council has approved capital projects including the $34 million police headquarters and the $20.5 millionWilson Street parking garage.

There is no easy solution to this. The project is a failure financially and leaves the city with few alternatives to recover the losses of GMHI. Increasing debt, property taxes and user fees are not alternatives. Rationalizing cost of operations is now a necessity to reduce overhead costs. It’s the only way out of the situation because the city cannot win the lottery.

It all started in April 2007 when the new city council unanimously approved Mayor Karen Farbridge’s proposed Community Energy Initiative (CEI).

Here are the goals set by the CEI to achieve by 2031:

* Use 50 per cent less energy per capita

*   Produce 60 per cent less greenhouse gas emissions per capita

*   Encourage and facilitate community-based renewable and alternative energy   systems.

The staff report at the time, said the CEI would position Guelph among the top energy performers in the world.

Today, the key management players are no longer employed by the city, leaving behind a multi-million dollar losing legacy that has challenged the most skilled financial practitioners among us. Item: The city has spent more than $2.8 million just to have the KPMG accounting firm perform a financial autopsy on this turkey, aka an audit.

The people associated with the GMHI project, have left the building. They include the former mayor, Karen Farbridge, and Chair of the GMHI Board of Directors; former Chief Administration Officer and Chief Executive Officer of GMHI, Ann Pappert; Former Chief Financial Officer Al Horsman; City Solicitor, Donna Jacques and Jasmine Urisk, who at the time, was Chair of the board of directors of Guelph Hydro. Other peripheral managers have also departed at all levels of the City of Guelph Corporation.

These include members of the city administration, Guelph Hydro, GMHI and Envida Community Energy Inc. and Guelph Hydro Electric Services Inc. (GHESI), the operating division of Guelph Hydro. In addition, GMHI and Guelph Hydro entered into contracts to supply power and co-generation thermal heating and cooling system.

These contracts were never fulfilled and the city has negotiated settlements, it is reported.

The Guelph corporate family of companies

So here is the cast of operational participants, all belonging to the City of Guelph’s corporate family.

GMHI was set up under the express direction of former Mayor Karen Farbridge. She took on the job of Chair of the GMHI board of directors in 2011. She handpicked her board thereby maintaining complete control. At the time of formation the assets to be managed included the Guelph Junction railroad.

Her mission was to implement the CEI announced in 2007. It was the product of a series of meetings with many of the leading citizens in the city described as stakeholders. They included members of the city administration, Union Gas, Guelph Hydro, business and industrial representatives, the University of Guelph, School Boards and the Guelph Chamber of Commerce.

It was an all-star cast that produced the agreement and thrust of turning Guelph into a world-class jewel of conservation, self-sufficiency in power, renewable energy sources, total management of waste and the gradual reduction of the use of fossil fuels to reduce the effect on climate change.

It was dreamy, heady stuff that stirred the environmental souls of those participating. But little happened for four years until the corporate vehicle, GMHI was established in 2010. In 2013, the Farbridge-dominated council approved moving Guelph Hydro unto GMHI.

The wheels of this ignoble experiment started to come off in 2009 when Guelph Hydro’s subsidiary, Ecotricity Corporation reported a loss of $3,945,000. The report said the loss was due to declining methane gas from the Eastview landfill. An impairment charge of $2.984 million was taken that year.

Update: Guelph Hydro has paid to take over the Eastview gas generating plant paying some $550,000 for it. Now which city corporation gets that money?

What is the interpretation of an ”impairment” charge? If the recoverable amount of an investment is less than its carrying value, then the asset is deemed to be impaired. The value must be written down to the recoverable amount.

It’s not difficult to understand that when assets are wriitten down, that’s real money lost forever.

There is more on this to come

Suddenly, the door was shut to public participation. Only a few politicians and civil servants were in on the plan’s execution.

It is now believed that Guelph Hydro was the banker for GMHI. The first step was to have Guelph Hydro form Envida Community Energy Corporation to be the hands-on builder of new projects, including installing solar panels on the roof of the Sleeman Centre and several public building throughout the city. Envida now owes millions in debt to GMHI.

The audited GMHI balance sheet revealed a startling statement that concerned two senior unsecured debentures taken out by GMHI totaling $103.612 million as of December 31, 2016. The largest was for $65 million, due 2030 and no interest of the debenture has been paid for two years, increasing the principal due by $8.612 million. The other debenture is for $30 million and is due in 2045. Both these obligations carry interest rates of 4.012 per cent and 4.112 per cent respectively.

The source of these debenture loans is described in the audit as the CDS&CO. As both are unsecured, the loans were made because of the City of Guelph’s owneship of GMHI and Guelph Hydro. It is difficult to imagine any financial institution committing $95 million without the assurance of repayment by the city. Regardless, the loans are unsecured. One can only conclude that a corporate relative within the city’s corporate family guarantees the liquidity of GMHI. The audit also revealed that a $20 million credit facility was arranged for GMHI but the source is not revealed. As of December 31, 2016, there has been no draw down on that facility by GMHI.

It is now clear that there was a lot of money flowing between various city-owned corporations. It was a five-year irresponsible mismanagement of public funds that has left the citizens with a $157.422 million price tag with no benefits to show for it. And, also there remains no possibility of repayment of rapidly depreciating assets.

Adding up the numbers

The balance sheet of GMHI shows assets of $230.596 million of which $162.653 million is composed of property, plant and equipment. Conversely, in my opinion, many of these assets are depreciating and failing to provide adequate cash flow to allow GMHI to pay its bills and continue to exist. The real cash liabilities of $163.474 million closely match the value of the total assets. The inclusion of shareholder equity of $67.122 million, according to the audit as a liability, is enough to match the total assets of $230.596 million to balance the books.

In my opinion, the shareholder’s equity, and that’s you and me, is virtually worthless because there is not enough cash from operations and assets to allow redemption of the shares. The record now shows that GMHI is so intertwined between various city-owned corporate entities that disclosure of the facts is an expensive and difficult task.

It would appear the debenture funding came through Guelph Electric Services Inc., the operating arm of Guelph Hydro. Envida was involved in other projects including the District Energy nodes set up in the Sleeman Centre and Hanlon Business Park.

Through all this GMHI activity, the public had no clue as to what was happening with their money. Item: Hydro bills for the 55,000 clients of Guelph Hydro increased electricity fees by 42 per cent in four years. In the past year the billing has decreased.

Today, Guelph Hydro reports a total of $228.3 million in assets. Its long-term debt is listed as $94.3 million and net income for 2016 was $7.1 million. It would take 13.28 years of $7.1 million in net income to repay it. Amazing coincidence! That’s 2030 the year the $65 million unsecured debenture is due for redemption.

Would you or I want to merge with a utility that carried an impaired debt of $94.3 million? How does the city merge or sell Guelph Hydro with that problem?

Now this is when it gets interesting. In May 16, 2016, Pankaj Sardana, CEO and CFO of GMHI, said there was an impaired charge to GMHI of $68 million. He explained that this was provided by a group of investors, without naming them.

Accounting for those pesky two unsecured debentures

But on the audited GMHI consolidated balance sheet there is a liability of $95 million composed of two unsecured debentures, one being $65 million and the other $30 million. The auditor reported the source of the debentures was CDS&CO. Remember this is now an impaired asset.

It is apparent from the audit by KPMG and the Guelph annual 2016 financials that Guelph Hydro has assumed the hit on the debentures and lists $94.3 million as debt.

Is it coincidence that the GMHI debenture debt has morphed over to Guelph Hydro who lists it as debt? Why would Guelph Hydro, well established with earnings of $7.1 million report debt of $94.3 million? If these figures are accurate, according to official public audits and financial documents, then the total GMHI loss includes the worthless shareholder equity, $63.122 million and the Guelph Hydro debt of $94.3 million totals $157.422 million.

On a historical note, some members of the Gang of Seven city councillors walked out of a closed session in January 2016, preventing council to continue its business because of a lack of quorum. Interviewed later, Coun. Phil Allt said their action was to “protect the staff and the corporation.”

Wonder how that worked out for them now that the details of the GMHI debacle is being revealed?

 

4 Comments

Filed under Between the Lines