Monthly Archives: June 2011

Did the dog eat Armtec CEO’s homework?

When Armtec’s Chief Executive Officer, Charles Phillips, told the Guelph company’s annual meeting that the reason the stock dropped $10.90 in three trading days, was the weather, the recession and, did I mention the weather?

Gee Chuck, every business in Canada faced the same weather conditions as Armtec. Apparently, some are better at handling it than others.

Those attending the meeting sensed there was more explanation needed about the sudden reduction of shareholder value but it was not forthcoming from company executives.

Board Chairman Bob Wright replying to the question of why the stock tanked in three days said:  “Who Knows?” Who was running the show if the Chairman of the Board of Directors was in the dark?

Boss Phillips said that he and fellow executives suffered along with shareholders as they owned shares in the company. Really? Is that why the Board approved asking the shareholders to enhance the executive compensation program?

The lame excuses and lack of operational explanation of why this company literally fell out of bed was not to be. Selling $58 million worth of new shares at $16.20 just before the end of the now revealed disastrous 1st quarter was a classic corporate two-step.

The credibility of the Armtec executives and board members has been shattered.

What investor in his right mind will invest in this company after the June 23rd annual meeting?

In those devastating three days of stock denouement who shorted the stock? Which, if any, insiders sold stock? Who knew what and when?

So many questions, so few answers.


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Some sappy support for Guelph bicyclists

In a letter to the Mercury, a bicycle enthusiast claimed that greater use of bicycles would make Guelph “a more ecologically friendly and healthy place to live.”

Or will it?

The letter says the city has passed a bylaw that creates bike lanes on major roads.

Like all bike activists, the writer neglects to mention that using bikes for basic transportation is unrealistic for no other reason that the vagaries of the weather and basic demographics. It is an activity centred on the age group 18 to 45. That leaves a lot of citizens off the saddles and into motorized transportation.

Biking has become a cult of a minority segment of society that insists its way of life must be imposed on everyone. They make their case arguing the health aspects of riders, removal of cars from the roads when bikes take over and a greener atmosphere.

They fail to acknowledge that many bicyclists are undisciplined users of the public roads and sidewalks. They ignore stop sign and red lights according to a recent study in Toronto. Guelph police have stated that most bicycle accidents occur on the sidewalks where the law states they should not be.

Bicycles are vehicles and are subject to the Highway Traffic Act.

Bicyclists gain no respect from citizens when they thwart the rules of the road.

But they are a demanding lot!

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Is the University of Guelph paying its fair share of property taxes?

Between the Lines

By Gerry Barker

Published June 18, 2011 in the Guelph Mercury

This is a tale of two cities.

One, the City of Guelph, is the “mother city”. The other is the University of Guelph that we will call the “inner city”.

Some 19,000 students occupy the inner city. We call them U-Birds. Most arrive in September and leave at the end of April.

This huge migrant community requires services from the mother city at little or no cost to the inner city. These include subsidized transit, water and sewer connections, streets and traffic controls, emergency services, police and fire, engineering, planning and development.

In return the inner city, by provincial statute, pays some $1.425 million in lieu of property taxes. For each registered U-Bird, the university pays $75. This formula, commonly called the bed-head tax, was established in 1983 and has not been increased in 28 years.

How about your taxes? Are you still paying the same taxes you did in 1983?

Don’t answer the question because we know the answer. Taking an annual tax increase of 2 per cent compounded over 28 years; the average taxpayer in the mother city is paying more than double in property taxes today compared to 1983.

During that period the mother city has grown. Growth carries a price tag. It requires new roads, water and sewer pipes, protection services, education facilities, engineering and planning, cultural facilities and increased civic staff to manage the growth.

Some of these additional costs are borne by the development industry through impost fees of which the new homeowner pays at closing on the purchase.

Growth is not a bad thing. The economic base grows with new businesses and new residents that establish in the mother city. That creates jobs and the need for homes, commercial and industrial services.

The trick is to manage growth so that taxpayers are not overburdened with the costs of development.

The inner city is unique among Ontario colleges and universities. No other post secondary educational institution in the Province has the urban acreage owned by the University of Guelph in the heart of the mother city.

Finding itself surrounded by mother city growth around its properties, inner city management launched into the development business, big time.

The axis of the commercialization of university lands is Stone Road. In most cases the inner city only leases its property to a variety of commercial and residential enterprises. This provides a steady flow of cash to meet expansion of the inner city‘s education facilities and a growing number of U-Birds.

The Stone Road growth was serviced by the mother city at the expense of its taxpayers.

Is the partnership arrangement fair to mother city taxpayers?  I suggest not.

A Guelph taxpayer not only pays property taxes but also provincial and federal income taxes plus the dreaded comingled 13 per cent HST. The U-Bird pays little or no income tax. The University pays no business tax although it is in the commercial land leasing business.

The university is not about to magnanimously pay more property taxes because of the ancient arbitrary cap set by the province for payment in lieu of property taxes.

The timing of the provincial election in October is perfect for the mother city council to lobby the province through Liz Sandals, our Member of the Provincial Parliament. The target is to update the inner city’s bed-head tax by at least the compounded rate of inflation since 1983.

It’s the least she can do for the mother city.

Gerry Barker is a Guelph resident. Reach him at

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How did Guelph’s Armtec lose its MoJo?

How did this once great company drive the bus into the swamp so fast?

In this case it is the share price of Guelph-based Armtec infrastructure Inc.  Its share price dropped from $13.48 Friday, June 3 to $4.35 Thursday, June 9.

The company announced after the market closed Wednesday night that it was suspending the dividend until further notice and stated the first quarter loss was higher than anticipated.

Let’s dig a little deeper into this debacle.

A week before the end of the first quarter, the company successfully sold a stock issue totaling 3.6 million shares for $16.20. For those unsuspecting purchasers the Thursday close of $4.35, represents a 73 per cent haircut of their new Armtec shares.

Ah, but the board of directors were busy March 10 approving a new executive compensation deal to be considered at the annual meeting June 23. Good luck with that.

At the end of March, Armtec stock closed at $16.54. Those new shareholders had to be happy as they had just paid $16.20 for Armtec’s new shares. The existing shareholders saw their investment in the company diluted by the issuance of new shares.

The company said proceeds from the $58 million share deal would be used to reduce debt.

The stripping of the share price started Monday morning June 6 when trading volume surged from the usual 40,000 to 60,000 shares a day to more than 300,000.

By Tuesday, volume increased again as the share price dropped by $2.98 at the close of trading. Volume increased by more than a million shares.

Anyone tracking the trading volume of Armtec and the sliding price of the stock prior to Chief Executive officer Charles Phillips announcing suspension of the dividend Wednesday night, had to ask: Was there a leak of the impending news?

The CEO said that the decision was made Wednesday, but it was a board of directors decision and many people had to know knew what was coming prior to Wednesday night’s decision.

Everyone it seems, except the unsuspecting shareholders.

The situation warrants an investigation by the Ontario Securities Commission (OSC) to include the volume of short sales of the stock and who was selling.

A short sale allows an investor to borrow stock from the broker and replace it when the price drops. An example is if you shorted 1,000 shares of Armtec Monday morning at roughly $13 you could close the transaction by replacing the borrowed shares Thursday at a price of $4.35.

Such an account would be credited with $8,650, the difference between $13 and $4.35 less commissions.

The OSC can obtain the trading records for the period March 31 to June 8. Of course this will take time and the OSC has the power to investigate the trading patterns and who was making them.

CEO Phillips denies there was any leak.  It boils down to two issues: What did the company know and when did they know it? Was there any trading by insiders knowing what happened last March when the losses were greater than anticipated?

The new stock issue was launched the week before the end of the quarter, was it a case of bad timing or desperation?

The company failed to meet its obligation to shareholders by revealing the 1st quarter performance results and the decision to suspend the dividend just two weeks before the annual meeting.

The situation warrants an investigation by the OSC so that shareholders may be assured the management fulfilled its fiduciary responsibilities.

Gerry Barker is a Guelph resident and former Armtec shareholder. Reach him at

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Loewig and Amorosi – tag team terminators

In December 9 and 10,2009,  Mark Amorosi, Guelph’s Human Resources Director participated in a course on Employment Termination organized by Federated Press and the University Health Network.

As a co-lecturer, Amorosi’s description in the course materials was: “His primary responsibilities are to provide vision and motivation to the city, to deliver Guelph’s commitment to staff to become a top employer in the community through excellence in HR and people practices.”

Mark! What happened?

Did you forget the course outlines?

Your lecture topic was: “Preparing for and conducting the dismissal meeting.”

Well, that worked well with the abrupt firing of Chief Financial Officer Margaret Neubauer.

You must have spent sleepless nights pondering how to terminate her with dignity, another topic discussed at the same workshop.

Maybe you missed that part. It was getting close to Christmas.

Well, we know now how NOT to fire someone. When you and lame duck Chief Administration Officer Hans Loewig, called the unknowing Neubauer out of the council chamber and fired her, gentlemen, that was not dignified. The Mercury reporter sniffed something was up and discovered the financial chief was not even allowed to return to the chamber to pick up her effects.

It was a modern day version of the role of the guillotine in the French Revolution. The beheading amounted to the same thing.

It was a public dismissal of a senior employee. There was no official explanation although Guelph Speaks has learned it was Neubauer’s alleged failure to provide leadership to her staff. UH? She has held the job for three years. Did it take the geniuses at the top that long to figure out she wasn’t up for the job?

At least she was on the job that is more than you can say for Loewig whose so-called unpaid leaves have become legend among city staffers.

We wish Margaret a successful wrongful dismissal lawsuit. Her firing had to be the most unprofessional and ham-handed execution since the dismissals of former CAO Larry Kotseff and David Kennedy.

Amorosi’s recent deflection of severance allowance payments to city staffers who left last year, was a failure to inform Council of the full extent of the settlements. His revised statement was more than $500,000 in excess of his original estimate.

The Neubauer case should be a wake-up call for Council and citizens that change is needed at the senior manager level.

With a search costing some $40,000 to replace Loewig, any experienced civic executive must think twice before entering the management disarray existing among the city staff.

Morale is low, staffers are afraid and resumes are either being circulated or at the ready. The lower-paid staff is particularly vulnerable in the situation as opportunities to move to another employer are limited.

The question remains, how does Mark Amorosi, besides his portfolio as HR chief and is also responsible for legal services, keep his job?

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Where is the Guelph Chamber of Commerce?

The three-year plight of small businesses on Carden Street is being ignored by the Guelph Chamber of Commerce and given lip service by the city administration.

After three years of traffic disruption, both ends of Carden Street are now closed off or under construction at a snail’s pace.

From Ian Panabaker, the city’s downtown corporate manger, comes platitudes and excuses why there has been no relief for those businesses trying to cope with the lack of traffic. One business, a fixture for 26 years, has already quantified its losses at more than 80 per cent.

Where is the Chamber in all this? Are they not charged with protecting the interest of members and business in Guelph. Its silence is deafening. If the Chamber does not protect existing business in the city, what is its purpose in promoting new commercial and industrial development?

There seems to be a determination on the part of city staff to complete the rink in front of city hall. First they ordered paving stones from a supplier in New York State. That delivery has been delayed. Then the rains came .  What’s next? The plague of locusts?

These small but key small business owners deserve better.

Start with a tax deduction while their  businesses are impacted by long term construction.

If the city administration won’t stand up for them then who will? The Chamber of Commerce should be pressing the city to assist those businesses that have undergone business disruption for  more than two years.

Because of the dire financial condition of the city, it is not about  start making property tax handouts to small business affected by the city’s own misguided redevelopment.


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Should Guelph senior civil servants live in town?

Ownership comes with responsibility. In politics voters expect that their officials, both elected and senior public service employees, to live in the community in which they serve.

Parachuting a candidate into an area inn which she or he do not reside has frequently been a killer for a successful election. The exception of course was demonstrated in Quebec during the recent Federal Election. An NDP candidate chose a vacation trip to Las Vegas during the 36-day campaign and never set foot in the riding and still won by more than 5,000 votes.

Only in Quebec you say?

In recent years Guelph has had its share of staffers who work for the city but do not live in it. If you hold a responsible position in city staff and you leave for your out-of-town residence, is it possible ownership of your responsibility lessens as you head for home?

If you don’t pay taxes in the city that employs you, why should you care about the outcome of your decisions? What is the impact on the shareholders, the taxpayers of the city, who pay your salary?

Can the good burgers of Guelph depend on the employee’s integrity despite not being part of the community?

How would the citizens know? Of the five top managers employed by the city only Derek McCaughan, executive director of operations, is the only one living in the city where he works.

Now the city is spending $40,000 to a head-hunting professional management recruiter to replace Hans Loewig whose recurring absences has prompted him to retire before his contract is up next February.

In the three years as chief administrative officer he never lived in the city choosing Brantford as his home. The bottom line is that if Hans Loewig is unable to perform his job consistently, replace him. This could cost the city severance pay but right now he’s drawing more than $200,000 a year. So what incentive is there for him to resign?

Mr. Loewig offered to stay on until November to offer his guidance to the new CAO.

That was not necessary when former CAO Larry Kotseff was fired and was not replaced immediately. Loewig was later recruited on limited contract and subsequently was awarded a long-term contract to February 2012.

His recent public firing on Chief Financial Officer Margaret Neubauer was a shabby way to treat a senior official. Predictably she will sue the city for wrongful dismissal based on her damaged reputation and ability to seek equal employment elsewhere.

As the saying goes, that dog is off the porch. Loewig will never witness the outcome of this event as he basks in the Arizona sun where he owns a retirement home.

Another legacy will be the outcome of the $19 million lawsuit launched by the original new city hall contractor fired by Loewig.

The monetary liability that these actions will cause will surface in the next four years when the lawsuits are decided.

An educated guess for the reason of Ms. Neubauer being fired is that she warned council about its failure to prepare business plans for its capital spending.

This is what happens when you bring mercenaries in to run your city. They lack community spirit, a sense of belonging and skill sets that do not match the city’s needs

Loyalty to the civic stakeholders cannot be bought.

Gerry Barker can be reached at

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