Monthly Archives: May 2016

Why you should care about Guelph Hydro risking your money to finance a flawed energy project

By Gerry Barker

May 30, 2016

The former Dalton McGuinty government launched into a misguided and costly program to move power generation away from fossil fuels to sustainable sources including wind and sun. Oh yes, then we still have a natural gas power plant generating 2,100 megawatts. Question, did it not cost more than a billion dollars to decommission the partially constructed gas generation plants in Oakville and Mississauga? Because the incoming Liberals wanted to save three seats in the area, including that of current Minister of Finance, Charles Sousa.

The first step to fulfill the McGuinty strategy of shutting down the coal-fired generating plants, was to dismantle Ontario Hydro and create three corporations: Hydro One, Ontario Power Generation Corporation (OPG) and the Ontario Power Authority.

Since that move was made, there was the small item of the $35 billion debt left behind by the former Ontario Hydro. Today, paying that charge down for the past 13 years, it was recently removed from your Hydro power bills. Regardless, during that time, we were all charged the HST on our bill. To my mind, I have never seen an accounting of the status of that old Hydro debt or what remains to be repaid?

According to the OPG since 2003, some 13 years ago, the Hydro trio of corporations has spent $16 billion on transmission and distribution. More than $21 billion has been spent on cleaner generation, read that eliminating coal fired- generation.

Since then, The Liberal governments of McGuinty and Kathleen Wynne have never balanced the books, creating an annual Ontario deficits ranging from $7 billion up to $13 billion. They did it because they could.

Let’s look at Guelph Hydro that in the past five years has seen hydro bills increase by an estimated 25 per cent. Part of this was passed through by OPG because of the aforementioned costs of converting from coal to wind, sun and natural gas.

An ignoble effort that has driven Ontario’s electricity costs to one of the highest in North America. The record shows that, there is so much power being generated 24-7 in Ontario that the surplus is sold at much less than cost, to neighbouring U.S. states. You can’t store electricity so the province has failed miserably to plan power development to match the needs of Ontario consumers. Instead, we end up subsidizing U.S. power users.

This has resulted in providing cheap Ontario power to competitors below the border, rebuilding the manufacturing base of those jurisdictions, while Ontario’s manufacturing base declines.

It is important to know that part of the high cost of power in Ontario were the deals made with private organizations, to build wind farms and solar arrays. The payoffs were juicy giving 20-year contracts to organizations that were guaranteed a kilowatt per hour rate of 20 cents, about 13 cents higher than what it cost to produce power. So the result was an enormous increase in the cost of retail power to Ontarians.

What does all this have to do with Guelph’s power customers?

Shortly following the 2010 civic election, Mayor Karen Farbridge organized Guelph Municipal Holdings Inc. (GMHI), naming herself as board chairman; four of her most trusted councillors plus two independent members were also added to the board. In 2011 Chief Administrative Officer, Ann Pappert was named Chief Executive Officer of GMHI.

The mayor believed that Guelph needed to adopt alternative energy systems to reduce greenhouse-gas emissions. Her problem was she could not use the financial resources of the City of Guelph because they were tapped out and it would affect the city’s credit rating.

So, she decided to bring the city-owned Guelph Hydro Inc (GHI) into GMHI. Her intent was to use it as the financial source to develop district energy plants and geo-thermal underground heating and cooling. The heat of the two current natural gas district energy pumps would heat the water distributed to select customers. The system was on a closed loop so it required a refrigeration unit to cool the circulated water during the warmer months.

This underground piping has already been installed.

I know, it sounds very complicated and I apologize for using the alphabet soup of acronyms. As it turned out, it has cost the citizens $26,637,244 and the current GMHI CEO/CFO, Pankj Sardana, says there is no hope that the money will ever be recovered. He further said the project should never have been started in the first place.

So, who put up the $26 million? We know that Guelph Hydro separate corporation, Electric Services Inc. (GHESI), inherited Envida Corporation; the organization charged with implementing the failed Community Energy Initiative passed by the Farbridge controlled council in 2007.

And where did GHESI get the money for this energy adventure? They got it from every Guelph Hydro customer in the city. And that’s why Guelph has one of the highest Hydro rates in the country.

In her eight years in office, the former mayor drove up property tax rates by some 38 per cent compounded. Now we learn the truth of her willful use of using Guelph Hydro to finance a thoroughly mismanaged and badly planned project without any regard for risk. She did it in secret, without public consultation or an environmental study.

The final question is why did the Guelph Hydro board of directors never object or question the GMHI operation? They knew what was happening because the GHI leadership was part of the GMHI.

The solution is to abolish the appointed board of Guelph Hydro and elect three Hydro Commissioner in the 2018 civic election. Only this way, the people may get some accountability.

All the players in this from the former mayor and GHI management should share the complicity and blame in the planning and execution of the geo-thermal project. There was no assessment of the number of thermal customers who were ready to sign up. This reminds us of that famous line: “If we build it, they will come.”

CEO Sardana was blunt when he said there was not sufficient number of thermal customers to pay the capital costs or operation of the district energy plants.

It is incredible that senior staff making eye-popping salaries and benefits failed to intervene and prevent this from occurring. Equally, why did Councillors Karl Wettstein, Leanne Piper and June Hofland fail to speak when they were involved? Why did they not question the decisions surrounding the development that cost more than $26 million?

They can achieve a measure of redemption by recommending the whole system be shut down and the equipment moth-balled.

Then, council should order an independent investigation into how this project failed and identify the mistakes that were made, resulting in this enormous financial loss of public money.

It was recently revealed that the originator of this debacle was the former mayor, Karen Farbridge. Today she is operating a consultancy to provide a “tool-kit for local elected leaders to build more resilient, sustainable and prosperous communities for all Canadians by taking action on climate change.”

With respect, any potential clients should check Ms. Farbridge’s track record in eight years as mayor of the City of Guelph.

In another post on her blog she said: “It’s the low-carbon economy, stupid.” I guess anyone who doesn’t like her tools are, well: Stupid.

That would include the 20,000 voters who defeated her in 2014.

 

 

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There are still questions remaining about the Pappert legacy

By Gerry Barker

Post #778 – May 28, 2016

When GuelphSpeaks broke the news Thursday afternoon that Ann Pappert was leaving her senior post as Chief Administrative Officer, the GS blog lit up like a Christmas tree.

The decision was a wise one on Ms. Pappert’s part because of the many questions about her stewardship that are still resonating. Council’s secret awarding of the $37,581 salary increase December 9, was the beginning of the end. More astonishing is they didn’t tell the public until the 2015 Provincial Sunshine List was published in March, 2016.

What were they thinking? By burying the increase for almost three months, did they think it would go away? The seven pro-Farbridge councillors who voted for the increase, betrayed Ms. Pappert by hiding the issue and then not apologizing to the public. We still don’t know who decided the amount of the 17.11 per cent increase.

It has been suggested that the increase was a planned political move to ensure that Ms.Pappert would remain CAO, manage the staff and do the Bloc of Seven’s bidding.

The five-year performance analysis of Ms. Pappert, emailed to Guelph residents, produced more public protest. The email documented performance failures by the CAO. It attracted a threat of legal action by Mayor Guthrie, who said council agreed with his decision. It resulted in a concentrated protest of Ms. Pappert’s record, as additional leaks of the closed meetings emerged and accelerated the public rejection of the CAO.

Why did her own supporters on council agree to threaten the author? They are either terminally stupid or they did it on purpose because the Pappert ‘Salary-Gate” issue was a threat to the Bloc of Seven. The mayor did not pursue his threat but why did he continue to support Ms. Pappert?

Just the other night, May 24, the Bloc of Seven council majority forced approval of a new program called the Guelph Energy Efficiency Retrofit Strategy (GEERS) to permit city funding of retrofitting private buildings. It included new windows, insulation, high efficiency furnaces fired by natural gas, solar panels to reduce dependence on the provincial power grid, and, a partridge in a pear tree.

As an aside, the acronym GEERS root description seems an unfortunate choice of words.

Here’s how it works. A citizen calls in a registered contractor to price installing new windows, insulation and a new furnace. The bid comes in at $22,000. Now a new team of city employees must vet the bid, make any changes deemed not applicable and instruct the owner that the city will finance the project. This step requires the applicant to establish ownership and provide a net worth statement, to back up the ability to repay the loan over 20 years, through the GEERS applicant’s property taxes.

Imagine that the city receiving 1.000 applications over the next two years. Where does the money come from? How does this program achieve a balanced financing without affecting capital spending on infrastructure or affordable housing?

The principal payments alone on this theoretical project amounts to $1,100 annually and does not include interest or other carrying charges, on top of the owner’s regular property tax increases.

The questions remain:

* Who is eligible for the program?

* What additional costs are factored in such as insurance, HST, legal costs?

* What happens if the house is sold before the loan is repaid?

* What is the interest rate charged on the retrofit loans?

* What happens when the homeowner cannot repay the loan?

* Does the city register its interest on the property title?

* When did the citizens vote to adopt this plan?

* Where is the city going to find the funding to implement this plan?

* Is this another Fbridger inspired plan to invoke her environmental polices?

* Why should property owners have to finance this plan?

* Did the staff, directed by Ms. Pappert prepare a business plan for the project?

* If so, was that plan approved by the finance department?

* Did the Bloc of Seven know those two days after approving the plan, that Ms. Pappert was leaving her job?

The overhanging drive to establish GEERS rests with former mayor Karen Farbrdge who remains a ghostly political force influencing the city government.

It’s another money-losing scheme done in the name of sustainability and fossil fueled use resulting in reducing Guelph’s contribution to climate change. A lofty goal but the Province of Ontario’s contribution of gases affecting climate change is 1 per cent of the total world carbon emissions.

Guelph’s portion of the Ontario carbon emission total is less than .00016 per cent.

It is yet another example of environmental projects that are adopted without an up-front analytical business plan to justify the cost. Most of these measures were adopted in by the Farbridge administration behind closed doors without public input.

So why is council turning the civic corporation into a bank to finance retrofitting a select number of properties? It ‘s another example of a misguided adventure orchestrated by a determined group of progressive adherents. In eight years, Farbridge managed to spend millions on energy-based projects, waste management and geo-thermal heating and cooling for a select number of office buildings and condos.

Don’t forget those bicycle lanes that have caused growing traffic congestion because vehicle lanes were reduced on major roads to permit wider bike lanes. The tiny minority of adults using bicycles for basic transportation does not contribute money for the road changes and maintenance. The irony is that cyclists do not pay for these road changes or contribute to the maintenance. In fact, Guelph’s cost of maintaining roads in the municipality is $28,000 per kilometer. The provincial average is $11,000 per kilometer. When it is suggested that cyclists should be licensed there is uproar from their lobbyists.

Their sponsor progressives regard these projects as investments. Trouble is, any investment has to have a return in order to qualify. We’ve already experienced that these so-called investments are great users of the public’s capital without the payback.

In their misguided view, the payback is reducing climate change that benefits all citizens. It’s a mindless theory for reasons we have already mentioned. Guelph is a miniscule contributor to global warming. When the progressives fail to build a new downtown library, a needed south end recreational centre or provide affordable housing or rebuild an ailing infrastructure, their version of investments pales by comparison.

Instead, starting with the 2017 budget, the staff wants to levy more capital to pay for badly needed, often critical, infrastructure retrofitting that affects all citizens. The proposal calls for two per cent special levy over ten years to rebuild the infrastructure. It is estimated that the contribution will net more than $250 million. That figure comes from the Associated Municipalities of Ontario (AMO).

One member of Council who attends the AMO meetings mentioned the cost of fixing our infrastructure. It is peculiar that Leanne Piper, a stalwart supporter of the former mayor, would bring this up to council and staff. She voted to support GEERS two days before Ms. Pappert quit. Her supporting vote contradicted her admonishing fixing the infrastructure that has been mostly neglected in the past eight years.

The people have reacted twice in the past 17 months and were successful in removing senior progressive leaders.

It is a lesson, that the people do have the power and are not afraid to use it.

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Questions Guelph citizens should be asking about Salary-Gate

By Gerry Barker

Posting #776 – May 26, 2016

GUELPH SPEAKS

NEWS FLASH

CAO Ann Pappert is leaving her Chief Administrative Officer position

Ann Pappert tendered her resignation today in the wake of performance issues and public reaction. She is prepared to stay on to facilitate a smooth turn over of her responsibilities to her successor. Her contract ends in October.

It is not known at this time what her plans are.

She is the second senior officer of the city staff to leave in the past few days. Deputy Chief Administration Officer(DCAI), Derrick Thomson, resigned and that leaves just DCAO Mark Amorosi, remaining of the senior staff members hired by the former Farbridge administration. DCAO Scott Stewart, was only hired last December.

To replace Ms. Pappert will take some months as the city restructures its senior management..

The current post continous

We recently learned that in a closed-session last October 13, members of council were asked to rate the performance of Chief Administrative Officer, Ann Pappert. An independent consultant tallied the responses of the 13-member council. It was reported that the CAO’s performance failed to have the support of council. The result, according to the consultant, did not warrant any increase in salary for the CAO. It is important to note that Ms. Pappert was not present at the meeting.

What allegedly followed was a series of recriminations by certain councillors over what they had just collectively stated, therefore there should be no raise. Expressions of remorse including “maybe we were too tough on her” were made, again in closed session.

On December 9, in closed-session, council voted to increase the CAO’s salary by $37,581 for 2015.

Now we learn that the CAO has hired a lawyer, a specialist in human resources cases who will only negotiate with city lawyers. Negotiate what? Ms. Pappert’s exit?

This has become known as “Salary-Gate,” the abuse of power by the administration. It is a clear example of a council exhibiting its arrogance and lack of resolve by supporting this outrageous increase. The thought of renewing this individual’s more than $257,000 contract is a chilling prospect in view of her well documented performance over five years.

Some unanswered questions

QUESTION: Who voted for this increase conducted in closed session?

QUESTION: Did the Mayor vote to pay Ms. Pappert the $37,581 salary increase December 9?

QUESTION: Why was the CAO’s 2015 salary increase stalled until December 9, 2015?

QUESTION: Who determined the amount of the increase?

QUESTION: When and how was that amount calculated?

The Human Resources department, headed by Deputy Chief Administrative Officer (DCAO), Mark Amorosi, normally recommends salary increases based on research comparing rates for similar jobs in other municipalities. His boss is CAO Pappert.

QUESTION: Is this not a conflict of interest?

QUESTION: What about the increases given to the three DCAO’s, Mark Amorosi, Al Horsman and Derrick Thomson? The latter two have left the city.

QUESTION: When were they approved and who decided the amount of their substantial increases?

QUESTION: Why is the senior staff involved at all setting their own salary increases?

QUESTION: Why are these details conducted in closed-session?

These four senior managers of the corporation are public servants and the public has the right to know the details of negotiations.

QUESTION: Why has Mayor Cam Guthrie gone to great lengths to support his CAO despite the outcome of the council rejection of any increase for Ms. Pappert, October 13, 2015?

QUESTION: Why did DCAO Mark Amorosi state that the reason the CAO got the raise was because she did not get one in 2014 and she did not request one?

QUESTION: Was the CAO told not to request an increase in the 2014 election year?

QUESTION: Is it possible that former Mayor Karen Farbridge is advising the seven members of the Orange Crush on council to block reform of her failed policies, including awarding excessive executive salary increases?

QUESTION: Were there promises made in the dying days of the Farbridge term to reward her trusted senior staff?

QUESTION: Is there any recourse by citizens to stop the waste of public money and deliberate obstructionism by the Orange Crush majority on council?

In Ontario, there is little citizens can do to recall errant public servants and elected officials, short of being convicted of robbing a bank. In this case, the four executives were in charge of the bank.

This action by the majority of council is reprehensible and a dereliction of their sworn duty toward the citizens of the city.

Why did council not tell us about the salary increases?

In particular, it was a secretive, duplicitous action that only came to light when the provincial Sunshine List of public employees earning more than $100,000 was released in March this year, almost four months after the fact.

Most disturbing is the action of Mayor Guthrie, who has repeatedly avoided involvement in confrontational events requiring his leadership. Earning a resounding victory in October 2014, Mayor Guthrie has failed to follow through on his promises to make a “Better Guelph.” Instead he has squandered obvious opportunities to fulfill his mandate.

His ability to provide leadership of this city is needed more than ever. As time goes by, it is making him less relevant as a mayor and politician. It didn’t have to be that way because there were resources to assist him to overcome the Farbridge stranglehold on city operations.

Instead, he denigrated citizens who objected to the performance of his CAO by summarily dismissing any suggestion that she lacked the ability to do the job. He even threatened one citizen with legal action. That threat disappeared quickly due to the public reaction.

He has been quoted saying that he is receiving calls from mayors and reporters from all over Canada asking how does he do it, what was his secret?

Do what?

This isn’t about selling insurance, big guy; it’s about integrity, toughness and keeping your word. All three of those attributes of your Posting #776leadership are MIA – Missing in Action.

In the meantime, contact your councillor to let them know of you displeasure over this salary case and other serious mismanagement of city finances and operations. There is no shortage of material.

It didn’t have to be this way.

Here is the Council contact list:

Mayor            Cam Guthrie              mayor@guelph.ca                         519 837 4643

WARD 1

Coun. Dan Gibson                            dan.gibson@guelph.ca                 519 822 1260 Ext 2502

Coun. Bob Bell                                 bob.bell@guelph.ca                        519 803 5543

WARD 2

Coun. Andy Van Hellemond       andy.vanhellemond@guelph.ca   519 822 1260 Ext 2503

Coun. James Gordon                   james.gordon@guelph.ca               519 822 1260 Ext 2504

WARD 3

Coun. Phil Allt                              phil.allt@guelph.ca                          519 822 1260 Ext 2510

Coun. June Hofland                    june.holfland@guelph.ca                519 822 1260 Ext 2505

WARD 4

Coun. Christine Billings            christine.billings@guelph.ca            519 826 0567

Coun. Mike Salisbury                mike.salisbury@guelph.ca                 519 822 1260 Ext 2512

WARD 5

Coun. Leanne Piper                   leanne.piper@guelph.ca                    519 822 1260 Ext 2295

Coun. Cathy Downer                 cathy.downer@guelph.ca                  519 822 1260 Ext 2294

WARD 6

Coun. Mark MacKinnon            mark.mackinnon@guelph.ca            519 822 1260 Ext 2296

Coun. Karl Wettstein                        karl.wettstein@guelph.ca            519 763 5105

 

 

 

 

 

 

 

 

 

 

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Who were the enablers and what did they do to lose $26 million?

By Gerry Barker

May 22, 2016

It isn’t too difficult to figure out now that the former Farbridge administration, on its misguided zeal to impose a radical and expensive underground energy system, was enabled by an assortment of civic staff and elected officials.

Official written statements released by the Chief Administrative Officer, Ann Pappert, and co-signed by Pankaj Sardana, Chief Financial Officer and Chief Executive Officer of Guelph Municipal Holdings Inc (GMHI); Chief Executive Officer of Guelph Hydro Electric Services Inc. (GHESI) and Envida Corporation.

Their statement included the following admissions. There is $17,937,244 in “tax losses” being carried on the books of GMHI. If you do your own income taxes you know that a tax loss is generated only by a real loss. It can only be used to offset capital gains. Thinking about this, don’t hold your breath.

Then the two district energy pumps and equipment cost another $8.7 million. The total loss is $26,631,224. It was revealed that some $3 million reduced the cost of the two district energy units. Where did that money come from? And the cost of those pumps was some $12 million, not $8.7 million as the Mayor stated.

Folks, the CAO told council that district energy is still in play. How can that be? The Godmother of GMHI must know that the company has no money and has consistently lost money for five years. Is the CAO expecting a financial resurrection of a dead dream of the former mayor, her friend and mentor?

A day of reckoning is reaching warp speed

During the presentation by Mr. Sardana to the members of council who represent the citizens as shareholders of GMHI, he was frank. Essentially, the concept of the Community Energy Initiative (CEI) and the two district energy units was poorly planned and executed.

Asked about what analysis was done before the plan was launched; the CEO replied, “If we now had done it again, we would never have embarked on it.” Mr. Sardana replied. He was not involved with the original planning of the CEI and the two district generating units.

His knowledge and expertise paints a picture of careless planning, sloppy execution, record keeping, and lack of oversight. Most of the execution of the plan was done in secret and off the city books. You didn’t have to read between the lines to understand how this happened over such a long time.

I contend that there were enablers that force-fed this now discredited and costly exercise down the public’s throats.

The path leading to a failed initiative was enabled by a segment of councillors and staff who were bound by secrecy.

Let’s take the present city council. Three members of the Bloc of Seven were supporters of the CEI along with the former mayor, Karl Wettstein, Leanne Piper and June Hofland. They not only knew what was happening but also as members of the GMHI board, enabled the process. For example; they had to know about the millions in so-called dividends paid to the city by GMHI. Did they not realize that those dividends came from borrowed money from GHESI and its start-up donation of more than $20 million paid to Envida Inc?

Did these three councillors deliberately neglect their fiduciary responsibility to their constituents? Of course they did, in the name of misguided political expediency.

The other four members of the present council’s Bloc of Seven, were all rookies including James Gordon, Phil Allt, Mike Salisbury and Cathy Downer; the last two had previous experience on council. They were not involved in this debacle that started in 2011. Also newcomers Dan Gibson, Mark MacKinnon and Christine Billings were not aware of the GMHI financial disaster. None of these councillors were involved when GMHI was started up in 2011.

But, the members of the Bloc of Seven, all supporters of the policies of the former mayor, are now caught between the rock and a hard place … support or shut up?

It remains that one of the chief enablers of this operation is CAO Ann Pappert. She had to oversee the operation as the first CEO of the city-owned GMHI. It’s her job to track the money and ensure that it is properly budgeted and accounted.

Another major enabler was the former Chief Financial Officer, Al Horsman. he was there when the CEI went south in terms of financial disaster, He was shifted in November 2014 when the suffen reorganization of the senior staff management occurred in the final days of the Farbridge administration. He took over environmental services including waste management, planning and engineering. It is now obvious he realized that finances were in disarray due to the Urbacon fiasco and the raiding of reserves to pay for the lawsuit settlement. He had to also know what was gong on over at GMHI.

Mr. Horsman left in August 2015 to take over as CAO in Sault Ste Marie.

The enabler superstructure began to crumble

After Horsman’s transfer, Deputy Chief Administrative Officer, Mark Amorosi, took the city financial department under his Corporate Services responsibilities. Since November 2014, the City of Guelph has not employed a qualified Chief Financial Officer. Since then, two general managers of finance, hired by Amorosi, left the city.

The last one, Janice Sheehy, also figured out what was happening under Amorosi’s leadership. She left last March after a year on the job. The Region of Peel hired her.

It is easy to understand that Amorosi was in on the failed GMHI experiment and enabled it to continue losing money for five years. He was a Farbridge loyalist who supported her CEI baby, no matter what the cost, as it now turns out.

Then there were the minor league enablers who were believers in energy sustainability, reduction of the use of fossil fuels and pedaling your way around the city on your bicycle.

Their beliefs have some foundation. The problem on this case, is blind ambition, which is not matched by the ability to pay for it. Under the eight-year leadership of Ms. Farbridge, it’s the reason why Guelph’s property taxes and electricity rates are among the highest in the country.

The operating and capital costs of Kitchener and Cambridge are 50 per cent less than Guelph. That difference comes out of every Guelph citizen’s pocket either through property taxes, user fees e.g., excessive charges for electricity, water, and storm drainage, even parking on major streets.

Now, the staff is proposing a ten-year special levy to finance acutely needed renovation of the city’s aging infrastructure. They propose, to place a surcharge on property owners of two per cent, in addition to the regular tax liability each year, starting in 2017 … if council dares to approve it..

With losing millions in mismanagement, the property tax levels have reached the breaking point. There is no evidence that the present CAO-led management team is unwilling to reduce operating and capital costs. The costs of operating the city are way out of line with a bloated staff that is demoralized and in some cases inefficient.

Only a change of staff leadership will bring true reform. Its byproduct will reduce the suffocating multitude of tax burdens prevailing on the citizens. There is a dire need to conduct an independent review of the governance rules installed by the previous administration. These rules are stifling the work of council including accountability to the taxpayers.

The staff management people that floated this tax levy plan are the same bunch who enabled the failed CEI debacle.

As for Karen Farbridge, she knew full well that her grandiose CEI would stall the needed work to fix the city’s proven infrastructure shortfall. That wasn’t glamourous enough for her ego and legacy.

But her legacy remains in tatters and is still being propped up by seven members of council who disregard their sworn duty to the people who elected them.

Karen would be proud.

As a public service, GS is listing the members of council and their contact points including their city-supplied phones, fixed and cell, email address and fax number. The more people contacting their representative the more they will become awarw of your concerns about mismanagement and financial losses sustained in the past five years..

Between Urbacon and CEI, those loseses are more than $49 million.

email                                    Office                   Cell            Fax

Mayor Cam Guthrie mayor@guelph.ca 519-837-5643 519-822-8277
Ward 1
Councillor Dan Gibson dan.gibson@guelph.ca 519-822-1260 x 2502 519-827-6407 519-822-8277
Councillor Bob Bell bob.bell@guelph.ca 519-803-5543 519-803-5543 519-822-6152
Ward 2
Councillor Andy Van Hellemond andy.vanhellemond@guelph.ca 519-822-1260 x 2503 226-820-5073 519-822-8277
Councillor James Gordon james.gordon@guelph.ca 519-822-1260 x 2504 519-827-6481 519-822-8277
Ward 3
Councillor Phil Allt phil.allt@guelph.ca 519-822-1260 x 2510 519-827-6579 519-822-8277
Councillor June Hofland june.hofland@guelph.ca 519-822-1260 x 2505 519-822-8277
Ward 4
Councillor Christine Billings christine.billings@guelph.ca 519-826-0567 519-822-8277
Councillor Mike Salisbury mike.salisbury@guelph.ca 519-822-1260 x 2512 519-827-7398 519-822-8277
Ward 5
Councillor Leanne Piper leanne.piper@guelph.ca 519-822-1260 x 2295 519-835-1136 519-822-8277
Councillor Cathy Downer cathy.downer@guelph.ca 519-822-1260 x 2294 519-827-8390 519-822-8277
Ward 6
Councillor Mark MacKinnon mark.mackinnon@guelph.ca 519-822-1260 x 2296 519-829-6285 519-822-8277
Councillor Karl Wettstein karl.wettstein@guelph.ca 519-763-5105 519-822-8277
 
 
 
 
 

 

 

 

 

 

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How a flawed Community Energy Initiative wasted $26 million with no material environmental benefit

By Gerry Barker

May 18, 2016

The Chief Executive Officer of the Guelph Municipal Holdings Inc. (GMHI), Pankaj Sardana, CFO, GMHI, CEO, Guelph Hydro Electric Systems Inc (GHESI). and Envida Community Energy Inc., spent almost two hours explaining how the previous administration pushed to develop district energy units costing $8.7 million without having a comprehensive business plan.

Mr. Sardana pulled no punches except one. He did not name the political author who was pushing a failed multi-million dollar community energy initiative that resulted in a massive loss of some $26, 637, 244 million, provided the audit does not establish the same figure.

Former Mayor Karen Farbridge was determined to establish a Community Energy Initiative (CEI) that Mr. Sardana described as flawed from its inception in 2011.

Her name was never mentioned during the shareholder’s meeting. But following the GMHI CEO’s remarks, it was clear that there was no doubt who was pushing to adopt the flawed CEI and the district energy plants.

At the beginning of the meeting Coun. Karl Wettstein, out of the blue, made an unrelated comment: “I don’t believe the Urbacon decision (to fire the general contractor building the new city hall), was an error.”

Where does he get this stuff?

Well, Karl, describe to us why it cost an additional $23 million over the contract price? It is clear that Justice Donald Mackenzie ruled there was an error and it cost the citizens big time.

Wettstein’s comment clearly illustrates why the city is in such dire financial shape. There is slavish support of councillors such as Wettstein, Leanne Piper and June Hofland of their former leader. It demonstrates their lack of basic financial understanding and denial of serious mistakes in judgment.

If they don’t understand it, how do they expect us to understand it?

This became shockingly apparent Monday night at a meeting of the GMHI shareholders, aka city council; Mr. Sardana carefully walked the shareholders through the labyrinth of corporate involvement that had been established by GMHI.

The more he spoke, the more it became apparent that this whole GMHI partnership with GHESI was a rogue operation. GMHI activities were shrouded in secrecy. It is now apparent that senior managers in both the city and Guelph Hydro knew what was going on. They are complicit because they received quarterly GMHI financial statements. This multi-million dollar operation functioned not only in secret but also off the city and Guelph Hydro books. Hydro used GHESI to be the conduit for financing the project.

In order to accomplish that, there were a number of people in on the deal. The result is there are more total loss numbers flying around about how much money was wasted.

GuelphSpeaks uses the figure $26, 637, 244 already announced and signed off by the CAO and Mr. Sardana. However, there have been other numbers bandied about ranging from a loss of $11 million to $40 million.

The Sardana presentation detailed an accounting of the mish-mash of corporations involved in the operation of establishing the real loss figures. On June 13 there is another shareholder’s meeting to receive the audit of the whole operation.

Will the audit of this affair reveal the truth about the losses?

Hopefully this will confirm the loss plus the causes of it. Make no mistake, there was substantial loss but we don’t yet know how much.

There are two important points to be made. Mr. Sardana was not involved in the creation or subsequent errors in judgment made by the former Farbridge led GMHI board. Second, the meeting, while open to the public, was not televised. Wonder why not?

Coun. Christine Billings asked the CEO about what analysis was done before the plan was launched.

“If we had done it again, we would never have embarked on it,” he replied. He went on to say that if the there were a full rollout of the planned district energy operation, the required base of thermal customers would not support the cost of the project.

He said the CEI drove the project from the beginning.

“We paid $5.5 million on the Hanlon district energy system with no environmental benefit? Coun. Billings asked.

“We understand now what we didn’t know before,” The CEO replied. He added that GMHI is cleaning up the finances and moving on. He referenced the $18 milliohm in tax losses but there was no equity in GMHI to support those losses. He said there is an outstanding loan made by the Royal Bank of Canada that must be paid off.

One of the accounting moves was to convert debt into equity. That may have the effect of making the books look good, but the money that created those debts has been spent. That’s why they are on the books as tax losses. But there is little or no revenue to offset them.

Wettstein said the GMHI consortium understood the role of CEI

Coun Wettstein said the board members of GMHI, GHESI and Guelph Hydro Inc (GHI), understood the role of the CEI. He added that some of those involved in making the decisions were “no longer with us.” Is it any wonder?

“Cam and I had little to do with the 2015 budget,” he said. Excuse me, both of you were on the council that initiated this GMHI sponsored scheme. You had to receive quarterly financial reports on the activities of GMHI and its holding corporations, including GHESI and GHI.

Tell us Karl, where did you think the financing for this preposterous adventure was sourced? As a councillor, one would believe that you were on top of the city’s overall finances, including the abortive creation of GMHI.

Coun. Phil Allt, who was not part of this CEI plan commented: “I hope this doesn’t turn out to be Guelph’s “Avro Arrow”. The Hanlon/downtown (district energy units) was not a good decision.”

Coun. Dan Gibson commented that the data was flawed and administrative interference pressure made things happen. But he never mentioned the name of the person exerting the pressure.

Coun. Billings said it has cost $14 million and it should have been no more than $1 million.

Coun. Leanne Piper, who was involved in the GMHI board and its operations, said the people in Guelph wanted the CEI. She failed to explain why more than $26 million has been spent. Nor why with flawed planning, spending $8.7 million on two district energy plants will never produce adequate funding to replace the original costs.

We still don’t officially know the source of the CEI funding

During his presentation, the CEO never explained the sources of funding the CEI project. It is apparent that it did not come from city property tax revenues. The whole project was maneuvered off the city books.

It is obvious, that it came from Guelph Hydro Electric Systems Inc, allied with GHI. It appears that some $23 million was transferred to GMHI from GHESI in the period following absorbing GHI into GMHI.

This is an alarming revelation of total misuse of publicly owned assets to foster a poorly planned scheme to establish an alternative community energy plan.

It is becoming more evident that there should be an investigation by the OPP to determine if this is fraud, perpetrated in secret by elected officials, on Guelph Hydro’s more than 50,000 customers.

The opportunity for public participation and independent investigation is fast approaching, as there will be an audited statement presented June 7. This statement will be the subject of a public shareholders meeting Monday, June 13, 2016.

I urge citizens to attend this meeting and judge for themselves what has occurred to affect their costs of electricity, since 2011, today and in the future. This was a deliberate attempt to use GMI to pay for a poorly planned and executed plan that has already cost citizens more than $26 million.

Remember there is one person in the administration who has been intimate with the details of this financial disaster, she is the one who council gave a 2015, $37,581 salary increase, December 9, in closed session before the discussion on the 2016 budget began.

The CAO knows more than she is letting on

CAO Ann Pappert was there from the beginning in 2011. In my opinion, she knows more than she is prepared to reveal.

We repeat, there is now ample evidence that, if a project of this magnitude occurred in private corporations, the evidence points to dismissal of those responsible and closing down of a gravely failed operation.

Trying to pinpoint those responsible is difficult due to the absence of those who made the decisions that led to this. But, the CAO knew, Ann Pappert, and with respect, so did the DCAO, Mark Amorosi. The new board has flushed out those former board members and staff members who were involved.

Regardless, the buck stops with Ann Pappert and Mark Amorosi, and the CEO of GMHI from 2011 to 2014, all of whom received quarterly financial reports of the status of GMHI and GHESI.

The only remnants of this raiding of the public purse are those councillors who were on the original GMHI Board of Directors. There were five councillors on that board plus the mayor.

The buck(s) stop with all of them.

 

 

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How your Hydro bills were used to finance a failed plan to push sustainable energy

By Gerry Barker

May 16, 2016

Documents released Friday night reveal how, starting in 2011, the Karen Farbridge administration created an off-the-city books corporate rabbit warren to deceive and push up your Guelph Hydro bills.

And it happened right under our noses.

Here’s a snapshot of the convoluted corporate tangle that was created by Guelph Municipal Holdings Inc. by Mayor Farbridge. It happened after her defeat to sell Guelph Hydro in 2009 to a consortium composed of Hamilton’s and St. Catharine’s Hydro systems. It was a rare occasion when her own supporters refused to support her proposal.

Why? She needed the money to pay for the city’s share of the 2009 federal/provincial shared infrastructure program in which the city was to pay a third of the approved $66 million cost. Unfortunately, reason failed again and the city’s share grew to $28 million with added projects. These included $2 million for bicycle lanes on Stone Road and a new $750,000 time clock in the Sleeman centre.

So, Ms. Farbridge tapped into Guelph Hydro Inc (GHI), for $30 million that was owed to the city through another convoluted scheme that turned over ownership of GHI to the city. She redeemed a $30 million note to bail out the city of a serious financial bind.

In 2011, Guelph Municipal Holdings Inc. (GMHI) was incorporated with then mayor Farbridge as chair and Chief Administrative Officer (CAO), Ann Pappert, as Chief Executive Officer. The board was loaded with her fellow council supporters, plus a couple of friendly outsiders.

There was a series of corporate changes that resulted in GMHI taking full control of GHI and its subsidiary Guelph Hydro Electric Systems Inc (GHESI). This corporate body was the revenue producer of GHI. Why GHI management did not balk at this take-over, remains a mystery.

Just days after delivering his “state of the city” address last week, Mayor Cam Guthrie now says there is an $8.7 “write down” of the costs of building the two natural gas-fired district energy systems. One was built in the Hanlon Business Park and the other in the Sleeman Centre downtown. Both provide heated water to businesses and two new high-rise condos built by Tricar downtown.

So while the mayor says in that this is not a charge to taxpayers such as occurred with the Urbacon settlement, it was taxpayer money spent on building these gas-fired plants. Using the term “write-down” really means write-off. We presume the $8.7 million was posted to the GHI balance sheet.

The word is we the people will never recover those costs. Poof! They are gone along with the means to repay it.

So the balance sheets of GMHI and and sister corporation, Envida, are really a sham. The losses are horrendous in both corporations. It’s difficult to believe that any respected Chartered Accountant would not question the finances before signing off.

But now we drill down a little deeper. l give Mayor Guthrie credit for tackling this financial disaster that has driven up Hydro bills to pay for the abortive dreams of a distrusted administration. It did not occur on his watch.

The Mayor’s ongoing support of the CAO is questionable particularly her 17.11 salary increase approved December 9, 2015 in a closed-session that he chaired. The large increases to senior management were not revealed until the provincial Sunshine List of civic employees, earning more than $100,000, was released in late March this year.

Here’s more: There is an item in the report of the GMHI operation in the past five years that reveals damage to the credibility of a number of people.

The first item in the statement to be presented Monday night is “tax losses” by both GMHI and Envida Corporation, the stepchild of GHI. The tax loss amount for GMHI is $10,595,931. In the case of Envida it’s $7,341,313. That totals $17, 937,244.

To clearly understand the implication of those “tax losses,” is that those are operational losses in the past five years. When a corporation has tax losses it is because it lost money. The only way those losses can be recovered is by making profits to reduce tax liability. Trouble is the claimed losses disappear. Under the circumstances, these losses will never be recovered.

Those are, plain and simple, real losses by the various corporate bodies set up to fulfill the ego-driven dream of the former mayor. She was determined to create the Community Energy Initiative, (CEI). She planned it to keep it off the city books.

The reason why is that under her watch, the city’s credit rating was overtaxed due to excessive spending and mismanagement of finances.

Despite her overt attempt to hide the real story from the public, the city is still liable for the losses incurred by GMHI and Envida. The Royal Bank of Canada loaned money to these organizations. The bank would never have done so without the guarantee of the city to repay the loans.

Again, it’s more of our money down the rabbit hole

Now when you toss in the “write downs” of $8.7 million building those two gas-fired generating plants, the cost of which will never be recovered, there is a total hidden liability of some $26,237,244. The chances of ever recovering that money are zero.

Despite five years of towering losses, GMHI sent a so-called $1.5 million dividend to the city. In the 2014 annual GMHI report, it stated that GMHI had sent dividends totaling $9 million since its 2011 start-up. When you add the $3 million sent in the last two years it comes to $12 million. Will someone explain how a money-losing operation can afford to send dividends to the city when it is losing millions?

Or are they just moving the deck chairs around the sinking Titanic, aka the City of Guelph?

Here’s why. The so-called dividends were used by the city to balance its books as required by law at the end of each calendar year. The trouble is that the city for the past five years has generated large negative variances each year because the administration overspent its own budgets. Instead, the city administration used the GMHI dividends plus raiding reserves to claim a balanced Financial Information Report to the province, as required by law.

Three members of the city council, Leanne Piper, June Hofland and Karl Wettstein, were part of that administration. Do they still believe that supporting GMHI was a worthwhile project? They had to know of the write-downs and tax losses but remained silent, as did their leader, Karen Farbridge and CAO Ann Pappert.

We now learn that Ann Pappert has been reappointed CEO of GMHI and is working closely with the mayor to resolve the financial morass created by the previous administration.

Mayor Guthrie should ask the Minister of Municipal Affairs and Housing to request an independent investigation by the OPP of this off-the-books financial situation and its management.

Is it time for an OPP investigation for fraud?

There is strong evidence that the former administration knowingly used GHI to supply the funding for this abortive plan orchestrated by the former mayor. In my opinion, it is tantamount to a criminal act to defraud the more than 50,000 retail Hydro customers by taking control of GHI and using its cash flow to finance the CEI.

Today, Guelph has one of the highest retail electricity rates in North America. Now we know why.

The first step is to ask CAO Pappert to take a leave of absence because of her connection to GMHI from its 2011 inception. Deputy Chief Administrative Officer, Scott Stewart would manage the CAO responsibilities until Ms. Pappert’s return. Mr. Stewart joined the senior staff last December and is immune from any responsibility for this $25,237,244 hidden liability.

The second step is to close GMHI down before it loses more money.

From the evidence that has been made public, there is no hope for GMHI to become profitable under its existing organization.

In the end, the people will have to pay the bills. What a minute! We’ve been paying for it all along through our Hydro bills. It is just painful that GHI and GHESI were used to allow Farbridge to push a failed dream of energy sustainability. It occurred under the CEI.

Even today, the CEI is supported by the seven Farbridge supporters on council we call the Orange Crush because of their shared political ideology, rigidity and obstructionism.

This city can ill-afford another multi-million dollar financial disaster fostered by the former mayor, Karen Farbridge.

 

 

 

 

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Is Salary-Gate the beginning of the end or the end of the beginning?

By Gerry Barker

May 12, 2016

Despite attempts to block public access by doing the citizen’s business behind closed doors, the leaks keep coming. The Guelph city council’s majority Orange Crush continues to obstruct and bring a once great city to its financial knees.

Here’s a word from the plumber: Want to stop the leaks of your private, close-session meetings? Put an end to those meetings and conduct your business in open council.

First, who is part of the Orange Crush? Councillor Phil Allt appears to be the defacto leader, along with Coun. James Gordon and Coun. Leanne Piper, this is the heart of the Orange Crush. Their fellow traveling councillors include: June Hofland, Cathy Downer, Mike Salisbury, and Karl Wettstein.

Collectively, they are dedicated supporters of the previous Mayor who was defeated in the last election. The trouble arises when these seven do everything in their power to stop reform. Reform that the majority of voters in the October 27 civic election chose by electing Mayor Cam Guthrie.

It is now painfully apparent that Mayor Guthrie is not up to the job of leading the city because when important issues arise, he abandons ship.

Here are some examples.

The Mayor failed to stop the reorganization of the senior staff before he took office even though he was a member of the Farbridge council that approved the reorganization. It happened before he took office December 1, 2014.

He stood by when Farbridge loyalist Susan Watson attempted to prevent GrassRoots Guelph from donating to civic candidates. An audit based on her attack that used the election finance statement by Glen Tolhurst, was thrown out by the independent auditor. Mayor Guthrie did nothing to support the candidate. Mr. Tolhurst did nothing wrong, being victimized by a frivolous complaint. The result was the estimated $11,400 cost of the audit was absorbed by the city, not charged to Ms. Watson.

Mayor Guthrie did nothing to stop the firing of the Chief Building Inspector, Bruce Poole who complained to the CAO that the city was breaking its own and provincial bylaws. The Ontario Building code mandates building permits be issued for all construction projects. Poole said the city failed to obtain building permits for some 70 city projects.

He is now suing the city for $1 million for wrongful dismissal. The city’s track record defending wrongful dismissal cases has been dismal and expensive. The Urbacon case comes to mind. Or, remember the $500,000 it cost the city when firing the Chief Administrative Officer(CAO) and Chief Financial Officer(CFO) in 2007?

But Mayor Guthrie supported CAO Ann Pappert, who received a $37,581 salary increase, despite those same councillors giving her a failing rating on her performance. Now apparently he has ordered an investigation in Guelph’s “Salary-Gate,” involving three senior managers receiving excessive pay increases.

This is the same mayor who recently told some 200 persons at a “State of the City” address, that his council, most of the time, was not divided. This comment was made before the news broke that the bloc of seven councillors voted on December 9, in closed-session to give CAO Ann Pappert a $37,581 salary increase for 2015. It occurred October 13, in another closed-session, despite this same bloc rating her performance unworthy of any increase.

It only took 57 days to experience an Epiphany awarding her with 17.11 per cent increase. One of the choice comments made was “maybe we were too tough on her,” at the October meeting.

Is this not a great way to run a $500 million corporation?

And where was Mayor Guthrie when this 57 days of infamy took place? Stone silent. Not only after the fact, he never said a word until the Sunshine List revealed the huge senior management increases awarded December 9, were reported three months later.

Not a whisper until Mayor Guthrie threatened legal action on a citizen, Rena Akerman, for emailing a detailed negative summary of the CAO’s performance over five years.

Instead, Mayor Guthrie gushes about what a great job he’s doing to grow the city. He did mention the aging infrastructure and the cost of servicing crumbling pipes, sewers, streets and city assets needing replacement.

The staff’s solution to handle the infrastructure deficit is to charge businesses and households a 2 per cent annual fee for ten years on top of regular property taxes. The estimated total take on this scheme is $280 million in the ten years.

This staff proposal was brought up in the closed session before the open 2016 budget debate December 9. It was leaked out after the 2016 budget was completed December 10. The proposal was pushed ahead to next November when the 2017 budget is discussed. Where was the Mayor, who chairs the meetings, public or in closed-session?

Is this part of his grand design for the future of the city? Push big decisions down the rabbit hole and avoid conflict at any cost?

You can turn the insurance salesman into a mayor, but you can’t take the insurance salesman out of the mayor.

 

 

 

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