By Gerry Barker
July 11, 2016
This is material you won’t read anywhere else.
It pains me to say this but the majority of Guelph residents either fail to understand how their city administration performs or they don’t care. My task is to make it informative and meaningful to every resident of our city.
This is how a national political party, the New Democratic Party, seized control of the city and imposed its policies and will onto the average citizen.
I have often referred to them as the “orange crush” (OJ) because they have successfully managed to elect their supporters to a council majority creating a ten-year history of political dominance. Not even the 2014 defeat of their leader, Karen Farbridge, plus two councillors and two choosing not to run again, changed their control of council.
By just five votes in ward three that returned June Hofland to council, the OJ retained the majority of votes on council electing seven out of 13 members. This group usually votes as a bloc to perpetuate the failed Farbridge policies that have wasted millions of taxpayer dollars.
Let us count the ways
It started with the 2007 decision to convert the derelict Loretto convent into a new civic museum. The project took more than five years and $16 million to complete the renovation located on the Diocese of Hamilton property of Catholic Hill. Today, the number of people visiting the museum does not cover the operating costs. And the second floor is structurally unsound for major, heavy exhibits.
As a follow-up, the former civic museum on Dublin Street, a heritage building, was sold to a corporation on the promise it would be converted into an artist’s colony for aspiring artists plus graphic and computer developers. Supporting this applicant was James Gordon, the architect of the Farbridge victory in 2006. The building was sold on that promise, despite another offer that council did not accept. Today the dream has been shattered as the owners have converted the space into upscale office suites. The city manager of real estate resigned.
Here’s a further follow-up: The city recently donated $110,000 to Ten Carden Street, a front organization created by the Guelph Civic League, (GCL). That was the key organization that elected Karen Farbridge and ten supporters in 2006 for four years. Who is godfather of GCL? Why it’s current Coun. James Gordon. The grant is supposed to create artist studios on the second floor of the former Akers Furniture Store on MacDonnell Street. Does this have a familiar ring to it? Who owns the building? Does 10 Carden Street have an interest in the property?
The financial train wreck that still needs explanation and the truth
Now, let’s look at the largest single loss of public money in the city’s history called the Community Energy Initiative, (CEI).
This potential train wreck that was initiated by former mayor Karen Farbridge and her supporters, was unanimously approved by city council on April 2007.
There was joy across the city as the newly elected council formed a consortium composed of the city administration, Union Gas, Guelph Hydro, business and industry representatives, University of Guelph, school boards, and the Guelph Chamber of Commerce.
Here are the goals set by the CEI to be fulfilled 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 in 2007, said that the CEI would position Guelph among the top energy performers in the world. Missing from all this was the business plan to support the claims.
Compounding the potential losses to the city besides the poorly planned energy scheme, was the decision to fire Urbacon Buildings Group Inc in September 2008. The general contractor of the new city hall and conversion of the old city hall into a provincial offences court, sued the city for wrongful dismissal. In 2014, Urbacon settled for $8.96 million.
It was only the tip of the iceberg. While CAO Ann Pappert was telling us before the 2014 civic election, that the settlement would not affect property taxes, the real cost of the completing the city hall project was $23 million more than the original budget, as reported by Ms. Pappert.
Remember, while this was occurring before the 2014 election, then Mayor Farbridge convinced her council in August, just before the capital spending was cut off, to approve spending $34 million to renovate the downtown police headquarters.
The wheels of the CEI’s noble 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 supply from the Eastview landfill. An impairment charge of $2.984 million was taken that year.
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. Now most people know that the city, by provincial law, must balance its books every year.
But because Ms. Farbridge formed Guelph Municipal Holdings Inc (GMHI) in 2010, as a separate corporation to pursue her dream of energy sustainability and reduction of carbon, the finances went off the city books.
It’s reasonable to assume that with the declining rate of methane gas supply at Eastview generating plant that the recoverable amount is fading fast, thereby increasing the impairment.
Let’s dig a little deeper. The problem occurs when the combined assets of GMHI and the renamed Ecotricity to Envida Energy Corporation, are losing, on average since 2007, $1,967,625 a year. When factoring in the aging of these assets and the CEI enterprise, as organized by the Farbridge administration, the CEI becomes a major league loser. In fact, GMHI lost $9.4 million in 2015.
The accountants like using the term ‘impairment” to describe actual losses of operations as “tax losses.” It’s still a loss by any other name. The argument is that tax losses can be useful to offset future profits and capital gains. In this case it is an actual impossibility. Read on to find out why.
It is calculated that GMHI has an investment impairment of $68.3 million.
GMHI amalgamates with Guelph Hydro
It should be noted that in 2013, GMHI and Guelph Hydro (GHI) were formerly amalgamated. This irrevocably pulled control of Hydro, a corporation with a book value of more than $150 million with a strong monthly cash flow from 55,000 customers, under control of the former mayor and chairperson of GMHI.
The mayor pulled Guelph Hydro into her web of manipulating funding for her CEI agenda.
This was a little-noticed development that gave impetus and funding to pursue the CEI plan to develop two district energy units in the Sleeman Centre and the Hanlon Business Park. These units cost $8.7 million to build. Powered by natural gas, they were linked to the geo-thermal underground water heating and cooling thermal system then under contract. The new plants were also licensed to supply power to the hydro grid, and that has not occurred.
The truth is these CEI operations do not make money and there is never going to be an opportunity to recover the millions that has already been spent.
There were two developments that gave the green light to proceed with the CEI plans. The first, approved May 28, 2012 by city council, was a waiver of sending audited financial statements of GMHI to the city as required under the shareholder’s declaration starting in 2012. But that’s okay, the mayor and four of her councillors were on the GMHI board and could monitor the finances. Surprise! The city council agreed to NOT receive the audited statements.
Now this is what citizens should understand. This is to prevent public knowledge of the GMHI activities and those associated corporations supporting the CEI. And the Farbridge dominated council went along with it.
The second, approved June 28, 2010 by GMHI, was: “The tender process as set out on the city’s Purchasing Policy be waived for energy efficiency and renewable energy generation projects that require access to city-owned lands buildings and rooftops.”
These two developments reinforced the mayor’s determination to prevent any public exposure to what the GMHI was doing. She proceeded with her CEI plans without having to deal with pesky city bylaws that would threaten her plans.
And her counci8l went along with it.
The bottom line is that these two developments broke all the rules of running a business, let alone the city, with no accountability or checks and balances. It remains a deliberate attempt to hide the truth from the public, who are ultimately responsible for the failure of the CEI plans.
In private industry, it would be equivalent to instant dismissal of the managers involved. This CEI was set up to protect those responsible for the planning and execution of this abortive scheme.
In other words, due to a series of operational mistakes that remained unreported, due to the closed-session meetings conducted by GMHI for five years, recovery of this GMHI financing was seriously jeopardized.
To be blunt, this CEI enterprise is a disaster financially with little or no hope of ever becoming remotely viable or an asset of the city. Today, there is no benefit to the public to show for the investment now estimated to be more than $40 million. Now, add in the growing annual “tax losses” of $1,967,245 of GMHI and Guelph Hydro’s subsidiary Envida and you don’t have to be an accountant to figure out this is a growing serious financial disaster. It adds up with debt servicing, tax losses, and write-downs of capital to some $3,268,245 every year.
Citizens now have a debt created by the former mayor, with the complicity of the board of directors of Guelph Hydro, costing even more millions to wind down the non-performing assets.
Any attempt to keep this failed project alive is just pushing more money down the rabbit hole with no guarantees we’ll ever get a refund of Return of Investment (ROI).
Even the current Chief Executive Officer and Chief Financial Officer of GMHI, Pankj Sardana, admits the CEI district energy projects, including the thermal energy connections, were poorly planned, managed and should never have been started in the first place without a sound business plan.
Yet, there are still plans being made to continue this charade of incompetence and wasteful spending.
The two who kept their mouths shut
Two councillors who served on the GMHI board since 2011 supported the architect of this financial disaster, former mayor Farbridge. Coun. June Hofland has been chairperson of the city council’s finance committee since 2010. Why did she not act in the public’s interest, to protest the financial gyrations of this operation? Was she not aware, did she not understand what was going on? She was a member of the GMHI board for four years. She also received a stipend for serving on that board.
The other is Coun. Karl Wettstein who also served on the GMHI board. Just last February 29, Wettstein declared a potential pecuniary interest at the time because he served on the GMHI board. The pecuniary interest he was referring to, was the stipend he received for serving on the board. Again why did he and Hofland not blow the whistle on this situation? Their silence in this matter is deafening.
Just to get this straight. If you receive a stipend for serving on a board, does that mean you don’t have to speak up when the organization is diving into a disastrous depth of debt and operational failure? Apparently it never entered their minds.
And there were other members of council who were part of the GMHI abortive energy project. Former Councilors Todd Dennis and Lies Burcher who were either defeated or chose not to run in 2014. Regardless, they did not raise concerns about the secret of public money flowing out the door to maintain Karen Farbridge’s dream of world recognition.
The sick joke about all this is the some $9 million that GMHI sent to the city treasury through Guelph Hydro over a six-year period. Was it just a book entry on the GMHI balance sheet or did the cash really get transferred? Following the money for that phony claim defies logic. How does a money-losing millions GMHI afford to send an annual dividend of $1,500,000 to the city?
It was all part of the Farbridge plan to make it appear the GMHI was making money, when in fact it was losing millions annually. It also could affect the city’s credit rating that the city needed. Because the GMHI operation was off the books, it did not affect Guelph’s credit rating. It remains all smoke and mirrors.
It’s disturbing how egotism transcends reason particularly when it comes to spending the public’s money.
Most citizens did not benefit from this CEI plan
The citizens of Guelph have been Royally duped by the former Mayor and her followers. Only the people can change it by demanding accountability and transparency.
This was a misguided program that was enjoyed by a tiny minority of the Guelph populace. The CEI plan affected only a concerned a handful of buildings downtown and a similar number of businesses in the Hanlon Business Park.
It’s safe to say that 98 per cent of Guelph’s households and businesses would not benefit from this multi-million excursion into an ego-driven experiment. It is one that has monumentally failed in planning and execution. Now we all must pay for it.
There exists a huge gap in trust by the public of those members of the council’s Group of Seven caucus that continue to support this boondoggle. Instead, they lament the exodus of management staff, excusing it as staff being lured away by more money and better working conditions. They don’t get it.
There has been a gradual disintegration of staff trust in the controlling majority in council. They know how money has been wasted. Former CFO Al Horsman, got it and left to be the CAO of Ste Sault Marie. He left a $209,000 job as a Deputy Chief Administrative Officer (DCAO). You have to ask yourself, why?
Even Ann Pappert took her leave soon after the report she signed with Pankj Sardana May 16, outlining the disastrous history of CEI was made public. Derrick Thomson, resigned his job as DCAO of Operations to be closer to home in Caledon, He was rehired to replace her.
This is the classic case of the chickens coming home to roost. The staff exodus of managerial staff is unprecedented but indicative of the staff malaise that has infected city operations since October 2014.
This should bring a long overdue political enema. Hopefully it is that our mayor and council will return civility, compromise and, give the city back to the people.