Headline of the week: Mayor chooses Taco Bells over sale of Guelph Hydro

By Gerry Barker

February 20, 2017

Last week the news was a mixed bag of burritos. Mayor Guthrie exclaimed in print that Guelph was getting two Taco Bell restaurants. It was an artful attempt to deflect a critical personal defeat by using the trivial Taco annoucement ignoring his abortive support of selling Guelph Hydro.

And all this time we believed things at city hall couldn’t get any worse.

Wednesday night, in a special meeting of council, there were two main discussion points on the agenda. On was to receive the report of the Strategic Options Committee’s (SOC) recommendations for the disposition of Guelph Hydro.

The other was to discuss the future of Guelph Municipal Holdings Inc. (GMHI). As it turned out, there was no discussion or conclusions reached about that defunct organization that has cost taxpayers an estimated $96 million.

When the former mayor and chairperson of GMHI officially added Guelph Hydro to its short list of municipally owned properties, it created a deliberate comingling of assets. That resulted in a ruptured financial debt of epic proportions coming about three months after the defeat of the mayor. By March 2015, Mayor Guthrie became the GMHI chair and was joined by Councillors Karl Wettstein and Cathy Downer, and the GHMI board was fired.

2015, the year the truth started coming out

That was in the spring of 2015, a year of faceless fumbling including the awarding, in a closed session of council Dec. 10, of $98,202 to the top three senior executives of the administration. That was followed December 14 by another closed session when council approved an Indemnification Bylaw. It essentially protected any employee or elected official, by paying their legal bills if sued by any citizen or corporation. This bylaw’s timing, as it turned out, played a role in protecting the top three managers from any procedure brought against them by the public.

That GMHI/Guelph Hydro investigation included a long period of behind-the-scenes checking of the linked GMHI and Guelph Hydro books. In fact, the process took 14 months.

The public was never told whom in the administration, or outside consultants, performed the autopsy on GMHI and Guelph Hydro or if financial experts conducted the process. What was eventually learned was devastating in terms of the citizen’s liability to pay the bills.

Fast forward to May 16, 2016

This was the day that outgoing Chief Administrative Officer, Ann Pappert, and CEO and CFO of GMHI, Pankaj Sardana, reported some of the details of the financial implications created by the GMHI Board of Directors including the former mayor. Ten days later, Ms. Pappert left the city job.

As guelphspeaks.ca has reported on the details of the May revelations, we will move on to July 13, 2016. The city staff produced a detailed, no punches pulled, report showing where most of the money went and how it was spent.

Two current councillors, Karl Wettstein and June Hofland, received a stipend to attend the GMHI board meetings for four years. Yet, on Wednesday, both voted to sell Guelph Hydro. Why? Did they know about the financial mess GMHI was in on their watch but never said anything? Was this the silence of the lambs?

Here’s the real punch line

In September, the council appointed a committee of five called the Strategic Options

Committee (SOC) to investigate the future of GMHI, Guelph Hydro and the Community Energy Initiativem created by the former, mayor in 2007.

Little did anyone know what the GMHI plans were, how they were determined and what the business plan was to develop two District Energy Nodes (gas-fired pumps). Both were designed to perform a number of tasks. First, a contract was signed to supply ten megawatts of power to the grid from each Node. That never happened. Then contracts were completed to connect the two large Tricar downtown condominiums with hot and cold water. There has been no mention of the city’s liability in regard to these service contracts.

Next, a system of underground pipes was connected to nearby buildings, five at the Sleeman Node and one in the Hanlon Business Park node. Cost of these Nodes was $8.7 million. Cost of this co-generation piping is presumed to included in the $2.6 million GMHI admitted losses.

This was the dream of the former mayor to generate power and supply hot and cold running water to those connected buildings. Only recently, it was revealed that GMHI was also planning two large natural gas-fired generating plants, one downtown and the other in the Hanlon Park. In fact, land for these plants had been secured.

Thoughts for your consideration: How was all this financed? Who knew of the sources of funding? How did this affect your tax bills and electricuty charges for four five years? Why were there no checks or balances concerning this waste of public monet that was shrouded in secrecy?

Most of the GMHI players are gone

Only two councillors remain as survivors of the GMHI financial disaster, Karl Wettstein and June Hofland. There is more on them later.

Wednesday, the Mayor, much like his predecessor in 2008, urged council to accept the SOC recommendation to sell Guelph Hydro.

It was soundly defeated. With only the Mayor, Councillors Mark MacKinnon, Karl Wettstein, Phil Allt and June Hofland supporting it, the sale of Guelph Hydro is off the table.

Now, during its five months of deliberations, why did this committee invite the public to offer opinions on the sale of hydro or a merger with another utility? The answer is simple: If you know the answer, why pay attention to the outcome? The response was overwhelmingly negative. Yet the SOC recommended it. The cost of six months of this SOC operation was $100,000.

But there was agreement to review the recommendation and investigate further for other “options.” Council was told that would cost an additional $500,000. The SOC says it will report mid-2017.

Are we not chasing moonbeams here? The public has already spoken about the sale and is lukewarm about a potential merger with another electric distribution organization. Even the SOC co-chair, Pankaj Sardana, warned that mergers are not always successful and the culture clash between merged utilities warrants serious consideration before buying in. Remember, it is the provincial government that is promoting amalgamation of publicly owned power distribution centres.

This is nothing but a political move to allow municipalities to free up cash. Already most of the muncipally-owned Electric Distribution Untilities have been snapped up by private corporations. Then see the value and it explains the comments of Mr. Sardan that mergers don’t always work.

Before the SOC continues it task, the public should be told how, when, and to whom the money is to be spent.

In my opinion, the SOC should wrap up the Community Energy Initiative, the over-riding influence of the demise of GMHI and its quest to make Guelph self-sufficient in use of electricity.

Let the next council decide the direction these energy issues should take.

Why the urgency to sell Guelph Hydro?

So why is the Mayor anxious to sell Guelph Hydro? He has a king-sized financial problem on his watch that 100 Taco Bells can’t solve. He wants to open his 2018 re-election campaign with a clean boatload of money to build the South End recreation centre and the Wilson Street parkade.

With a book value of an estimated $150 million, the sale of Guelph Hydro would have solved a lot of pressing demands for funds.

There are other solutions to reforming the administration. The city overhead is choking growth. When you are faced with a loss of $96 million, there are only three ways to solve it:

Enter an aggressive, cost cutting of operations planned by an experienced and qualified financial expert, or sell off your assets to pay for the shortfall. There is another option, pay it off by using the city’s Standard and Poor’s credit rating and borrow more money (see cost cutting above).

Spending another $500,000 seems like a last ditch effort to salavage the reputations of former GMHI participants who, collectively, must share the responsibility of failure..

The $23 million Urbacon settlement costs are are penny ante compared to GMHI’s flight from financial reality.

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15 Comments

Filed under Between the Lines

15 responses to “Headline of the week: Mayor chooses Taco Bells over sale of Guelph Hydro

  1. Bill

    Please stop saying the taxpayers are on the hook for $96 million. You need to show how you are coming up with $96 million and where the losses are being absorbed – i.e. Ratepayers vs taxpayers. There is definitely a big embarrassing loss here but I don’t think it’s $96 million.

  2. Colleen

    I have looked at the agenda again and see no references to any discussion that was supposed to happen anout GMHI. The only item on the agenda for the Feb 15th meeting was to receive the SOC recommendations. Can you please point me to the reference on the agenda that says there will be discussion about GMHI?

    • Colleen

      I was referring to the February 15th specially called meeting to review the SOC recommendations. It seems the two meetings are being confused.

    • guelphspeaks reader

      Which two are being mixed up?

    • Colleen

      It seems like the meeting on the 15th and the materials presented there are being mixed up with the materials that were supposed to have been a part of the meeting the following day. Two separate issues, two separate meetings yet are being referred to as one and the same here.

    • guelphspeaks reader

      Thanks for clarifying. Is there a difference in outcome?

    • Colleen

      Thats my point. They are mutually exclusive. One has nothing to do with the other.

    • guelphspeaks reader

      Now that both meetings are over, it seems the end result is the same. That’s all I was asking.

  3. Rena

    I believe that our mayor has just signed his own death certificate politically. He is being extremely short sighted if he thinks that citizens are stupid enough to see ‘what a wonderful ‘ guy he is by using the sale of Guelph Hydro to build a south end rec centre and a library.

    Sorry Cam, go back to selling insurance.

  4. guelphspeaks reader

    All these secret meetings are really the root of the problem. And forming pricey committees and forums to facilitate public input that ignores the input.

  5. Guido

    It’s beyond me how it would cost $ 500 000.00 to continue this study. Where are they meeting , at the Royal York?? Just close down GMHI and take your lumps!

  6. DAVID BIRTWISTLE

    Should not those paid directors of GMHI who also were/are City Councillors have abstained from any Council motions having to do with GMHI/GUELPH HYDRO as there appears to be,if not is/was, a conflict of interest?

  7. DAVID BIRTWISTLE

    I’ve missed TACO BELL since it departed GUELPH some years ago-surely that’s a silver lining within the doom & gloom pervading GUELPH?!

  8. I agree with David B. that there certainly is the appearance of a conflict on the part of Karl and June. I thought we had an Ethics Commissioner on retainer. He should be investigating!

    • geo

      Ah yes the integrity ogre; this situation cries out for him. Lets see if it’s ever brought up at a Council meeting.

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