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.