Was city council duped giving away the $228 million Guelph Hydro to solve the GMHI losses?

By Gerry Barker

August 16, 2019

Opinion

Part Six of Seven

It began in the fall of 2016 when city council formed the Strategies and Options Committee (SOC) to select the best way to dispose of Guelph Hydro and its substatial assets. That ibcludes a guaranteed customer base of some 55,000 who pay thrie account mpnthly.

This committee was asked to examine all options including merger with other utilities, sell Guelph Hydro or keep it as a profitable and effoicient city-owned corporation. Seems the latter choice is logical and straight forward.

The SOC was composed of the following: Co-chairs Derrick Thomson and jane Armstrong, Robert Bell, co-chair of GHESI and Mark Goldberg. It is assumed that at a closed-session of city cou ncil, June 9, 2017, that Ron Clark, solicitor of Aird and Berlis, was representing GMHI. In fact, he attended a number of those closed meerings according to city records. The one missing link is when Mr. Clark was appointed solicitor for GMHI.

When council approved the merger, Mr. Clark made a presentation that gave the impression that he was representing Alectra, or at the least supporting the SOC merger proposal.

So, why were the meetings of the SOC and liaison with cuty council conducted in closed-sessions?

Well, a lot did happen between the fall of 2016 and February 2017 whenthe SOC recommended to city council that the option of selling Guelph Hydro be withdrawn. In short, no longer considered. Council voted 7-5 to not sell Guelph Hydro.

We now know what happened. On December 13, 2017, council voted 10-3 to merge with Alectra Utilities. What motivated those ten elected councillors to agree to the merger? Further, Mr. Clark advised council that the agreement was not finalizeds and it would take a few months to complete.

Why did council rush to approve the agreement? Reading on that irgency will be revealed.

Let’s backtrack to why Guelph Municipal Holdings Inc., for more than four years, under the leadership of Mayor Karen Farbridge, was also chair of GMHI? Her Chief Administrative Officer, Ann Pappert, was also Chief Executive Officer of GMHI.

Under any corporate organization chart, having the two top executives controling in the same capacity, of both the City of Guelph Corporation and its corporate subsidiary, GMHI. Itwould not be tolerated. Here’s why, it’s a dangerous concentration of power in the organization..

It gave the two women carte blanche to do what ever they wanted to achieve goals without oversight or checks of balances. Thar’s not the way our municipal systems are supposed to work.

But make no mistake the Mayor was in complete control of both corporations. As it turned out it wasn’t the GMHI situation that defeated mayor Farbridge in 2014. It was the wrongful dismissal lawsuit by the general contractor of the new city hasll, Urbacon Buildings Group Inc.

That six year legal battle cost the city an additional $23 million to complete the project.

The mystery that prevails is what made the SOC recommendation to city council that the sale of Guelph Hydro be taken off the table as an option?

Was the SOC a masquerade or just following orders?

To this day there is no explanation or details of who or what influenced the SOC to recommendation removal of not selling Guelph Hydro.

It left only two alternatives, merge with another utility or continue to operate it. If that was the SOC choice it would eliminate the opportunity to help clean up the GMHI $66 million losses.

In my opinion, no bank was prepared to put up the $68.3 million considering the depth of the losses revealed in two staff reports in May and July 2016. Instead, the city loaned the money to GMHI not aware that there was no possibility of GMHI repaying the loan. This was confirmed in the GMHI consolidated audit perfotmed by the accouting firm KPMG. They described the loans as “Shareholder’s Liability.”

This placed the city administration in a bind. Because the province demands that all municipalities must ballance their books at year end, where was the city going to find $66 million before then end of 2016?

The city debt limit could not handle it. The risk managers at he banks would not touch impaired assets that was being written down. There were no GMHI profits available to service the growing debt some of which remains today and is growing.

Then, along came the strategy to sell Guelph Hydro and use thr proceeds to pay off the $66 million. In the fall, the wheels started turning when the SOC was selected to find a buyer or merge Guelph Hydro with another partner.

Merger negotiatins began in earnest in June 2017. In early October, Mayor Guthrie announce the city had signed a Memorandum of Agreement with Alectra.

So here’s the deal:

The city transfers title and assets of Guelph Hydro with a 2016 book value of $228 million to Alectra. In return, Alectra promises to establish a Green Technology centre in Guelph and the city would receive an annual dividend of 4.86 per cent of 60 per cent of Alectra utilities profits. City council appointed Jane Armstrong as Guelph’s representative on the Alectra Board of Directors.

The merger was approved by the Ontario Energy Board in 2018. The decision denied intervenor access ti the meeting despite a number of residents who requested a open meeting and the opportunity to speak.

None of us were granted that request. On January 1, 2019 the deal was completed.

There are more details of this deal that have not been revealed. Why did this merger solve the city’s GMHI problem? Did Alectra assume the $66 million losses that were financed internally by the city? Did the city recover the $2.6 million it admitted spending to sell the deal to the public?

Is it not true that Alectra promised there would no charges to the city regarding rate increases for power? Alectra recently asked the Ontario Energt Generation Board for a 5 per cent rate increase.

The city did receive $18.5 million from Guelph Hydrp’s surplus. What happened to those funds that were the property of the citizens?

Council, despite the leaking of the SOC recommending dropping the sale of Guelph Hydro, did not explain the reasons or even a summary of the SOC decision. The SOC assumed it was covered in closed-sessions protected by the Council Code of Conduct.

The Code of Conduct prevents any councilor or member of the SOC to discuss or reveal the contents of any designated closed-session meeting in which they participated.

If there is an apparent breach of the rule, the offender may be subject to dicipline as determined by the Integrity Commissioner who may suspend the offender following an investigation and fine them.

Closed-sessions are the most abused procedural rules that prevents disclosure by council or any board or committee to not discuss the content of such closed-session.

In my opinion, this suppresses information of the public’s interest that should be revealed. There are certain legitimate reasons for a closed-session including contract negotiations, real estate transactions and certain staff issues.

The fact is that in the first two years of the Guthrie administration, there were 84 closed-sessions. There was supposed to be a summary of the meeting reported after but that did not occur.

It is, in my opinion, the essence of convenient cover-up that denies public participation, accountability, transparency and open government.

This is what happens when the real shareholders of Guelph Hydro are rarely informed of the methods, reasons or, dare I say it, what happened to due diligence?

 

 

2 Comments

Filed under Between the Lines

2 responses to “Was city council duped giving away the $228 million Guelph Hydro to solve the GMHI losses?

  1. Joe Black

    No we were by the crooks

    • In Response to Sharon Kerr

      Yikes Sharon! Talk about mixing apples and oranges. Donald Trump is a deranged fake man who doesn’t understand the constitution of his country, is a dedicated racist and has not kept his campaign promises including a better, cheaper health plan than The Affordable Care Act, aka ObomaCare. His trade war policies are causing a global recession that U.S. farmers are witnessing the terrible effect on losses of contracts due to aggressive tariffs placed on US grains, pork and beef, by the Chinese in retaliation to Trump’s trade war tactics.

      My greatest fear is the effect of the Trump’s administration’s wild and fanciful actions around the world and the effect it has already impacted Canada.

      Now to the home front. I agree that use of illegal drugs in Guelph has been a long-term problem. It is one that can be controlled but will never disappear even with the advent of pot for recreational use. Guelph police have focused on the dealers of these drugs including the arrival of the powerful opiod fentynal. Several things need to happen: Enforcement of the supply that includes wholesalers, physician’s pharmacists and local dealers. This campaign will be costly and take time. It’s time city council stops denying and provide the resources to halt this scourge that is not unique to Guelph.

      Dealers and users should be arrested and dealt sever penalties if found guilty. No more releases of accused on their own recognacense, provide the resources for more law enforcement, the courts and the professional organizations whose members may be part of the distribution of illegal drugs.

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