Category Archives: Between the Lines

Gerry Barker Between the Lines

The GMHI Odyssey: Following the money leads to a staggering hit on city finances

By Gerry Barker

July 24, 2017

The epic unraveling of the Guelph Municipal Holdings Inc, (GMHI) affair is like watching a kitten untangle a ball of wool.

There are so many moving parts, bopping through a dense fog of spin, denial, obfuscation and malfeasance.

What people are expecting is how much did this excursion into a fantasy world of power self-sufficiency coupled with providing co-generated hot and cold running water to buildings actually cost?

Guelph Speaks used two official documents to reach its conclusion that GMHI cost the city $157.422 million most of which is not recoverable. The two documents include the audited consolidated balance sheet of GMHI and the Guelph Hydro 2016 financial report. By any definition losses can only be described as “staggering.”

The long-term effect is a severe restriction of capital and operational spending. That amount represents about 40 per cent of the total 2017 city operational and capital spending budgets.

In my opinion, it has jeopardized capital spending on the $63 million South End recreational centre and the Downtown library (again) of an estimated $60 million. Keep in mind that city council has approved capital projects including the $34 million police headquarters and the $20.5 millionWilson Street parking garage.

There is no easy solution to this. The project is a failure financially and leaves the city with few alternatives to recover the losses of GMHI. Increasing debt, property taxes and user fees are not alternatives. Rationalizing cost of operations is now a necessity to reduce overhead costs. It’s the only way out of the situation because the city cannot win the lottery.

It all started in April 2007 when the new city council unanimously approved Mayor Karen Farbridge’s proposed Community Energy Initiative (CEI).

Here are the goals set by the CEI to achieve 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 at the time, said the CEI would position Guelph among the top energy performers in the world.

Today, the key management players are no longer employed by the city, leaving behind a multi-million dollar losing legacy that has challenged the most skilled financial practitioners among us. Item: The city has spent more than $2.8 million just to have the KPMG accounting firm perform a financial autopsy on this turkey, aka an audit.

The people associated with the GMHI project, have left the building. They include the former mayor, Karen Farbridge, and Chair of the GMHI Board of Directors; former Chief Administration Officer and Chief Executive Officer of GMHI, Ann Pappert; Former Chief Financial Officer Al Horsman; City Solicitor, Donna Jacques and Jasmine Urisk, who at the time, was Chair of the board of directors of Guelph Hydro. Other peripheral managers have also departed at all levels of the City of Guelph Corporation.

These include members of the city administration, Guelph Hydro, GMHI and Envida Community Energy Inc. and Guelph Hydro Electric Services Inc. (GHESI), the operating division of Guelph Hydro. In addition, GMHI and Guelph Hydro entered into contracts to supply power and co-generation thermal heating and cooling system.

These contracts were never fulfilled and the city has negotiated settlements, it is reported.

The Guelph corporate family of companies

So here is the cast of operational participants, all belonging to the City of Guelph’s corporate family.

GMHI was set up under the express direction of former Mayor Karen Farbridge. She took on the job of Chair of the GMHI board of directors in 2011. She handpicked her board thereby maintaining complete control. At the time of formation the assets to be managed included the Guelph Junction railroad.

Her mission was to implement the CEI announced in 2007. It was the product of a series of meetings with many of the leading citizens in the city described as stakeholders. They included members of the city administration, Union Gas, Guelph Hydro, business and industrial representatives, the University of Guelph, School Boards and the Guelph Chamber of Commerce.

It was an all-star cast that produced the agreement and thrust of turning Guelph into a world-class jewel of conservation, self-sufficiency in power, renewable energy sources, total management of waste and the gradual reduction of the use of fossil fuels to reduce the effect on climate change.

It was dreamy, heady stuff that stirred the environmental souls of those participating. But little happened for four years until the corporate vehicle, GMHI was established in 2010. In 2013, the Farbridge-dominated council approved moving Guelph Hydro unto GMHI.

The wheels of this ignoble 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 from the Eastview landfill. An impairment charge of $2.984 million was taken that year.

Update: Guelph Hydro has paid to take over the Eastview gas generating plant paying some $550,000 for it. Now which city corporation gets that money?

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.

It’s not difficult to understand that when assets are wriitten down, that’s real money lost forever.

There is more on this to come

Suddenly, the door was shut to public participation. Only a few politicians and civil servants were in on the plan’s execution.

It is now believed that Guelph Hydro was the banker for GMHI. The first step was to have Guelph Hydro form Envida Community Energy Corporation to be the hands-on builder of new projects, including installing solar panels on the roof of the Sleeman Centre and several public building throughout the city. Envida now owes millions in debt to GMHI.

The audited GMHI balance sheet revealed a startling statement that concerned two senior unsecured debentures taken out by GMHI totaling $103.612 million as of December 31, 2016. The largest was for $65 million, due 2030 and no interest of the debenture has been paid for two years, increasing the principal due by $8.612 million. The other debenture is for $30 million and is due in 2045. Both these obligations carry interest rates of 4.012 per cent and 4.112 per cent respectively.

The source of these debenture loans is described in the audit as the CDS&CO. As both are unsecured, the loans were made because of the City of Guelph’s owneship of GMHI and Guelph Hydro. It is difficult to imagine any financial institution committing $95 million without the assurance of repayment by the city. Regardless, the loans are unsecured. One can only conclude that a corporate relative within the city’s corporate family guarantees the liquidity of GMHI. The audit also revealed that a $20 million credit facility was arranged for GMHI but the source is not revealed. As of December 31, 2016, there has been no draw down on that facility by GMHI.

It is now clear that there was a lot of money flowing between various city-owned corporations. It was a five-year irresponsible mismanagement of public funds that has left the citizens with a $157.422 million price tag with no benefits to show for it. And, also there remains no possibility of repayment of rapidly depreciating assets.

Adding up the numbers

The balance sheet of GMHI shows assets of $230.596 million of which $162.653 million is composed of property, plant and equipment. Conversely, in my opinion, many of these assets are depreciating and failing to provide adequate cash flow to allow GMHI to pay its bills and continue to exist. The real cash liabilities of $163.474 million closely match the value of the total assets. The inclusion of shareholder equity of $67.122 million, according to the audit as a liability, is enough to match the total assets of $230.596 million to balance the books.

In my opinion, the shareholder’s equity, and that’s you and me, is virtually worthless because there is not enough cash from operations and assets to allow redemption of the shares. The record now shows that GMHI is so intertwined between various city-owned corporate entities that disclosure of the facts is an expensive and difficult task.

It would appear the debenture funding came through Guelph Electric Services Inc., the operating arm of Guelph Hydro. Envida was involved in other projects including the District Energy nodes set up in the Sleeman Centre and Hanlon Business Park.

Through all this GMHI activity, the public had no clue as to what was happening with their money. Item: Hydro bills for the 55,000 clients of Guelph Hydro increased electricity fees by 42 per cent in four years. In the past year the billing has decreased.

Today, Guelph Hydro reports a total of $228.3 million in assets. Its long-term debt is listed as $94.3 million and net income for 2016 was $7.1 million. It would take 13.28 years of $7.1 million in net income to repay it. Amazing coincidence! That’s 2030 the year the $65 million unsecured debenture is due for redemption.

Would you or I want to merge with a utility that carried an impaired debt of $94.3 million? How does the city merge or sell Guelph Hydro with that problem?

Now this is when it gets interesting. In May 16, 2016, Pankaj Sardana, CEO and CFO of GMHI, said there was an impaired charge to GMHI of $68 million. He explained that this was provided by a group of investors, without naming them.

Accounting for those pesky two unsecured debentures

But on the audited GMHI consolidated balance sheet there is a liability of $95 million composed of two unsecured debentures, one being $65 million and the other $30 million. The auditor reported the source of the debentures was CDS&CO. Remember this is now an impaired asset.

It is apparent from the audit by KPMG and the Guelph annual 2016 financials that Guelph Hydro has assumed the hit on the debentures and lists $94.3 million as debt.

Is it coincidence that the GMHI debenture debt has morphed over to Guelph Hydro who lists it as debt? Why would Guelph Hydro, well established with earnings of $7.1 million report debt of $94.3 million? If these figures are accurate, according to official public audits and financial documents, then the total GMHI loss includes the worthless shareholder equity, $63.122 million and the Guelph Hydro debt of $94.3 million totals $157.422 million.

On a historical note, some members of the Gang of Seven city councillors walked out of a closed session in January 2016, preventing council to continue its business because of a lack of quorum. Interviewed later, Coun. Phil Allt said their action was to “protect the staff and the corporation.”

Wonder how that worked out for them now that the details of the GMHI debacle is being revealed?

 

2 Comments

Filed under Between the Lines

Four stories about Parkades, Planning, Populations and Politics

By Gerry Barker

July 20, 2917

Turning a parking lot into a parkade may benefit the few at the expense of the many

It’s a project long overdue, the Wilson Street parking garage next door to city hall. The five-storey building will contain 496 spaces and will be completed in mid-2019. Of that total 70 per cent or 347 will be allocated to monthly permit holders. The city already has applications for more than 400 monthly permits.

Monthly permits holders are not downtown shoppers. The fact that there is now a line-up for monthly permits indicates that the chief users of the garage will be downtown workers mostly concentrated next door to the City Hall. As the council just announced the details of the project,, it would appear that city staffers had the inside track on applying for the monthly permits.

So the new proposal could be construed as chiefly designed for those city employees. But there are still 149 spots available for short-term parking. That’s a little more than the present Wilson Street parking lot has now. This revised plan is going to cost $20.5 million or $8.5 million more than the original estimate. Funding will be done by adding debt and using reserves.

Perhaps staff should reconsider the ratio of short-term spots and monthly permit holders if for no other reason than public perception of the plan that city staff has first dibs at the majority of spaces.

There will be provision for two parking spots for charging electric vehicles with rough-ins for 80 more. Then there is a storage room for bicycles complete with lockers.

What these facts show is that vehicles far outnumber cyclists using the facility by a ratio of 40 bikes to 496 motor vehicles. That’s 0.080 per cent. Projecting that staff recommendation forward, is it a mirror of the ratio of bicyclists using our streets and sidewalks to the numbers of vehicle use 24/7?

So, why is the city planning to spend more than $12 million on new bike lanes and paths over the next ten years? Toss in the year-round maintenance of $271,000 to service the additional 52 kilometers of trails and add another $2.71 million over the ten years to the total. Council, acting in the Committee of the Whole, approved the proposal but balked at the maintenance costs. Council will discuss the proposal soon before formally approving the project.

*            *            *            *

With the majority of this council, the art of negotiating escapes them

Mayor Cam Guthrie is a business booster for Guelph. He recently announced that a “major national corporation” was considering moving to Guelph and being part of the Baker Street parking lot development. The Mayor did not reveal who it was.

This week, council asked questions. Not about the identity of the corporation but members insisted that a new downtown library be part of the development. The staff report stated the library “may” be part of the development. This irked some councillors who insisted it must be part of the development. The Mayor and staff indicated that negotiations can be complex and that going in, the demand for the library to be included could endanger the negotiations.

Here we go again. We just lost millions on the failed Guelph Municipal Holdings Inc. (GMHI) misadventure into an electricity wonderland, and the spenders on council are in high dudgeon about spending millions on bike trails and a downtown library.

There is no free lunch as we have discovered considering losing $23 million on the New City hall project and the GMHI fiasco in which the combination of losses of some $163 million hangs heavily over the city‘s finances. And the full story of this operation and the final cost has yet to come.

One thing you can depend on is the city’s newfound transparency of its operations. It explains the well-publicized exercise to merge or sell Guelph Hydro. The Strategic Options Committee, in which not one elected official is a member, is currently shopping the utility. Of course, their activities are not public with only periodic reports to council.

Has nobody this city administration learned anything about closed session meetings denying public participation?

*            *            *            *

Eye-opener -The Greater Golden Horseshoe Growth analysis

Recently, the Neptis Foundation did a study of the population growth between 2001 and 2031 of municipalities located in the Greater Golden Horseshoe. The coverage stretches from Durham Region on the East to Simcoe County on the North, City of Waterloo on the West and wraps around to Niagara on the south.

This is the heartland of Ontario and the election battleground in 2018 in which the Liberals have the greatest number of ridings, including Guelph. Let’s look at the growth percentages:

The 30-year study declared The Region of York with the highest growth rate, 20 per cent. Next is The Region of Peel, 16 per cent; Toronto, 13 per cent; The Region of Durham, 12 per cent; The Region of Halton, 11 percent. Those are the municipalities with the higher population growth numbers.

Note that with the exception of York, the high growth pattern with waterfront, wraps around Lake Ontario from Durham to Halton regions.

The most startling statistic is that Guelph’s pattern of population growth is only 2 per cent. The rate is the same as Wellington County and The Region of Niagara. The city is surrounded by more robust growth rates such as Waterloo, 7 per cent; Halton; 11 per cent; Hamilton, 4 per cent. The most interesting stat is Simcoe County bordering on Lake Simcoe, Georgian Bay and Lake Couchiching.

It must be something about the water.

So why hasn’t Guelph grown in the first 16 years of the study like the other municipalities on its border? Since 2001, a council controlled by former Mayor Karen Farbridge for 11 years has governed Guelph.

In that management time frame, the city taxes and user fees exploded. Reserve funds were depleted to pay for overspent annual budgets; severe development restrictions were imposed; there was no expansion of commercial and industrial assessment (16 per cent) compared to residential high-density development (84 per cent).

The cost of electricity, water treatment and emergency services soared. Cost overruns on city projects caused unexpected financial losses. City operational and capital spending budgets were frequently overspent. Independent consultants warned city council that Guelph was a difficult place in which to do business.

Obviously these events have led to the low growth of the city. It has not gone unnoticed.

Something to think about when it comes time to cast your ballot October 2018.

*            *            *            *

The ongoing dilemma of supporting the leaders of Ontario’s political parties

Today when you lift up the hood to check the Ontario government’s power source, there are some surprises.

Premier Kathleen Wynne’s numbers in the high teens have not budged, even after the Liberal budget promised everything from a $15 minimum wage to cutting Hydro rates by 25 per cent. And, don’t forget, the Libs claimed the provincial budget was balanced. If you believe that, I will sell you the Burlington Bridge.

Progressive Conservative Leader of the Opposition, Patrick Brown, is a man of many thoughts and diversions. But there is trouble in PC internals including alienating the PC core with a record of switching positions. In politics it’s called the pragmatic approach. One would believe there was nowhere to go for brown but up. His predecessor colleagues managed to say the wrong thing at the right time and paid the price. But at least one rose like the Phoenix and became Mayor of Toronto, the aptly named, John Tory.

The NDP’s Andrea Horwath is probably the most seasoned leader in the Legislature. But she is stuck with a national party that rejected its leader and has been groping ever since to establish its identity and a new leader.

There are two other minority parties, the Trillium Party an offshoot of the PC’s and the Green Party that has never gained traction in Ontario or, or for that matter, across the country.

Ladies and gentlemen: Start your engines.

 

 

5 Comments

Filed under Between the Lines

Did Omar Khadr play a part in the Liberal’s record-breaking 2014 election victory?

By Gerry Barker

July 17, 2017

Let’s start with the Supreme Court of Canada’s ruling dismissing Omar Khadr, a made terrorist, who killed and wounded two U.S. servicemen in combat against Afghanistan militants including the Taliban and Al Qaeda some 15 years ago.

My former editor had a precise order when investigating malfeasance by government and it deep pocketed supporters: “Follow the money.”

When former Prime Minister Stephen Harper’s minority government agreed to repatriate convicted Canadian terrorist Omar Khadr from a U.S. prison, it marked the beginning of a legal wrangle that lasted five years.

Let’s skip back to 2010 when Conservative Stephen Harper won a majority in the House of Commons and the Liberals were crushed winning only 35 seats. The New Democrat Party elected more than 100 seats and became the official opposition. The Liberals were in disarray, a new leader, Justin Trudeau, was elected and the rebuilding of the “natural governing party” began.

Now let’s ask questions that track back to that 2010 defeat of the Liberals.

It did not take long following Khadr’s release from a Canada prison that legal action began to prove Khadr’s innocence.

In view of the long legal action taken on Khadr’s behalf for more than five years, who was paying his ongoing legal bills?

Mr. Khadr did not have the funds to pay what turned out to be a team of lawyers. It is doubtful they were working pro bono.

So what were the sources of funding his defense team?

Who were his underwriters? What was the motivation to fund Khadr’s defence? Khadr had no collateral to finance his quest for indemnification. Lawyers don’t work for nothing.

More important, aside from Khadr’s $10.5 million settlement and his lawyers’ costs, who else really benefited from this settlement?

Which political party in Ottawa had the most to gain from the Khadr affair?

What role did that play in the 2014 defeat of the Harper Conservatives?

Winning 183 seats from the 35 held in the previous parliament, it is now evident that the Liberal victory was one of the greatest in living memory.

Of all the political parties in Ottawa, notwithstanding running an excellent campaign, did the Liberal party benefit from private financing of the Khadr case over the last five years?

Canadians probably will never know the answer to that question. It does leave a question, if the Liberal supporters were not complicit in paying Khadr’s legal bills, who was?

What were Khadr’s legal costs after five years of trials and other expenses?

For Prime Minister Justin Trudeau to now say the settlement was necessary because the cost to Canadians would have been $30 to $40 million and the government would still have lost, is a taste of hyperbole.

Canadians want to know why did this case cost so much and take so long?

The Supreme Court ruled that Khadr’s rights were denied because he was a Canadian citizen and the Canadian government did not intervene to protect his civil rights.

Khadr’s involvement in combat wasn’t a schoolboy fight; he was armed with grenades and used them. He was sent to Guantanamo Bay, the top security prison populated by terrorists. He confessed to killing a U.S. servicemen and partially blinding another, but later recanted.

As a Canadian citizen, did Mr. Khadr contribute to the obligations required as a citizen? Did he pay income tax? Did he have a bank account, or pay for his travel to the Afghanistan war zone? Did he swear to support the Canadian Constitution and accept Queen Elizabeth as our head of State? Did he accept government social payments including health care and welfare? Did he attend Canadian schools and study Canadian history? Did he have any Canadian friends? Did he know the words to the national anthem?

Instead, he was described as “boy soldier” therefore not responsible for his actions.

The fact that his parents were Al Qaeda operatives, who received Canadian citizenship, exacerbates the lack of screening of immigrants arriving in Canada. This isn’t to disparage the work of our border and immigration agents. They work under express rules in dealing with immigrants and in the past 15 years, the average intake annually is 200,000. That placed enormous pressure on our front-line staffs in Canada, and overseas, where much of the immigrant processing is done. This has occurred with Canada’s involvement in combating terrorists in Afghanistan, Iraq and Syria.

Unfortunately, the government did not consider the effect of its decision to pay Mr. Khadr $10.5 million in compensation for his alleged mistreatment while in U.S. custody.

The decision by the Supreme Court sets a dangerous precedent. Unfortunately, many immigrants use Canada as a safe, convenient place. A glaring example came during the fighting in Lebanon and residents complained to the Canadian government to provide transportation out of the country. A ship was sent, at government expense, to evacuate the part-time “Canadians.” Then they complained about the facilities aboard the vessel. A year later, when hostilities ceased, 57 per cent of those evacuees were back in Lebanon.

Shouldn’t Canadians now question how many Canadian citizens are part of ISIS and are aiding the cause of the Islamic Caliphate in the Middle East and Afghanistan?

They are not acting as Canadian citizens and their contribution to our established culture is minimal. But now our top court has ruled that as enemy combatants, they are entitled to compensation as Canadian citizens if captured by coalition forces.

Omar Khadr volunteered to fight in Afghanistan against U.S. forces. The United States is our ally and in 100 years Canada and the U.S. have fought tyranny in Europe, Korea and Afghanistan. Many Canadians fought in Viet Nam serving with U.S. forces. Canadians are remembered on the Viet Nam memorial wall in Washington that contains the names of 58,000 troops killed in action including Canadian volunteers.

None of them received $10.5 million from the Canadian government while serving in the service of a foreign country, one that was an ally fighting a common enemy.

This has not been a great week for the Prime Minister. He shuffled off to Hamburg to mingle with the G20 world leaders. The Khadr story broke and the firestorm of protest by Canadians from coast to coast will stick to him and his government like Gorilla glue on a doorknob.

The government lawyers who negotiated this settlement have given up; possibly spooked by the Supreme Court decision that Khadr’s constitutional rights had been violated. But did anyone in government consider the public interest and fall-out of the decision? Oh well, we’ll do it while the PM is in Hamburg. Martinis anyone?

Martinis aside, was the plan to get the Khadr situation out of the way before the election just two years away?

In Calgary, while attending the Stampede, the PM once again said the settlement was necessary to settle because of the millions it would have cost to defeat the lawsuit brought by Khadr for $20 million.

I, like many Canadians who are serving or have served in the military, police services and diplomatic corps are stupefied at the morality of the decision. It has sucked the juice of loyalty and service from thousands who cannot believe spending the $10.5 million but then also apologizing. Paid to this person, a Canadian by accident of birth, who consorted with the enemy and took part in armed combat against the forces of our ally.

The outrage has now extended to thousands of Canadians donating money. To date $134,000 has been collected to be given to Tabitha Speer and her two teenage daughters. The widow of the man Khadr killed attempted this week, in a Canadian court, to have a stay of payment to Khadr because she had a $134 million wrongful death award in a U.S. court.

Her motion was denied

Now there are demands to have the Canadian government compensate Ms. Speer and her two daughters.

So many questions and few answers.

 

 

 

 

3 Comments

Filed under Between the Lines

Liz Sandals and the Ontario Liberals ready for re-election?

By Gerry Barker

July 13, 2017

In politics and life, timing is everything and some prevarification goes a long way

The other day I received a large four-page brochure from our Liberal member of the Legislature, Liz Sandals, who represents Guelph. It was labeled “ Community Update- Spring 2017.” While this is July, I presume events were occurring so fast that the spring edition was merged into the summer version.

The only conclusion I could reach after browsing through the content was it reinforced Liz’s intention to run again in Guelph next June. Or, maybe even before if the Premier calls a snap election.

Problem is based on what? Premier Wynne’s personal poll numbers are below 20 per cent. That means more than 80 per cent of those polled would not support her, or the Liberals, in June 2018, the mandatory Election Day in Ontario.

But that’s a long way away. The Sandals brochure speaks of the Liberal promises and accomplishments while ignoring the sad record of the government.

Ms. Sandals ignores the loss of her job as Minister of Education over a revelation that she approved spending millions to some of the teacher’s unions just to attend the bargaining sessions in 2014/15. The most damaging event was Sandals’ argument that the payments were made due to extended bargaining time to cover union rep’s extra food and lodging costs in Toronto.

Then she admitted that the Liberals, while in office, had distributed millions over the years to the teacher unions as “bargaining bonuses” if that description fits.

At that point, Premier Wynne stepped in and said that the union members had to supply receipts to show the funds were spent covering the period of extended bargaining. The horse, unfortunately, was already out of the barn.

In a cabinet reshuffle, Ms. Sandals was removed as Minister of Education and assigned as president of the Provincial Treasury Board. It was a face saving move by her good friend Kathleen Wynne.

So, let’s look at Treasury President Sandals latest missile to the Guelph voters.

On page one, the lead story focuses on the 2017 provincial budget with a screaming headline that the budget is balanced!

The first one that caught my eye was the claim that Guelph had the second lowest unemployment rate in Ontario.

Ms. Sandals must know that the city she represents has one of the highest concentrations of employees paid with public money. More important, consider since Ms. Sandals’ tenure as Guelph MPP, the ratio of 84 per cent residential assessment and 16 per cent commercial/industrial assessment has been unchanged for ten years.

While it could be argued that the situation is a municipal responsibility, there have been provincial resources available to increase commercial and industrial assessment to lift the burden of taxation from homeowners.

We are still waiting.

The recent 10-year history of the city shows that property taxes and user fees have increased by more than 3.5 per cent compounded annually. It has resulted in one of the highest municipal tax rates in the province.

But there is one aggravating caveat. The University of Guelph only pays $75 per student in lieu of property taxes. In 1987, the rate was created by the Peterson Liberal government and has never changed. Today, the U of G property tax bill is some $1.7 million.

No change in the rate but increased due to the growing number of students attending the university since 1987. Translation: There has been no provision to increase the rate in the past three decades, even to match the rate of inflation.

While Guelph’s property taxes and user fees have more than tripled in the last 30 years, the university property taxes are locked in at 1987 levels. In real income, the student rate is worth about $10 today.

The university has an unusual advantage over other post-secondary institutions in the province. As a former agricultural college, it owned hundreds of acres used for crop testing and training. That was 50 years ago. Today much of those lands are leased back by the university to a variety of commercial and residential enterprises. This provides a steady cash flow unmatched by any educational institution in Ontario.

The growth of the city has encompassed much of those lands. I have never seen a financial statement of the university that is a public supported organization. The income from land rental should be revealed. For no other reason than to see if U of G property taxes reflect this additional income.

Where was the Guelph MPP to tackle this perverted 30-year property tax freeze that thrust paying part of the U of G overhead costs upon taxpayers? While most citizens are proud of their university, the cost of supporting it through growing emergency services, road and infrastructure costs, public transit, and recreational facilities are borne by the citizens. This amounts to an increase in the city overhead that has grown disproportionally with the growth of population.

Bottom line: Do the citizens of Guelph gain any benefit from this arrangement?

How the Sandal Liberals blocked a citizen’s petition to audit city finances

When citizens complained in September 2012, through a documented petition to the Minister of Municipal Affairs and Housing, she dismissed the claims. She added that the petition issues made by GrassRoots Guekph and the City of Guelph, had to jointly resolve the issue. Liz Sandals was given a copy of the petition in advance of presentation to Minister Linda Jeffery on the condition it be embargoed until the official release. The reason was to give the MPP a heads up of the content of the petition.

Somehow the embargoed petition was delivered to then Mayor Karen Farbridge.

When an elected official keeps their word that’s class. In this case, Liz Sandals had only one of three copies of the final version of the petition. I had one and a colleague had the other. But it goes further, when our organization known as GrassRoots Guelph arranged a press conference in Queen’s Park, we received no assistance from the Sandals office. Actually our group of seven was escorted from the building by three security guards. We were told we could hold our press conference on the front lawn of the Legislature. Back in Guelph, an hour later, the Farbridge team reported the incident.

In my opinion, Ms. Sandals’has complicity in this but she will never admit it. That day, she failed not only her supporters but also the entire population of the city. She was complicit in not informing the people, her constituents, who had the right to know and to petition under a provision of the Ontario Municipal Act.

More on the truth according to Ms. Sandals

Another interesting feature of her brochure was a table that preposterously claimed that Ontario’s economic growth outpaced all G7 group of countries. This is like comparing elephantine economic powers to a beetle crawling up a stalk of corn with the intent of munching on a cob or two. Talk about gilding the lily.

Gazing on the Wynne Liberal management record over the past three years, here are some of the lowlights and potential highlights:

* Stop selling part of Hydro One to private enterprise while claiming to retain control.

* Urging municipalities owning hydro distribution systems to either merge or be sold.

* Claiming to cut Ontario’s bloated high cost electricity system rates by 25 per cent for the next four years then increasing rates to pay for it.

* Failing to reform the Police Act, the Ontario Municipal Act particularly pertaining to closed-door sessions, Ontario Hospital Insurance Plan, Correctional services, hydro power generation and transmission and costs.

*Failing to stem the exponential growth of salary and benefits paid to Police and Fire employees.

* Replace the arbitration system of resolving Police and Fire union contracts.

* Why does Guelph have the hughest number of deputy fire chiefs in thr Province?

* Getting out of the booze business lowering the cost of alcoholic beverages and allowing wider and competitive sales by private enterprise.

* Failing to end the Beer Store’s foreign ownership monopoly.

* Stop creating the highest cost electricity system in the country.

* Failing to resolve the infrastructure problems facing municipalities in Ontario.

* Increasing costs of public servants with generous benefits that exceed those of private enterprises.

* Refusing to support that transportation needs of the larger cities.

* Failing to increase disability payments while raising the minimum wage to $15 an hour.

*  Merge the two public education systems to create efficiencies of operation and lower costs. Allow the secular schools to conduct their curriculum.

* Restore the provincial bank system to allow clients to deal electronically to conduct their businesses and invest in infrastructure.

* Allow the Provincial Bank to support small businesses and non-profit organizations.

* Reconsider plans to convert fossil-fueled vehicles to electric with regard to the economic outcomes of switching too fast.

 

*

 

 

 

4 Comments

Filed under Between the Lines

Ever try to put lipstick on a pig? That’s what city spin-doctors are trying to do with GMHI

By Gerry Barker

July 10, 2017

Here’s the premise of a story that won’t go away. It’s about the losses associated with the Guelph Municipal Holdings Inc. (GMHI) and how some $163.474 million was lost in a bungled former administration’s attempt to create energy self-sufficiency in Guelph.

It’s a story that most people cannot figure out because they were not told details of the financial misadventure by the GMH Board of Directors chiefly composed of city councillors. They worked behind closed doors. Further, two of them, Coun. June Hofland and Coun. Karl Wettstein are still silent about their association as directors of GMHI.

Now it’s alarming that council continues to vote for projects such as the $12.3 million extension of trails over ten years. The off-road maintenance of these trails is estimated to be $271,000 a years. Council balked at this one and ordered staff to re-think its recommendation. In making this recommendation, why didn’t the staff, particularly those senior managers, think the maintenance costs were excessive particularly in winter?

Council caught it and recognized it was too high.

But I digress, the following is a statement by the accounting firm, KPMG, auditors of GMHI’s consolidated balance sheet.

“In our opinion, the consolidated financial statements present fairly, in all material respects, the consolidated financial position of Guelph Municipal Holdings Inc. as at December 31, 2016 and its consolidated results of operations and its consolidated cash flows for the year ended December 31, 2016 in accordance with International Financial Reporting Standards.”

As quoted in the Guelph Tribune July 3, 2017: “Pankaj Sardana, the CEO for Guelph Municipal Holdings Inc., the parent company for both Guelph Hydro and Envida Community Energy Corp., also updated councillors on the status of the district energy project, which has seen millions of dollars written off or written down from the city’s books.”

The key words here are “millions of dollars” If anyone should know, it would be Mr. Sardana who addressed the dire financial condition of GMHI 14 months ago.

“The expenses are higher than the revenues, and expect to remain so for the duration of the contracts,” he added.

Here are the figures on the GMHI balance sheet audited by KPMG

The consolidated total audited current assets of GMHI are $67,943,000.

The total consolidate non-current assets according to the audit is $162,653,000.

Total assets are $230,596,000

“The capital asset has been written down to nothing, zero,” Sardana told councillors, adding many of the assets from the district energy portfolio are now considered “onerous.”

Now, here is what the audit declared as GMHI Liabilities:

Total current liabilities:                                    $30,736,000.

Total non-current liabilities:

Provision for liabilities and changes                $    490,000

Senior unsecured debentures                             $94,283,000

Employee future benefits                                     $10,297,000

Customer deposits long term portion               $ 5,196,000

Deferred revenue                                                  $22,472,000

Total current liabilities                                         $163,474,00

Shareholder’s equity:

Share capital                                                            $67, 530, 000

Accumulated other comprehensive loss            $     (555,000)

Retained earnings                                                  $     147,000

Total Shareholder’s equity                                    $67,122,000

Total liabilities                                                $230,596,000

The shareholder’s equity is worthless. The former administration used public funds to invest in the Community Energy Initiative. It needed capital to finance its blind ambition to change Guelph and convert its demand for power through what turned out to be a failed District Energy plan.

Few people knew the depth of losses that GMHI generated over five years. Almost all of GMHI meetings were conducted in closed session.

Shifting the deck chairs on the Titanic

Now the city is moving money between agencies controlled by GMHI to pay down part of the debt owed by Envida Community Energy, the total of which is estimated as $20 million.

Trouble is, it’s our money that is being shuttled around with Peter paying Paul.

According to the Tribune, “following discussion of the money lost … Mayor Cam Guthrie remarked that it “does feel good to feel that my concerns have been validated.”

How does the Mayor feel now that he and his council are stuck with a huge problem: What do we admit to the citizens? The KPMG audit reveals a brutal situation in which the public’s financial resources have taken a monumental financial dump of dollars.

There was the deliberate use of secret meetings denying the right of the public to be informed of what was going on. It was not only undemocratic but a cover-up by senior city employees and at least four councillors plus the former mayor as chairperson, who served on the GMHI board of directors.

This allowed the city council members of the board to have total control of GMHI including Guelph Hydro.

When you are not accountable, you can get away with anything

During this period, millions were being spent and committed to projects that were never openly discussed in public. GMHI never made any money but sent $1.5 million annually as a dividend to the city to validate its existence. It was all a phony exercise in which money was taken from capital funds to pay the dividend. No one questioned it yet in 2015 the GMHI board said more than $9 million had been transferred to the city over six years. In that same year, GMHI lost $2.8 million.

Now we are seeing some of the fallout. Guelph Hydro is buying the dying Eastview generating plant that relies on a dwindling methane-gas supply from the former landfill site. Also approved during a special meeting, councillors, acting as GMHI shareholders, approved the sale and transfer of solar panels. Ownership of solar panels on top of the Guelph Hydro headquarters was transferred to the utility. Also approved was the sale of solar panel installations on eight city facilities back to the city.

The sale of Eastview will generate $558,000. The solar panels on the Guelph Hydro HQ roof solar panels $796,000. The city solar installations transfer cost $276,000.

Following a question by Coun. Dan Gibson, chief administrative officer Derrick Thomson confirmed the assets were being sold to generate cash that could be used to help pay Envida’s lenders. Who were these lenders? Did this involve the holders of the senior unsecured debentures, one for $65 million and the other for $30 million?

Who is liable for repayment of these debentures that are listed on the balance sheet as a liability?

Mayor Guthrie, as a councillor for those four GMHI years, were you ever informed of what the former mayor and her entourage were doing? Were all members of council receiving regular reports of the GMHI and Guelph Hydro activities in relation to the Community Energy Initiative?

Was the plan to make the city “look good?”

In the past, Guthrie has called the district energy project “a vision that was rammed forward” because the city “wanted to look good.”

Well Cam, you and your council colleagues have known about this multi-million dollar financial disaster for almost three years. Or maybe you didn’t because there was no Chief Financial officer in place to raise the alarm. It took two and a half years to finally hire a CFO who has financial accreditation and experience to provide the necessary checks and balances needed to sort out the mess.

In 2014, the voters figured it out that there was gross mismanagement by the city administration. As a result, you were elected mayor with the majority of people seeking change.

Unfortunately the honeymoon ended March 25, 2015 when council approved what turned out to be a 3.96 per cent property tax increase. That was a long way from your election promise to contain the property tax to no more than the Consumer Price Index.

But while that was a repudiation of you as Mayor, there was a much bigger problem brewing. While praising the contribution of the GMHI board, you did take over and named two councillors to the board. One was Karl Wettstein, who had served on the GMHI board for four years. The other was Coun. Cathy Downer. Wettstein remains silent on the activities of GMHI along with Coun. June Hofland, the former chair person of the city finance committee.

Did the city finance committee ever discuss what was going on with GMHI and Guelph Hydro, both owned by the City of Guelph?

What possessed elected officials to develop such a brain cramp about their connection with GMHI? Were they so loyal to the former mayor’s vision that they refused to blow the whistle?

What the public needs to be told are details of the wind-up of GMHI and the Community Energy Initiative. And, it is more important, to be informed of the costs resulting from this misadventure.

Stop playing games. Report to the real shareholders the details of this costly exercise to fulfill the ambition of a community leader who is no longer in power.

Meanwhile lets stop spending public funds on trails, road shrinking to create more bike lanes, wading pools, art centres and wellbeing giveaways until our house is put in order through an action plan.

Let’s learn from what happened in the 2014 election. The real political power in Guelph for the past ten years has rested with the 12 ward councillors. This will be the 2018 battleground and the citizen’s only opportunity to restore political balance on city council

 

 

2 Comments

Filed under Between the Lines

Here are some thoughts: Monopoly is just not a board game

By Gerry Barker

Weekend edition July 8, 2017

I am a curious kind of guy. It goes with a lifetime of being a reporter.

As many viewers know, I am not a fan of the Guelph Mercury Tribune. The owner of the twice a week publication is TorStar Corporation through a subsidiary called Metroland Publishing.

This organization owns and manages some 52-community newspapers, big and small, across southern Ontario. Metroland’s goal is to deliver profits to the mother ship, the Toronto Star. The Star remains a great newspaper despite degradation of its ad base, major staff reductions and farming out its production facilities to Transcontinental, a major print production group.

There exists an editorial firewall between the Star and Metroland Publishing. Metroland’s chief goal is to sell advertising to create profits. There is nothing wrong with that provided that the editorial content is usually a ratio of 60 per cent compared to 40 per cent advertising.

But editors and reporters cost money. The larger papers in the Metroland group provide greater funding for editorial personnel than say, the Guelph Tribune. When you have your Tribune delivered on Tuesday and Thursday, the 60/40 ratio is in general terms, reversed. The Thursday edition containing usually 42 pages plus a boatload of flyers is a classic Metroland strategy.

Think about this. The Tribune is the only print newspaper in our city of 131,000. Metroland folded the Mercury daily 18 months ago. The Mercury building on Macdonnell Street has been sold leaving the city with only a memory. It left an enormous editorial vacuum that has not been filled by its sister paper.

The connection between the Tribune and the city allows the administration to have a virtual monopoly controlling the news. One of the reasons the Tribune is soft in its news coverage is the paid adverting it receives twice a week from the city called “City News.” The city communications department controls the content. It’s a department that has 13 staffers, more than twice the number of Tribune editorial employees.

Can you imagine the Toronto Star allowing this to occur? Allowing the city administration to control the editorial content of the paper? In Guelph, this has been going on for ten years. For much of that time the Mercury provided a counter balance in terms of news coverage.

I speak from personal experience. A year ago I supported Guelph resident Pat Fung’s financial analysis comparing the city’s operating and capital spending to peer Cities Including Kitchener and Cambridge. Mr. Fung is an experienced financial expert with Chartered Accountant and Certified Public Accountant credentials.

When he asked the Tribune to report on the results, he was told it would take too long to check the facts. He took that as a no. I suggested we take out an ad in the Tribune explaining the report and its impact on city finances. After accepting the copy for the ad, the day before publication I was informed that the paper would not run the ad as they considered it inflammatory. Funds donated by citizens are held in a trust account to be used to promote and ensure distribution of an updated Fung Report next year prior to the election.

That order preventing publication had to be a Metroland executive decision. Of course the information, thoroughly researched and confirmed, was highly critical of the city administration. But Metroland didn’t want it published because it reflected negatively on the cozy relationship between the Tribune and the administration.

That friends, is called a monopoly that includes censorship. The administration controls the message, not the newspaper management. Most news is rewrites of city press releases. There is no attempt to check the details or investigate the background of decisions made by council.

The latest example was the Tribune’s failure to investigate the Guelph Municipal Holdings Inc. scandal that has cost the city millions. This is a tough and complex story because of the manipulation of city-owned agencies, including Guelph Hydro to pursue an abortive attempt to create self-sufficiency of electric power.

How many millions are involved? It’s difficult to pin down but it appears to be more than $100 million pending disposition of assets and a large pair of senior unsecured debentures owed by GMHI. That debt amounts is $94.283 million.

The Tribune has not covered this major story for more than a year except for press releases provided by the city or statements made in open council.

Why do I bother telling viewers about this corporate management of information?

I believe it is vital for citizens to be informed, have access to public information and be free to criticize and comment without fear of retribution.

We are the real shareholders of the Corporation of the City of Guelph, and not the employees including the members of council who are elected to represent our interests.

 

5 Comments

Filed under Between the Lines

This is what the provincial Sunshine List doesn’t tell you

By Gerry Barker

July 4, 2017

It was 21 years ago that former Ontario Premier Mike Harris’s government introduced the provincial Sunshine List naming all public employees earning $100,000 or more. The first list contained the names of every public employee who was paid from the public purse. That includes municipal employees.

The List also included the taxable benefits received by those employees earring more than $100,000list

What were never included are the benefits that municipal council is contracted to pay. These benefits include pension contributions, vacation and sick leave not used during employment. Throw un-paid health care upon retirement and in the case of non-union management employees, special contract terms applicable to their position.

Guelph management considers these accumulated management benefits confidential and negotiations are conducted in closed sessions. The fly in the pudding is the argument that such secret details are to protect the taxpayer. From what? It’s all about revealing too much detail for other management employees now and in the future.

Let’s look at a recent example. Our former Chief Administrative Officer (CA) was promoted to succeed Hans Loewig in 2011. As a result, her salary increased by more than $40,000 and she did not live in Guelph. A year later, she was advised by council to make Guelph her permanent residence moving from nearby Waterloo. As a special consideration, council agreed to give her $20,000 moving expenses if she moved within 90 days, and she did.

Ms. Pappert was also named Chief Executive Officer (CEO) of the newly formed Guelph Municipal Holdings Inc. This was an initiative by former Mayor Karen Farbridge using the Community Energy Initiative to make Guelph a world leader in environmental and renewable energy self-sufficient.

She remained CEO for four years up to her April 2016 resignation and leaving May 26, 2016. In 2013, her salary was listed in the 2013 Sunshine List as $214 thousand. The 2014 Sunshine List showed her salary to be $219,657. Apparently Ms. Pappert’s salary and benefits were discussed, again in closed session, prior to council approving the 2015 budget, March 25, 2015.

Then a closed session of city council, December 10, 2015 awarded the four top city managers a total of $98,202 in increases. But this was not exposed to the public until March 2016 when the provincial Sunshine List was published. One of the four, former Chief Financial Officer Al Horsman, resigned in August 2015. The 2015 Sunshine List revealed in March 2016, that he received $188,999 for eight months on the job.

Ms. Pappert, who worked for five months in 2016, received $263,757.32. From January 1, 2015 to May 26, 2016, Ms. Pappert was paid a total of $489,818.26 or $28,812 per month. Plus she received an estimated $8,783 in taxable benefits.

This placed her as being paid more than the Premier of Ontario.

Part of her resignation package included unused accumulated sick and vacation day payments and a retroactive performance bonus of some $26,000.

Looking at her salary and taxable benefits for her five years as CAO of the city, her gross salary and taxable benefits exceeded more than $1 million.

But that’s the tip of the iceberg. There are the pension benefits that citizen are obligated to honour. Lifetime ealth care plus other perks embedded in her contract.

The underlying problem is that council has failed to review and control these management positions based on performance and professionalism. In 2016, there were 96 non-union management positions. This is the underlying problem of the high cost overhead of operating the city.

Police and fire department salaries are excessive and citizens are helpless to do anything about it because salary disputes are settled by outside arbitrators.

Guelph has become a Mecca of public employees who enjoy unfettered salaries, benefits and job security. Also what most citizens don’t realize is the long-term liability of overly generous pay packages that include, in most cases, hidden perks. The public servants of our city collectively represent the costliest item in which more than 80 per cent consumes most of the operational and capital budgets.

The size of the staff today (2,235) is some 850 more than it was in 2007 (1,450). That’s an increase of 58.6 per cent. This data comes from a city report.

The latest Statistic Canada census figure states Guelph’s population is 131,000. In 2007 the city population was some 119,000, an increase of 12,000 since or 10 per cent.

Tell me, how does the administration justify a staff increase of 58.6 per cent when the city population only increased by 10 per cent? Did it require an additional 850 employees to handle the12,000 new-comers to the city?

For every new full-time employee, the citizens are responsible to guarantee millions in future pension benefits. Yet three councils in those 10 years have failed to understand the long-term liability of staff. In fact, even when informed by the Fair Pensions for All group, they refused to believe it.

With the millions of dollars wasted on their watch, it only points to the total ignorance and failure to maintain their fiduciary responsibility to the citizens. Remember them? They just pay the bills and deserve better representation.

Not all councillors are financially challenged. Next year, it is important to elect councillors who are not isolated by dogmatically-possessed individuals who are thick as treacle on a cold winter’s day.

We deserve better.

Climate change anyone?

3 Comments

Filed under Between the Lines