Tag Archives: Guelph Hydro

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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Tonight, it’s time to tell the truth about the failure of GMHI and Guelph Hydro

By Gerry Barker

February 15, 2017

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Tonight’s meeting, starting at 6 p.m. at city hall, will be a challenge for council and the administration to tell the truth about the huge losses encountered by the Guelph Municipal Holdings Inc. (GMHI) and Guelph Hydro. And include future liabilities to the taxpayers.

It’s time for the administration to level with the people and tell them specifics about the multi-million losses that the Community Energy Initiatives cobbled together by the former mayor. Her agenda was to make Guelph a world-class leader in energy efficiency and its environmental bedfellow.

Here’s what we do know.

On May 16, GMHI CEO and CFO Pankaj Sardana, along with former CAO Ann Pappert revealed that GMHI had accumulated losses of $26,637,244 million. Both officials signed the report tendered to city council. Ms. Pappert resigned 10 days later.

On January 12, it was revealed that the former mayor had even bigger plans. GMHI secured two parcels of land in order to build two Natural Gas-fired generation plants, one in the Hanlon Park and the other downtown. The cost of these plants and the two parcels of land needed to build them have not been disclosed.

Here are the write-offs. The capital cost of the Hanlon District Energy Node of $5.1 million will be written off. With only two customers, it loses a reported $55,000 every year. The Sleeman Centre Node cost was $6.1 million with $3.6 million being written down. The Sleeman Node makes some $127,000 a year.

Next, we are not told the cost of the underground thermal energy system connected to two Tricar condominium buildings, the RiverRun Theatres and the Sleeman Centre. Instead, we are told that the thermal system, powered by the Sleeman Centre District Energy Node will continue to supply hot and cold water for heating and cooling. Again, there are no details of the cost to citizens. What does that commitment accomplish in perpetuating GMHI, at the public expense?

At this point, we should be told of the total and ongoing cost of these misguided projects now and in the future

Here’s what we don’t know.

Because of the operational secrecy employed by GMHI over four years, there are still many questions that need answers. The ultimate hypocrisy employed by GMHI was sending a so-called $1.5 million dividend to the city each year to justify its existence. It was just a return of our money while GMHI in its entire history never made a dime.

In polite circles, that would be described as a “Ponzi” scheme. Paying off the city or the city-owned Guelph Hydro with its own money.

Because the former mayor and chair of GMHI, did not allow public participation in her management of GMHI, we have been handed one of the most serious financial

operating deficits in the city’s history.

Then there is that $65 million borrowed from Guelph Hydro by GMHI. In his May report, Mr. Sardana admitted that neither GMHI nor Envida Community Energy, a subsidiary of Guelph Hydro, had any financial resources to even pay the interest on that loan.

In the 2015 Financial Information Report, the city reported that there was an “impaired” asset outstanding of $69 million. The reason the amount had increased was because there was no money in GMHI to pay the interest. Simply, there are no hard assets underlying this $69 million loan because GMHI is essentially bankrupt.

So, the city takes on this debt and lists it on its books as an asset. As the city has folded Guelph Hydro into its financial orbit, it’s only a matter of time before the “impaired” asset becomes a liability and will have to be written off by fitire councils.

The questions remain, where did the money go? Was it spent? Is it a legitimate asset of the city? Is it no longer on the Hydro books?

Is it possible that the city financial managers have conjured a plan to keep the loan off the hydro books because the council committee is preparing us for the sale/merger of our electric distribution system?

The temptation of getting its hands on the proceeds of a sale on Guelph Hydro that could reap more than $150 million to solve all its wasteful spending problems and mismanagement of our affairs.

We are not the lost tribes of Carden Street. We are all the citizens impacted by this impending bad decision.

Make no mistake. This plan is in a full court press to selloff the jewel of our city assets to right the wrongs of the past.

My advice? Only the people can stop it by pressuring the council by email, telephone, Twitter and Facebook to say no and demand the truth of what has happened to our city.

If you turn up tonight at 6 p.m. in force, council will listen.

If council fails to listen to the people, then they are all in peril in October 2018 of being re-elected.

That I can guarantee.

I know there are some coucillors who understand the ramifications of tonight’s decisions. But the majority of progressives can be defeated by the people.

I don’t know about you, but this is a no-brainer. Stop, tell the truth and lets start the process of returning Guelph to fiscal responsibility and meet those targets that almost all people want that are bring denied.

You know what to do.

 

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Citizens will hear the future of Guelph Municipal Holdings Inc. & Guelph Hydro Wednesday night

By Gerry Barker

February 13, 2017

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Important note: The sale or merger of Guelph Hydro is scheduled for Wednesday night February 15, commencing at 6. p.m.  The fate of GMHI will also be discussed the same night. Sorry for the inconvenience. My advice still stands, please plan to attend the Wednesday meeting and make your voices heard. GB

On Wednesday, expect a different tactic employed regarding disposal of Gyelph Hydro.. A five-person committee, headed by CAO Derrick Thomson, is asking council to approve the sale of Guelph Hydro with the committee having the power to do so.

This time the method is different from 2008 when then Mayor Karen Farbridge was defeated in attempting to have council approve the merger with two other local distribution facilities in Hamilton and St. Catharines.

This is nothing but an end run to capture capital gain from the sale or merger, take your pick but someone is going to pay for it,

How can this committee, that has one member of council on it, Bob Bell, be given the power to dispose of the city’s most valuable, profit making asset?

How can the committee gain such power when the future of the Guelph Municipal Holdings Inc. misadventure into a $96 million disaster, hangs over the city like a vulture setting up his evening meal.

Ask yourself, where does the city, the one without a Chief Financial Officer for more than two years, plan to use this potential cash bonanza? Reduce the debt? Pay-off the $65 million hydro loan now sitting on the city books as an impaired asset. That’s because the borrower, GMHI, chaired by former mayor Farbridge, has no money to even pay the interest of the Hydro loan.

Apparently, the Wednesday agenda will discuss extending the future of GMHI to be targeted until mid year.

Are the potential Hydro sale/merger proceeds going toward the police HQ renovations? Or a new downtown Library? Or the South End recreation centre? Those items total capital spending of $140 million.

Is this prudent management of city assets? We live in a city that has higher operating and capital spending budgets than Cambridge and Kitchener, some 50 per cent higher. The disappearance of senior managers since 2014 has made matters worse. Our taxes are among the highest out of 445 municipalities in the Province.

Even more interesting, the Thomson committee debated for five months. They asked for public input and the response was overwhelming against the sale/merger of Guelph Hydro.

The committee also gave citizens little time to appear before council to comment on the committee recommendation to allow it to sell or merge Guelph Hydro. Is this fair?

This is nothing but a gigantic sham to shut down public protest and grab the value of Guelph Hydro estimated to be $150 million.

* If you want someone else to control your electricity costs, don’t show up Wednesday night.

* If you believe what this Thomson committee was told by outside consultants about the declining value of Guelph Hydro and the future of turning your home into a storage site costing thousands of dollars, then don’t show up Wednesday night.

* If you believe that your water bills are going to be reduced if Guelph Hydro is sold, don’t show up Wednesday night.

* If you believe that the proceeds gained by selling off Guelph Hydro will lower your taxes, don’t show up Wednesday night

* If you have faith that council will table the committee recommendation, don’t show up Wednesday night.

It’s time to call a halt to the sloppy and inefficient management that has been denuded of talent. Instead, it lurches on without reducing the city’s gargantuan spending policies that always are directed at the wrong goals at the expense of the necessary goals.

This is the citizen’s opportunity to protest this recommendation that lacks the credibility of public power.

If council passes the recommendation, say goodbye to public trust, power and the city’s most valuable asset.

Addendum

In my opinion, Councillors Karl Wettstein and June Hofland should not participate in discussions regarding Guelph Municipal Holdings Inc or the proposed sale/merger of Guelph Hydro. Their role of serving on the GMHI board of directors for four years and participating in the $96 million dollar losses, linked to Guelph Hydro, of that city-owned corporation, creates a conflict of interest.

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City dismisses a key senior employee for release of confidential information

By Gerry Barker

February 10 2017

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Today marked the end of the Farbridge administrative regime existing for the last ten years. Chief Administration officer (CAO), Derrick Thomson announced that Deputy Chief Administrative Officer (DCAO), Mark Amorosi, was no longer employed by the city.

Reaction was swift as the Internet lit up with comments from citizens supporting the departure.

As the editor of guelphspeaks.ca, involved in a lawsuit commenced by Mr. Amorosi, at this time, I will have no comment until the details of the dismissal become more relevant to the case.

While the CAO applauded the “valuable contributions that Mr. Amorosi contributed to the City of Guelph, there were many underlying concerns about the operations of the city by a DCAO who oversaw, Finance, Human Resources, Information Technology, Special Project Management and Court Services.

That responsibility was the largest senior management responsibility of any of the three DCAO’s. They reported to CAO Derrick Thomson who announced the departure of Amorosi.

Enter the $1 million lawsuit by former Chief Building Inspector Bruce Poole, against the city for wrongful dismissal. His lawyer, during the examination for discovery, asked the city for emails concerning Mr. Poole’s firing. Instead the city downloaded the files from the server and hundreds of alleged confidential, unrelated emails were included. Most initiated by former Chief Administrative Officer, Al Horsman.

But here’s the problem. While Amorosi was responsible for the Information Technology department, headed by former city clerk, Blair Labelle, the drive sent to Bruce Poole’s lawyer contained a ton of alleged confidential information. It was an external thumbnail drive reported to contain 53,000 emails included in the information that was requested by Mr. Poole’s lawyer.

Tony Saxon, reporting in the online Guelph Today, published some details of the thumnail drive in a report last Friday morning. The public reaction was instant. By the afternoon CAO Thomson, apologized and requested the return of the offending drive.

But here is where the plot thickens. Five days later, the city fired Mr. Amorosi.

This is a veteran senior manager who had enormous responsibility for eight years.

In my opinion, this firing statement published by the city, did not trigger the dismissal. It was something else that created the immediate firing of a senior manager making $216,000 a year.

It may never be revealed what the real reason was because of the secretive manner in which the public is denied specifics of the how our city is managed. Or why voters rejected in 2008 the sale of Guelph Hydro. Yet the administration is now seriously considering selling or merging Guelph Hydro…the same thing.

Digging into it, the committee charged with examining the options of the future of Guelph Hydro, has heard from a consultant that today’s Hydro Electric Distribution (LDC) systems are outdated and losing value.

Why? Because more and more local power distribution systems are being overtaken by technology. He cited that people would have batteries in their basement to store unused power generated by rooftop power generated solar panels.

To interpret, he is saying that a homeowner will have to invest thousands to install the solar panels, then the storage batteries and the necessary control equipment.

When Tesla, the electric car company operated by Elon Musk, builds the world’s largest battery manufacturing facility, and along with dozens of other companies, they have been working to develop high-capacity batteries for cars.

To suggest that there is technology today that is reasonably priced is misguided and a disservice to citizens. Think about it. We have a perfectly working electric distribution system that derives power from a well-established source.

Why would citizens in Guelph agree to sell a perfectly well operating electric supply system, based on this specious information promising something that is non existent today? Why would they agree to lose control of their Hydro distribution system to be exposed to new charges from a new owner for a service they need?

I contend, that our Guelph Hydro system is doing the job intended since it has going back to Adam Beck and the Niagara Hydro generating systems.

Haven’t the citizens being exposed enough by the errant Guelph Municipal Holdings Inc? It has been an adventure imposing a District Community Energy system to almost bankrupt the city, losing some $96 million?

The case is clear. Our administrative overhead costs are way out of line. We can survive if the council realizes what is the only course of action to save the city financial problems.

Selling Guelph Hydro is a band aid. Managing our overhead, as outlined by Pat Fung, CA, CPA in his detailed analysis of city financial management, is the responsible way to reduce our costs and dependence on ever-increasing property taxes.

Today may be the first day to begin the recovery of common sense and reform of an administration that is ill. Is it ready to correct the mistakes of the past without selling a premier asset?

As a final note, I have disagreed with some of the decisions of Mayor Cam Guthrie in the past two years. But I must say, that he is on the brink of cleaning up the financial mess he inherited.

Drive on.

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Guelph’s high electricity bills can be traced back to the losses of the Community Energy Initiative

By Gerry Barker

November 22, 2016

If I was running Burger King, Premier Kathleen Wynne told 850 Liberal delegates just told a whopper! I made a mistake she told delegates to the Liberal Convention over the high cost of power to the people.

I don’t know about you, but our two-person household received a Guelph Hydro bill that was $95.83 less than the previous month. The adjustment over the month before and the month before that when our monthly bill averaged $340 including water. How about you? Did your hydro bill take a sudden drop in power costs?

Water is a small amount of the bill considering the city would not let us water for five months.

There’s something fishy here. Are the smart meters over billing?

How about all that money that Guelph Hydro sent over to Guelph Municipal Holdings Inc (GMHI) at the bequest of the former mayor, chair of GMHI with a majority of her supporters basking in her environmental radiance.

That all changed following the 2014 election when it was discovered that GMHI had bungled a scheme under the umbrella of the Community Energy Initiative to create alternative energy systems downtown and at the Hanlon Business Park. The plan called District Energy natural gas-fired Node pumps was to power a co-generation thermal hot and cold water system to a handful of nearby downtown buildings including the Sleeman Centre and RiverRun Theatres. GMHI, through its partners, entered contracts to supply 10 megawatts of power from each of the Nodes annually

I have written a lot about this financial debacle, one that the citizens of Guelph are going to be paying off for years to come. Suffice to say the costs are running close to $107 million and counting. There is little return to support the investment.

It’s sad that the city administration is not leveling with the people who pay the bills.

Instead, it is now scurrying to cover it up. Here’s how they are doing it.

Where does the city find $106 million? Well, Premier Wynne in her mea culpa explanation to the Liberals says they are going to seek efficiencies by streamlining the 70 small municipally owned public utilities in Ontario.

That’s Wynne-speak for amalgamate or else. Remember when former mayor Karen Farbridge tried to sell off Guelph Hydro to a consortium of Hamilton and St. Catharine utilities? The people said “no” and it was one of the few times her loyal caucus turned on her proposal.

Now we have the Premier trying to unwind ten years of Liberal mismanagement of electric power in Ontario by forcing amalgamation of Guelph Hydro with larger distribution utilities.

Sure, there is a lot of money in it for the city. The estimated book value of the city-owned power distribution system is around $170 million.

The city has already brought Guelph Hydro into city control as just another department controlled by city council. They did this by wrapping up GMHI in which the former mayor folded Guelph Hydro into GMHI with its enormous debt.

Then, the city absorbed the $69 million impaired investment from GMHI, posting it as an asset. That money came from a Guelph Hydro subsidiary.

Are you starting to get the picture?

The so-called asset now sitting on the city books cannot be supported by GMHI that has no financial ability to even pay the interest. The original loan was $65 million. In the 2015 annual financial report, it had grown to $69 million.

The problem is that asset sitting on the city books has no underlying hard assets, particularly now that the city has it sitting on its books.

What a dilemma! Along comes the provincial government to the rescue, led by a premier with a 14 per cent approval rating. Her so-called streamlining of the 70 municipally owned electric distribution centres would see Guelph Hydro disappear when pushed into a Hydro distribution consortium.

Fasten your seat belts! This selling of Guelph Hydro is going to be presented to a council that has squandered millions of poorly planned and executed projects. The loss of this $170 million facility may suit the administration in the short term but the fallout will affect the ability of life in Guelph for years to come.

The irony of this is that two members of the present council were on the GMHI board for four years and never said a word about the money flying out the door to create an environmental nirvana.

Last, but not least, the former Chief Administrative Officer of the city, Ann Pappert, was the Chief Administrative Officer of GMHI for four years. So, ask yourself, why did city council, in closed-session Dec. 10, award her with a retroactive pay increase of more than $18,624, a vacation pay-out of another $18,580, plus a 2 per cent increase that took her 2015 pay to $257,248?

Where is the oversight? Where are the checks and balances to prevent the abuse of the public trust?

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Memo to city administration: It’s about the spending, stupid

By Gerry Barker

September 22, 2016

There was a guy named James Carville who, in the 1992 Presidential election, coined the phrase, “It’s the economy, stupid.” Carville was a political agent for Democrat candidate Bill Clinton who was facing George H.W. Bush. That one sentence galvanized the U.S. electorate to elect Clinton their new president.

It doesn’t take much more convincing that Guelph has not only a spending problem but the problem of carrying the baggage of money wasted on various schemes initiated by the former Farbridge administration.

There have been a number of revelations of money wasted. The Urbacon city hall contract lawsuit added an additional $23 million to the original cost of the building, taking the cost to $65 million. An impatient mayor triggered the firing of the general contractor, when the building was 95 per cent finished, caused this. That led to the defeat of the former mayor. She has yet to apologize for that mistake in judgment.

Did the public approve of this?

In her eight years in office, the former mayor and her council majority of supporters, allowed the number of full-time city staff to balloon by more than 35 per cent. The population increase during that period was 6.5 per cent.

Along comes the $37.1 million spent by the city-owned Guelph Municipal holdings Inc. (GMHI). The board was chaired by the mayor and four members of council, giving the chair absolute authority.

She exercised that authority behind closed doors without any public participation or input. Last May 16, we learned the truth about her secret project to develop two District Energy Node pumps, powered by natural gas and through a complex underground co-generation system, supplied hot and cold water to nearby buildings.

The Node located in the Sleeman Centre, supplies the co-generated hot and cold water to the two, new hi-rise Tricar Condo buildings, Sleeman Centre, RiverRun Theatres and St. Mark’s church.

Pankaj Sardana delivered the bad news to council in an open meeting. He said the project was started with a bad business plan and should never have been started in the first place. His presentation to the GMHI shareholders, aka city council was supported by the former CAO, Ann Pappert, who had served a Chief Executive Officer(CEO) of GMHI for four years.

If anyone knew of what GMHI was planning, it had to be her. But no one, the former mayor, the four councillors or Ms. Pappert serving on the GMHI board, said a word. Mr. Sardana’s presentation was the first indication of trouble with this project.

The devil is in the details

On July 13, the staff presented a detailed report on how the project failed and the associated costs. Those costs included the sum of $68.5 million an “impairment” asset on the city books. 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 must balance its books every year.

But because Farbridge persuaded her city council comrades to form GMHI in 2010, as a separate corporation, the finances went off the city books. This clandestine approval allowed her to pursue her dream of energy sustainability and reduction of carbon.

This $68.5 million is impaired because the cost of carrying the asset is some $3.5 million and exceeds the revenue. But there is no provision in the city income to pay these interest costs annually. The result is the so-called “asset” becomes a liability on the city books. In other words, the citizens have to pay for this colossal, multi-million dollar mistake. Yet Mark Amorosi keeps saying the city finances are in solid condition.

The mysteries remain: How was that impaired investment money spent? Was it a term loan? Who guaranteed it? Are there hard assets to provide collateral under-pinning the funds?

Mr. Sardana only mentioned that there were investors bankrolling the funds. It now appears that those “investors” were Guelph Hydro through it subsidiary, Guelph Hydro Electric Services Inc (GHESI). This is the billing and collection department of Guelph Hydro. The cash flow from some 55,000 customers each month is estimated to be more than $20 million or $240,000,000 a year.

The next question: Did the former mayor use that cash flow to finance her abortive Community Energy Initiative (CEI)?

And did her demands for GMHI financing, impact the Hydro costs of the estimated 55,000 customers in the past four years? During that time consumer Hydro charges increased by 42.5 per cent in Guelph.

If you can’t use it, pay someone else to take it off your hands

And what is the provincial electricity system doing during that period? Among other things, it is paying U.S. Border States to take its excess power off its hands. That indicates that since 2006, power consumption has dropped in Ontario by 13 per cent. Yet, the province continues to expand wind, solar and natural gas fired generators adding another 1,300 megawatts (MW) this year. The province’s supply of power now has an installed capacity of 40,000 MW.

The highest daily peak demand was in 2006, during the summer, when demand reached 27,000 MW. This year, during a severe drought for most of the summer months, the peak demand exceeded 23,000 MW for just one day.

Despite these facts of provincial power capacity and usage, the former mayor amalgamated Guelph Hydro that is owned by the city, with GMHI. She gained complete control, using the utility as her piggy bank to fulfill her CEI dream of power sustainability and climate control.

Mr. Sardana says that neither GMHI nor the Guelph Hydro subsidiary, Envida Community Energy Corporation, is financially viable.

With what we know now, I feel the police should investigate this whole GMHI/Guelph Hydro failed plan. If for no other reason, the public needs assurance there is no evidence of fraud, misuse of public funds, failing to disclose GMHI financial data of the operations to citizens. There should also be an investigation into complicity on the part of the former mayor, members of council serving on the GMHI board of directors, and Guelph Hydro.

We know that the Bloc of Seven majority supporters of the former mayor will never agree to any investigation of the CEI despite the evidence, that is now public that they tried to suppress. In fact, the city is advertising for people to apply for the CEI public advisory board, despite the history of CEI and the financial mess that remains.

By failing to accept their responsibility to effectively represent their electors, they face a backlash, if not next year but the year after, when they must answer to the voters in the October 2018 civic election.

In Guelph, preparations are underway to create the staff’s 2017 budget recommendations to Council sometime in the next few weeks. Rumours have been flying about the financial condition of the city.

Citizens who will be able to make presentations during the process will closely follow this procedure to finalize the next city budget.

There is a viable cost-cutting alternative financial plan on the table prepared by Guelph resident, Pat Fung, CPA, CA. It will be interesting to discover how this plan will affect the outcome. To obtain a copy, go to www.guelphspeaks.ca and it is available for downloading.

Please participate, it’s our future.

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Assessing the financial wreckage left by the Farbridge Community Energy Initiative

By Gerry Barker

July 18, 2016

Tonight, city council will discuss a thorough and damning city staff report detailing the history of the Community Energy Initiative (CEI) that was the heart and soul of the former mayor’s administration.

This was a master plan to develop District Energy Nodes that were linked to an underground network of insulated pipes to deliver hot and cold water to nearby buildings. The Nodes also were designed to generate electricity. These Node sites include the Sleeman Centre where the natural gas-fired pumping system was located; the RiverRun theatre across the street; St. Marks Church located nearby and the two Tricar high-rise condo buildings south of the Sleeman Centre.

The staff report also detailed the operation of the District Energy Node built in the Hanlon Business Park. That only had two customers plus the head office of Fusion Homes. The report said that both the Hanlon and Downtown district energy Nodes cost $8.7 million.

Ms. Farbridge acted as chairperson of a corporation, formed in 2010, known as Guelph Municipal Holdings Inc. Also serving on the board were Councillors Karl Wettstein, Lise Burcher, June Hofland and Todd Dennis. Burcher did not run in 2014 and Dennis and Ms. Farbridge were defeated in the civic election.

That meant that Councillors Hofland and Wettstein served on the GMHI board for five years or more in Wettstein’s case. They were present when the original business plan was developed, yet they never revealed details. They were present when the board meetings were held in closed session for five years, but never said a word about what was happening at GMHI and the Byzantine collection of various companies involved.

Tonight as city councillors, Wettstein and Hofland will be able to vote on the future of the CEI. If they were part of the problem for five years of closed session meetings of GMHI, they should resign or at least recuse themselves from participating in tonight’s meeting.

Oh! What a tangled web we weave

The former mayor did know what was going on and who pushed the failing CEI. She also said little about the role played by GMHI and ultimately Guelph Hydro, plus its subsidiaries, Envida Community Energy Corporation and Guelph Hydro Electric Services Inc

Now Mr. Wettstein says he will not be a candidate for council in 2018. Ms. Hofland tells people that she didn’t understand what was going on.

In 2015, it was reported that GMHI lost $9.4 million. At the same time, Envida owes $11.8 million to GMHI.

Then the staff report says that GMHI does not have the financial capacity to underwrite an expansion of the downtown Node to meet the Combined Heat and Power Standing Offer Program (CHPSOP). To meet that requirement standard, the reports says will cost $29 million.

Are you beginning to believe that this wasn’t such a good idea in the first place? You are not alone.

In the case of the Hanlon District Energy Node, the cost to meet the CHPSOP contract power requirements will be $31 million. That’s a total capital cost of $60 million including the two units already installed, and hooked up to the underground thermal heating and cooling system.

According to the staff report, GMHI has admitted that the two Nodes “will not generate sufficient cash flows over their useful lives to fully recover the costs of installing these assets.” GMHI has already stated it does not have the financial capacity to expand the two Nodes.

Up until this year, the city’s Capital Asset Renewal Reserve (CARR) fund financed the retrofits. Repayment to the reserve will come from cost savings from reduced electricity bills on public buildings with solar panels installed. The repayment is estimated to be completed in ten years. The report did not say how much was taken from the CARR reserve.

Exactly how these power savings will be transferred to the CARR is not explained.

Then there is the item carried on the city books of $68.6 million as an investment in GMHI on our balance sheet. But the so-called investment is already impaired and, over time, this will reduce the value of the investment that will become an expense on the city income statement.

Translation: Citizens could be paying this off over the next 10 to 15 years.

Another wrinkle in this maze of duplicity is the so-called dividends paid to the city by GMHI each year that totaled some $9 million up to 2014. This smells like it was a book entry without actual cash changing hands. If this is true, then it is gross misrepresentation and borders on being criminal.

Now we know why our former Chief Financial Officer, Al Horsman, left the city last August. His successor, General Manager of Finance and city Treasurer, Janice Sheehy, resigned in March after one year on the job. The city finances have been under the supervision of Deputy Chief Administrative Officer, Mark Amorosi for the past 19 months.

This secret scheme is so financially convoluted that we may only get to the bottom of it when the results of an audit are announced in September.

The three options recommended by the consultants and the staff:

In the meantime, this extensive staff report is offering three potential options:

  1. Exit Option: Exit the District Energy business and specifically shut down both Nodes.

Number One includes paying off agreements with customers using the heating and cooling system. Price tag is estimated to be more than $10 million to exit agreements with customers connected to the two Nodes.

  1. Operate As-is “Stabilize” the current investments in both systems and continue operations under current contractual agreements, without investing significant capital or infrastructure expansion or spending on business development activities.

Number Two is to keep it going until next March and evaluate the outcome of another nine months of losing money. It not hard to figure out that this is the salvage option to save some reputations and bump the mess into the 2018 budget.

  1. Preserve opportunity for growth: Continue to operate the current investments within both Nodes and actively assess our position for future investment opportunities.

Number Three represents insanity. We own a system that is losing money at warp speed and it will cost another $59.7 million to fulfill the Farbridge dream.

If you’ve made it this far, you are probably scratching your head over how could this have happened? How could reasonable and experienced people create such a mess and there was no critical comment or explanation for five years?

We now know it happened right under our noses by a small group of people who held absolute power over the city government for nine years.

We may never know the real costs of this failed project, masquerading under the guise of a Community Energy Initiative.

Did you benefit from this? It was a total abuse of the public trust that was a corruptive attempt to inflict a multi-million dollar energy plan on the citizens who had only one recourse every four years: Vote them out of office.

Let’s total up the costs of what is known so far

Cost of installing the Node pumps in the Sleeman Centre and Hanlon Creek Business Park – $8.7 million;

Tax loss costs for GMHI and Envida – $18 million

GMHI loss in 2015 – $9.4 million

Finally there is the $68.6 million investment by GMHI sitting on the city books. The trouble is the investment is impaired because its value declines as servicing the debt costs exceed the value. Over time, the GMHI investment becomes an expense on the City of Guelph’s income statement.

Other charges include $267,000 per year for GMHI Staff. There is a $612,000 break-up fee for contracts with the Independent Electric Service Organization. Add in the cost of consultants including Deloitte.

It appears that the losses so far amount to $37.1 million excluding the $68.6 million listed as an asset on the city financial accounts for GMHI. Also not included are the asset write-downs and write-offs or the so-called $9 million in dividends GMHI alleges it sent to the city.

Annual net income of both Nodes is $123,230. It will take more than 70 years to recoup the $8.7 installation costs. The Hanlon Node is losing $51,193 a year.

The problem lies in the five-year failure of Envida and GMHI to develop a customer base for each Node that would make the District Energy plan and thermal heating and cooling system successful. It was pointed out May 16 by GMHI Chief Executive Officer, Pankaj Sardana, that each Node should have a customer base in buildings of between three and four million square feet in order to meet operating expenses.

In the original business plan of GMHI and Envida it is now apparent that this vital component of the District Energy installations failed to factor in the customer base needed to support the two Nodes.

Here’s what should occur at tonight’s meeting.

The CEI should be scrapped and be reconsidered once the audit of the GMHI operations is completed. The “As-is” District Energy Nodes option proposed by the Deloitte consultants should exist until November 30th. At that time the two Nodes need to be closed down and mothballed until all agreements and associated costs have been settled. Current estimated liability to exit the District Energy system is $10 million.

It is up to our council representatives to consider the stakeholders who they represent and stop the bleeding of city funds supporting this failed attempt to satisfy the ego of a defeated mayor.

I urge Mayor Guthrie to call a recorded vote on each motion and amendment.

It is anticipated there will be arguments made to keep the CEI on track. The more people who attend the meeting, creates the greater opportunity to end this failed project.

Let’s show up and wrap it up.

 

 

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