Tag Archives: Strategic Options Committee

Why the 2018 budget is so important for Guelph’s future

By Gerry Barker

August 28, 2017

Let’s start by saying there are many smart people who run our city.

The problem is that the political ruling class – the council gang of seven progressives – has dominated and controlled public business for more than 10 years.

Under the leadership of former Mayor Karen Farbridge, grandiose schemes and social engineering policies have brought the city to a state of a serious financial condition. Not the least of which is the $163 million loss made by Guelph Municipal Holdings Inc. (GMHI) and its impact on Guelph Hydro.

This loss was verified in the Consolidated GMHI balance sheet audited by the KPMG accounting firm, completed last December.

Part of the $163 million GMHI losses are two debentures issued by “investors” to fund an ambitious plan to build two large natural gas generating plants to achieve electricity self-sufficiency for the city. Although GMHI purchased land to build these plants, the corporation collapsed. Because GMHI is wholly owned by the city, these debentures have been transferred to Guelph Hydro that now has a $94 million debt on its books.

There is little disposable cash available to meet the growing demands of the city. Assessment is only increasing at a rate of 1.5 per cent per year. Taxes are increasing exponentially at an average rate of 3.6 per cent per year. The city has one of the highest per capita debt rates in the entire country.

Spending remains out of control as major projects initiated by the Farbridge council have failed to meet budgets or acceptable performance. The detailed comparison of City of Guelph operating and capital spending budgets is telling. The 2015 report by Guelph resident Pat Fung, CA, CPA, compared Kitchener and Cambridge showing both those cities’ matching budgets were 50 per cent lower than Guelph’s.

There are fundamental reasons why this disparity of these two similar-sized city’s overhead and operating costs are substantially lower on a per capita basis. And yet Mr. Fung was mocked by a number of councillors after he left the chamber following his presentation. And that report was made before the GMHI audit revealed the complete failure of the former two administrations to force citizens to trust their judgment. Maybe that’s why for four years the GMHI board of directors dodged public scrutiny by holding its meeting in closed session.

The GMHI board operated like mushrooms, growing in the dark.

The GMHI board was chiefly composed of the former mayor as chair and four of her council supporters who controlled the operation. Two of those councillors are still on council, June Hofland and Karl Wettstein. Neither has disclosed any of the details of the GMHI collapse in which they were a party.

The overspending marches on. Mayor Cam Guthrie ran on the promise to match property tax increases with the Consumer Price Index. His promise was defeated in the first two months of his election by the Gang of Seven councillors who were supporters of the former mayor.

But he has accomplished some important achievements the greatest being exposing the failed GMHI Community Energy Initiative (CEI) founded in 2007 by the former mayor.

The CEI was the basis of the attempt by the former mayor to make Guelph energy self-sufficient. It was matched with a system of thermal underground co-generation piping to supply hot and cold water to a small number of buildings.

It was a colossal failure, as reports and an audit of GMHI’s operations were made public of the “initiative.” As a result, there’s a number of senior staff who left the city. Part of the reason was due to a closed session meeting of council December 10, 2015 that awarded $98,202 in salary increases to four top city executives.

Three of the four are now gone including former Chief Administrative Officer (CAO), Ann Pappert, Former Chief Financial Officer, Al Horsman, and former Deputy Administrative Officer (DCAO), Mark Amorosi. The fourth senior staffer receiving the secret increase was the current CAO Derrick Thomson.

We, the public did not discover the executive increases until March 31, 2016 when the Ontario government posted its Sunshine List of all public employees who were paid more than $100,000.

Operating a $500 million Corporation without a Chief Financial Officer

After some 28 months, the city did not have a designated CFO, although Trevor Lee has been recently hired as a DCAO taking over Mr. Amorosi’s responsibilities that includes the finance department.

The policy of constantly increasing property taxes approved last December included an extra two per cent tax levy on all city properties above the normal tax increase. Those funds were to be applied to infrastructure repairs and maintenance and city buildings. For the past ten years the increases have averaged 3.6 per cent. The exponential growth of these annual increases has created a cash box of money to fund the failed projects of the former mayor and her supporters.

Starting next month, the 2018 budget process will start. Already the staff is preparing its recommendations to council. The staff report will be the basis for discussion and provide for public input.

To say it will be the most important budget since 2007 is an understatement. Because it will occur in an election year, expect some goodies and a possible lower property tax. That’s what happened in 2010 and 2014. It’s called political survival and is the final opportunity by the 13 members of council to ensure their re-election. Or, at least that’s the theory.

I believe that it’s time for political courage and council should take the necessary steps to reduce the operating overhead of operating the city.

So, what are the choices?

There has been a fairly high turnover of staff since 2014. The biggest expense the city has is the cost of its 2,200 employees. It would be a good first step to freeze hiring for six months giving managers time to reconcile their operation to reduce costs. A real staff reduction goal of five per cent is achievable in all areas of operations. Cost reductions lies not just in numbers of employees but also in reform of operational procedures.

Hanging out there is the potential sale or merge of Guelph Hydro with another Local Distribution Company currently underway by the Strategic Options Committee. It is co-chaired by CAO Derrick Thomson and Guelph Hydro Chair, Jane Armstrong. Nine years ago, the former mayor attempted to persuade her colleagues to merge Guelph Hydro with utilities from Hamilton and St. Catharines. It was a bad idea then and it still is.

The public revolted and council voted the proposal down. In my opinion I do not believe anything has changed insofar as the current public rejection of a similar proposal. Again, the Mayor is in favour of selling the utility with current assets stated as $228 million. I see this proposed sale as a band-aid to fix a major financial problem.

Experience has shown that once council has money on the table it will disappear down the rabbit hole of personal agenda and schemes. It is impossible to repair the financial damages caused by previous administrations with an open cheque for selling an important and vital utility that pays an annual dividend to the city.

Reform city council by reducing the number of councillors to nine from 13

Another choice facing the electorate is reformation of council in the individual ward elections in which the progressives have controlled for almost 11 years. It’s a lousy system that requires amendments to make it more democratic and effective. By that I suggest reducing the number of councillors to nine, one from each ward and three councillors including the Mayor who are elected at large across the city. The present council will never agree to that, Instead the change should be included in the 2018 ballot and let the citizens decide.

Another choice that voters have is to prevent any future mayor or member of council to integrate Guelph Hydro with city operations. This is what happened with the integration of Guelph Hydro with GMHI. The mayor achieved control of Guelph Hydro that created her unwarranted full control of the financial disaster of GMHI. It must never happen again and only the voters can prevent it in the next civic election. Accordingly, we citizens should demand the cancelling the Community Energy Initiative and a wind-up of GMHI.

To assist citizens in making this happen, I suggest that Guelph Hydro dump the present appointed board of directors as of October 2018 and replace it with five elected Hydro commissioners who would elect their own chairperson.

Maintain an operational firewall between Guelph Hydro and city council

It is now essential that there must be a firewall between Guelph Hydro and its owner, the City of Guelph. The recent experience of GMHI that created long-term losses should be a grim reminder that control of Guelph Hydro should never be used again to perpetuate the will of any mayor or member of council.

Well folks, next year will be a game changer if citizens act to not only vote but also let their representatives know how they feel about the future of the city.

The greatest challenge is to seek out and persuade candidates who are prepared to be game changers to return truth to power and to the people.

Guelph Speaks will continue to report and comment on events as they unfold. Mind you, at times it feels lonely in the weird world of local media with the exception of the online paper, Guelph Today. It often produces real news stories and not the usual Pablum of rewritten city press releases instead of challenging or investigating the real issues that affect us all.

Good government is based on a system of checks and balances. In Guelph there is an absence of this because our elected representatives rarely challenge staff recommendations. Failure lies in all the closed-session meetings in which the public’s business is discussed in private often with the staff. It happens before every meeting of council and often during a council meeting.

In my opinion, the $98,202 payment to four senior managers authorized by council, in closed-session, December 10th 2015, was an affront to the public but also to members of staff. The fact that the citizens did not know of the action until the provincial Sunshine List was published four months later, only made the barn smell worse. It’s called lying by omission. And council still refuses to accept responsibility, or allow release of the minutes.

It’s something to recall in the next civic election.

Remember that all this occurred before the citizens knew about the $163 million GMHI fiasco and the losses of public money. In reality, this makes the 2014 Urbacon lawsuit that was part of the $23 million cost overrun of the new city hall, look like penny ante.

Just remember that both these projects were planned and executed by the former mayor and her elected supporters. Seven of those supporters are members of the current council.

Let’s not forget.

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How ten years of socialistic fascism has dominated and cost Guelph citizens millions

By Gerry Barker

February 28, 2017

Judging from the comments on the guelphspeaks blog, there is a lot of confusion about what happened to the Guelph Municipal Holdings Inc. (GMHI) and its control of Guelph Hydro and the Guelph Junction Railroad.

Remember, confusion is the tool of authority.

But what is socialistic fascism?

The fabric of political socialism is a fair description in which most Canadians believe. Fascisim means total control. And the two previous admiistrations were experts at denying the right of the public to know, using closed sessiona to discuss important public business.

Even afrer 11 years of the former federal administration led by Stephen Harper, our basic beliefs in socialism pervaded. Remember Mr. Harper steered Canada through the world’s greatest global economic disaster. Canada survived for the most part thanks largely to the Canadian Banks that were not exposed to the mortgage-backed worthless securities securities that were being flogged by the major U.S. Banks as well as many banks oversears.

But when you drill down to the municipal level, Guelph’s two Farbridge administrations have introduced and then concealed projects by adding radical energy and environmental projects that, by latest count, have cost $96 million with miniscule tangible return.

I know there is the doyens of the socialist Left, including the former mayor and her supporters, who disagree with this. There is the old expression in the financial business, “you can’t fight the tape.” But that’s what is going on right now as our elected officials, aided by senior management, are fighting the tape by trying to seek solutions to avoid what has already been revealed.

The shades of grey and black of the cover-up

A former mayor created it. Her ambitions of energy self-sufficiency and unproven theories of accomplishing her goals have led to this debacle.

It ended October 27, 2014 when she was defeated as mayor of Guelph by Cam Guthrie by more than 5,000 votes.

In early 2015, Mr. Guthrie suffered through a couple of political events as council approved the 2015 budget including a property tax increase of 3.96 per cent. It was not what he campaigned on, promising voters that he would keep property tax levels at the rate of the Consumer Price Index. The second shock was the state of the city-owned GMHI, that had been chaired by the defeated mayor.

What they learned was GMHI was a money losing, failed operation that was virtually bankrupt. The one big GMHI asset was Guelph Hydro that the former mayor had quietly incorporated in GMHI.

Protected by a closed-mouthed administration, who knew of this development?

Guthrie became chair of GMHI along with Councillors Cathy Downer and Karl Wettstein.

Wettstein, a four-year member of the GMHI board, told the October 24, 2016 council meeting that he and Guthrie had “ a negative impact” on GMHI operations.

Mayor Guthrie angrily replied: “That is the most inaccurate statement I’ve heard in the past two years.”

Wettstein knew what GMHI was up to because he was on the board. To now say that he played a role in its discovery of waste, secrecy and politics, is the height of arrogance and of covering his behind.

Then, at the same meeting, Coun. June Hofland made the following statement: “I feel very sad because I feel we have been moving backwards but we don’t have the sophistication or leadership at this time to move forward with the holding company.”

Okay June, as chairperson of Finance, you get two minutes for forgetting your fiduciary reponsibility to the citizens as their elected representative. And June, this is a game for adults.

These are comments from two members of council who were paid to serve on the GMHI board for four years. Did they sit on the board like birds on a wire? Did they not realize what their sworn responsibility was to the citizens who elected them as their representatives?

And on the February 15, 2017 they voted to sell Guelph Hydro as recommended by the Strategic Options Committee (SOC).

But wait! This 8-5 vote not to sell Guelph Hydro was not necessarily a vote not to sell Guelph Hydro, according to some councillors. Coun. Phil Allt voted to sell the utility but then hedged his decision by saying he wanted more alternatives. Some councillors who voted not to sell Guelph Hydro also said their vote depended on the SOC phase two report in midyear.

Was this motiob a vote to instruct the SOC to “explore further options?”

Huh? While it was an up and down 8-5 vote not to sell Guelph Hydro, or so we thought, it was not necessarily a vote by council to not sell Guelph Hydro.

Are you still with me?

Why are there no council representatives on the SOC? Any volunteers?

For baseball fans, this is called a politiclal squeeze play. This is when a runner is trapped between the first and second basemen and is tagged out., because there is no place to go.’’

In this case, the metaphor seems to fit.

No elected official wants to be caught between selling Guelph Hydro or not. What they do know is the people they represent are dead against selling the utility. Councillors wanting to sell Guelph Hydro are motivated by the cash the city will receive from the highest bidder, It is estimated the proceeds could be as high as $150 million.

Is this any way to run our city? Do we have to spend $600,000 to get some outsider advisor to tell us about the options? We just lost $96 million on the abortive GMHI schemes. Why are we now spending more money to placate those councillors who still believe the Community Energy Initiative was an important contribution to the city?

Remember, confusion is the tool of authority.

It remains the most epic mismanagement of the operation of this great city in its 200-year history.

Last October, the strategy of unwinding the money-losing GMHI entwined with Guelph Hydro was discussed by city council. A staff report to council recommended to “shelve, cease or park” the failed city-owned corporation.

Mayor Guthrie was thrilled when council voted 10-2 to investigate the future of GMHI using the term “rationalization.” That’s muni-speak for investigation and taking action.

That action has wrapped up GMHI by about 90 per cent. The remaining obligation to support the District Energy Nodes (pumps) is to continue supplying hot and cold water to five buildings downtown. The Hanlon Business Park Node has been written off.

It all started with the Community Energy Initiative (CEI) created by the former mayor, Karen Far bridge, in 2007. In 2011, the then mayor, supported by her majority of council, approved setting up GMHI. The first board of directors included the Mayor as chair, four members of council, June Hofland, Karl Wettstein, Todd Dennis and Lise Burcher. There were two independent members and the CEO of Guelph Hydro.

The Mayor also brought in her city Chief Administrative Officer, Ann Pappert, to be Chief Executive Officer of GMHI. She remained in that job for four years. On December10, 2015 in closed session, council awarded Pappert with a retroactive pay increase of some $26,000.The reason for this was never disclosed.

Is it possible that this incresse to the CAO, that totalled $37,501, was followed four days later when council approved a new Indemnification bylaw, It stated that the city would reimburse legal expenses of any elected or staff member if they were the subject of a legal procedure initiated against them.

Guess you may describe that timely action as locking the barn door after the horse has been stolen.

On May 16, 2016, council, acting as shareholders, was told that GMHI had lost $26.6 million and had no financial ability to pay off a loan from Guelph Hydro.

Now that loan sits of the city books as an “impaired” asset totalling $69 million in 2015 as reported by the city.

Now, supposing you are a major Canadian bank risk manager and based on the GMHI business plan, considered loaning the money to GMHI. With the state of the GMHI balance sheet showing a loss of $26.6 million, would you take the risk and loan GMHI the money?

It is safe to conclude that the former mayor, having control of Guelph Hydro, convinced the publicly-owned utility to use its credit rating to allow the loan of some $60 million.

Here are two city-owned corporations, both controlled by the former mayor as chair of GMHI and serving on the Guelph Hydro board.

This action was all done in secrecy over four years. The public was not informed nor participated in the merger of the two corporations owned by the citizens. Nor was there any information regarding the justification for obtaining the loan.

There are no underlying asssets of GMHI to justify calling the loan an “impaired” asset.

The citizens were double-duped by the whims of an eco-centric former mayor whose actions went far beyond her capability to manage fiscal responsibility. It was a monumental echo of the Urbacon affair that cost the city more than $20 million to complete the new city hall. It occurred on the former mayor’s watch.

Fortunately, her blind ambition was halted upon her defeat in 2014. By then most of the damage had been done.

In my opinion, I believe the SOC and Community Energy Initiative should be scrapped. In its place we need an independent audit of the financial impact of the Governmental and financial relationships of the three three public institutions, the Corporation of the City of Guelph, GMHI and Guelph Hydro.

Why, you may ask? Guelph currently has no Chief Financial Officer or City Solicitor. They are key players in administering life support to an administration that is bereft of qualified senior management.

If council is ready to spend $500,000 to obtain additional information on how to deal with Guelph Hydro and wrap up GMHI, the money should be spent on the audit.

Since October 2014, there is evidence that an independent audit is indicated. Here are the 11 senior staff managers who have left:

Janet Laird, Executive Directort of Environmental Services; Derek Mcaughhan, Executive Director of city Operations; Dean Wyman, General Manager of Solid Waste management; Al Horsman, Chief Financial Officer; Bruce Poole, Chief Building Inspector; Don Kudo, Deputy City Engineer; Janice Sheehy, General Manager of Finance and city Treaurer; Ann Pappert, Chief Administrative Officer; Mark Amorosi, Deputy Chief Administrative Officer of Corporate Services; Donna Jaques, City Solicitor.

If the audit reveals criminal action by the three corporations, the Ontario Attorney General should order a police investigation.

 

 

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