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Why did Council approve Guelph Hydro merging with Alectra Utilities not knowing the final terms and conditions of the deal?

By Gerry Barker

January 2, 2018

Following a marathon meeting December 10, council approved by a 10 to 3 majority, to merge Guelph Hydro with Alectra Utilities.

It was the culmination of a $2.36 million city-financed campaign that was conducted chiefly in closed-sessions by the Strategies and Options Committee (SOC) and city council. Our council approved formation of the SOC 14 months ago. It did so without the active participation of any elected members of council.

Council’s decision remains the greatest con job of a proposal in the history of Guelph. The details to this day are secret and kept far from the eyes of the 55,000 Guelph Hydro customers and owners of the utility.

How did this happen?

The night of approving the merger, there were 22 delegates appearing before council. By a three to one majority, they opposed the merger or at least request deferring the decision to allow more time for the citizens to absorb the details. Also, there was a petition containing 76 names that flatly opposed the merger.

The majority of council robotically ignored these citizens.

Seven delegates representing Alectra’s interests sang the praises of a Guelph Hydro merger with Alectra. Only one of the seven, Mark Goldberg, a member of the SOC actually lives in Guelph. The seven came from Toronto, Mississauga Brampton and Barrie to praise Alectra and reassure council that this was a good marriage.

Or is it?

From at least two sources, why didn’t council not have the final agreement details, and not declare that important information before approving the merger after midnight Dec. 10?

We attended that meeting and the lawyer representing Aird and Berlis, the Toronto-based legal firm, carefully outlined the status of the negotiations between the city and Alectra, stating they were yet to be finalized.

Add the voice of Pankaj Sardana, Chief Executive Officer of Guelph Hydro, who admitted just a few days before the meeting that negotiations were not completed and would not be shared. That is, until Guelph Hydro, Guelph Municipal Holdings Inc. (GMHI) and Alectra approves the merger and documents are released to the media and the 55,000 Guelph Hydro owners, the customers.

Here’s why not to hold your breath on that happening

The question is: Why did council pass a motion to approve the merger when the final legal documents had not been negotiated, signed and sealed?

Did those ten councillors understand the final merger details when they voted to approve it? But then, why would they, negotiations were still being conducted in closed- sessions between the parties.

Why is that a surprise?

This administration conducts too much of the public’s interest behind closed doors. Since Cam Guthrie was elected mayor, there has been little attempt to open council’s business. Indeed, there has been little attempt to fix the secret workings of the public business, a hangover of the previous administration.

Once those doors are closed, the public is shut out of the proceedings. To protect itself from public disclosure, council has a hired closed session investigator at their beck and call to diffuse any right of the public to know and understand what’s going on behind those closed doors.

We know from personal experience how the closed-session investigator from London known as Amberlea Gravel functions.

I requested the minutes of the Dec. 10, 2015 closed-session council meeting, in which three months later we discovered $98,292 in base salary increases were awarded to the top four senior managers. I received my answer four months later when my request was denied.

Not allowing need-to-know our business is an inconvenience

This is nothing but a repeat of the policies of the Guthrie administration. It’s just too inconvenient to let the public know how and why council conducts our business.

In itself, it is an affront and disregard of our Canadian Democratic rights to participate in public civic affairs without the threat of retaliation.

Personally, I have experienced how our council condones retaliation against a writer, a resident and critic who legally participates and comments on public affairs for the past ten years.

Back to the business at hand, betrayal of the public trust

It really didn’t matter because councillors were well aware of the secret meetings. Council confirmed it by appointing an outside lawyer who said the merger terms and condition were still to be negotiated. Mr. Sardana knew the deal was not finalized and that’s why he said the negotiation information would not be shared.

We were informed that Aird Berlis had acted for Alectra previously in an unrelated matter.

Did council base its decision on the 245-page of manufactured dreck purported to be the final details of the agreement? This document was released to the public but was only available online December 1. Just 12 days before the Dec. 10 meeting.

This was a carefully orchestrated operation to deny the public its rights to access the details that council passed with only three members opposed, James Gordon, Bob Bell and Phil Allt. I do not often share the views of Mr. Gordon or Mr. Allt but in this case, they had the guts to do the right thing and opposed the deal.

On November 24, GS sent each councillor 46 questions regarding the merger. We only received one reply from the Mayor five days before the Dec. 10 meeting. To his credit, the Mayor gave me a previous heads-up that he needed more time to consult and research his answers.

But five days before D-Day?

The questionnaire was in response to the “energizingtomorrow.ca” website that stated, “Ask Us Anything.”

All the GS questions were based on the merger and the details as far as we were aware. As Mayor, Mr. Guthrie I would assume was speaking for all members of his council. Three of them did not vote for the merger

The most interesting answer to one of the questions asked wawhy council was giving away Guelph Hydro. He replied: “We are not giving away anything.”

Our differences lie in one simple fact: If Guelph Hydro is valued at $300 million how does that justify a $1.5 million “dividend” from Alectra a year? Further the city share is based on only receiving 60 per cent of Alectra Inc. profits. So to get control of Guelph Hydro, Alectra threw in some sweeteners.

You are the judge, how sweet are they?

They promised to establish a Green Power Technology Centre in the Guelph Hydro headquarters building that will employee ten people. Alectra also promised to make Guelph the “Hub” of its expansion into South Western Ontario. And don’t forget the $18.5 million special dividend from Guelph Hydro to the city. That’s persuading council using our money.

The downside is that an estimated 60 Guelph Hydro employees are to lose their jobs through termination, relocating or retiring. It didn’t seem to matter to the ten councillors who approved the merger.

Adding up the Guelph Hydro’s annual estimated profit after expenses, in 2016, the surplus was $7, million: in 2017 it is estimated the surplus will be $7 million; in 2018, prior to closing there will be additional net earnings of Guelph Hydro. That will possibly total $21 million over the three years.

On closing of the merger, that notorious $18.5 million special gift from Hydro to the city kicks in leaving a balance of $2.5 million remaining in the kitty.

Hold the phone! Guelph Hydro already had a cash reserve of $22 million on its 2016 books. It’s all so deliciously transparent. First, the $2.36 million the city has spent on driving this crazy deal to fruition is neatly covered by the annual $3 million dividend Guelph Hydro delivers to the city three-year surplus of $21 million.

So it would appear that city council is not going to receive a $3 million divudend when it mergers with Alectra but just $1.5 million.

Is this a great deal or what?

Still with me?

Lying in the entrails of the great give away by city council is the $22 million stash of cash Hydro had before any these merger talks ever began.

What happens to that money if this deal ever closes?

Another unanswered question. Is it remotely possible that not only Alectra will wind up with the city’s only viable, profitable subsidiary worth an estimated $300 million but a bonus of $22 million in cash? As 131,000 citizens are kept outside the decision process, the council approves the deal. We are left without clothes shivering in the dark.

Bad metaphor? Unfortunately true

In view of the facts, how can Coun. Mike Salisbury who moved the approval motion, and seconded by Coun. June Hofland, have access to the final terms and conditions that were yet to be completed? That goes for the other eight councillors who voted to approve something that they had little knowledge of, the final merger deal and documents.

And why were Councillors June Hofland and Karl Wettstein even involved in this decision? They were on the failed GMHI board of directors for four years, drawing a fee for serving and never revealing what was happening as the operation lost $63 million in shareholder value.

That was our divestment that was swallowed up by incompetence.

When does council deliver the details of this merger?

Accordingly, as one of the 55,000 Hydro owners, as a shareholder, I would be interested in knowing the final details of the merger agreements version if and when completed.

In my opinion, the council motion Dec 10 was illegal because the final details of the terms and conditions of the merger were not known at the time. Therefore, council cannot give away our $300 million Guelph Hydro without fully disclosing the final details to the public. For a change, hold an open debate on the merits and benefits as agreed to by both parties.

The Ontario Energy Board must still approve the merger. It is incumbent on the two parties that proof of public acceptance of the merge must accompany the application. This is not expected before the fall of 2018.

Will that be ham and cheese or smoked meat on rye?

There was little council enthusiasm listening to the delegates opposing the motion. This turkey was already baked in the oven. The only reason to hold a one-hour closed- session meeting before the public meeting was to eat supper and decide who would move the motion and who would support it or not.

Wilson Street Parking garage financing

Oh! In case you are wondering what the city will do with $18.5 million “special dividend,” here is the latest info: The Wilson Street $20 million five-storey parking garage across the street from city hall. Guess who benefits from that?

If that’s the case, the $18.5 million is our money only held by Guelph Hydro. So at least it may be used to create a badly needed downtown parking garage. The only problem is those having monthly parking passes will occupy the majority of available spaces.

And there are so many capital projects begging for funding.

Yep! It makes sense to give away Guelph Hydro to solve that problem.

Some Short takes

Notice the Mayor was a part owner of the Guelph Royals baseball team to save it from folding. He had to vacate his position due to a conflict of interest. Guess he got a look at the books. What? Council has a baseball team?

The changes are a’comin

There will be a number of changes coming in this year’s civic election. The provincial government has passed rules governing corporate and union donations. There remains a proposal to have a new nomination period of three months starting in May. The 445 civic councils in Ontario have Until March 31 to pass new bylaws to change the nomination dates. The last thing Premier Wynne needs is to rile up the municipalities. It’s the best we can hope for.

Mayor announces he is running in 2018

Stating: “I really enjoy being Mayor and I love being Mayor.” He then produced a list of accomplishments that were not specific including the financial details.

We do not agree with the mayor that 2018 will be the “silly season.” There will be many surprises and issues demanding the truth.

Accordingly, watch for a special “Truth Squad” report posting by GS based on the Mayor’s list of accomplishments … One Pinocchio, Two Pinocchio, Three Pinocchio!

Guelph Speaks wishes all a Happy New Year, one that is prosperous, healthy and fulfilling.


Filed under Between the Lines