A few answers

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AnswersI was surprised that only ten people stood at the lectern to speak in the Judicial Inquiry’s first public meeting, last Monday.  I had expected that at least Brian Saunderson or one of his minions would have the courage to stand up in public to explain why they wanted to spend so many millions of your tax dollars pursuing their private vendettas. Explain why they launched an inquiry a few weeks before the municipal elections opened, instead of three and a half years ago, when they took office. Explain why they haven’t been able to stop looking at the past since they were elected, and start looking to Collingwood’s present – and plan for our future.

But of course that would take a spine.

However, some good, salient comments were made, in particular by John Worts, Kevin Lloyd, David O’Connor, Peter Dunbar and Irene Matwijec. And, I hope, maybe a few were made by me, too.

However, some of the other speakers asked surprising questions. Surprising because most have been answered many times in the past in local media and on my blog. In particular in my admittedly lengthy timeline of events.

I suspect many of these questioning speakers are rather new to the community, and not fully aware of the lengthy history of these events – many of which are already more than seven years old. I thought I might try to answer at least some of their questions here, so in future they have the background. I am paraphrasing their questions below.

1. How was the price of the share in Collus established?

A. World-renowned consulting firm KPMG was retained by the Collus board in Feb. 2011 to establish the value of our electrical utility as a sellable commodity, examine the options for its future, explore opportunities in the then-current political climate, and return to the board with a report that spring.

Their draft report was titled Calculation of Value, and presented to the Collus board on May 20, 2011. It determined the fair market value of all the common shares of Collus Power (on page 2 of the report) as at December 31, 2010 as:

…we have calculated the fair market value of all the issued and outstanding Shares of Collus Power Corp., as at December 31, 2010, to be in the range of $14.1 million to $16.3 million (i.e. with a midpoint value of $15.2 million).

Half of that (the RFP was for “up to” 50%) would be somewhat less than $8 million, which is what the town received from PowerStream. The balance of the funds paid to the town came from the utility’s recapitalization and from the $1.7 million promissory note held by the town, for a total of approx. $14 million.

The valuation report was marked as a draft because, as John Rockx of KPMG noted in a 2015 email,

The valuation report was left in draft format since the former controller, Tim Fryer, did not provide us with responses to a few questions in respect of the report content (see blanks on page 5 of the report) or provide us with the final December 31, 2010 financial statements of Collus Power…

Fryer, as you know, is now a councillor and running for re-election.

2. Who was responsible for the sale?

A. No one. No one person, that is. The Collus board had KPMG do the evaluation in spring, 2011. And in May, 2011 the board came to council to discuss Ontario’s changing energy sector and the likelihood of legislated amalgamations after the next provincial election. They asked for and received council’s permission to further explore options – including selling – and to report back with their ideas.

The board came back to council in June, 2011 and proposed looking for a strategic partnership. Council agreed with their choice and formed a nine-person Strategic Planning Team to guide the municipality through an open process. That led to an RFP being sent out to a selection of likely buyers (existing energy utilities) across the province. Four bids came back.

In Dec. 2011, the RFPs were opened in camera by council and PowerStream was chosen as the winner of the bid. The choice was announced publicly and confirmed by council vote in Jan. 2012. The offer was then sent to the Ontario Energy Board for approval.

Including all the council members (PowerStream was owned by three other municipalities), treasurers, lawyers, auditors, consultants, utility and town staff, board members, and staff from both the OEB and Energy Probe involved in the transaction, I estimate close to 100 people oversaw, commented on or approved the sale.

3. What was the impetus to sell it off?

A. Prior to the fall, 2011 provincial election, all three main political party made pronouncements on reducing the number of LDCs across the province. They threatened forced (legislated) amalgamation if they could not convince utilities to merge or sell on their own. The Collus board decided (and council agreed) it would be better to do two things rather than wait for the laws to force things:

  1. Act now while it was still a seller’s market and the value might be higher, and
  2. Look for a strategic partnership rather than an outright sale, so Collingwood still retained a say in the rates and service delivery.

In Feb. 2012, the Ontario government released the “Drummond Report” (The Commission on the Reform of Ontario’s Public Services). His recommendation (12-13) was to “Consolidate Ontario’s 80 local distribution companies (LDCs) along regional lines to create economies of scale.”

In the report titled Renewing Ontario’s Electricity Distribution Sector: Putting the Consumer First (released Dec. 2012), the province’s Distribution Sector Review Panel recommended reducing the 73 LDCs in Ontario into 8 to 12 regional distributors within two years, and that the remaining 6 to 10 regional distributors serving southern Ontario should have at least 400,000 customers each. So Collingwood’s decision was ahead of the curve.

Council of the day didn’t “sell it off” – we collectively agreed that selling the entire utility was an irrevocably foolish move. Unlike, of course, the current council, which privatized our utility after almost 50 closed-door meetings because not one of them could see the benefit in retaining local control, in keeping local jobs or ensuring electricity rates don’t skyrocket for consumers.

4. Why didn’t the town get more money?

A. The utility only had about 15,300 customers at the time of the sale. The value of that business, plus the assets (it leases, not owns, its building) was determined through a study by KPMG. See number 1, above. And the decision had been made to sell up to 50%, not the whole utility.

Apparently, all of the bids were reasonably close to the winning bid in terms of cash offered. PowerStream was ranked best, however, in the points awarded for corporate culture than others.

UPDATE: It took a LOT of digging to find out exactly how much money the town will get for the ENTIRE utility (I apologize for some previously incorrect numbers). The town’s website is almost as dark and mysterious about the financial works of this deal as Saunderson and his cabal have been. Little wonder, since they’ve done it all in secret. However, according to the OEB’s website, the town will get $25 million for the whole utility. Of that, the town will pay Alectra $13.1 million, leaving $11.9 million for the town.

Given that the original valuation for the utility was approx. $16 million, we’re losing about $4 million in the deal. Sure it seems like we’re getting a lot of money, and I grant the value of the utility grew in the six years since the share sale, but that was because of a combination of factors: an increase in residential customers (roughly 2,000 more) and the benefits of the strategic partnership (increased efficiencies, lowered operating costs). And a lot of the money received will go towards paying the costs of the judicial inquiry, which could cost $6 million or more. So the actual amount we put in the reserves for the entire utility will be less than what we got for half of it in 2012.

Since the town won’t be receiving its dividend from the utility, we also lose $180,000-$200,000 a year in revenue which you, dear taxpaying reader, will have to pay instead. And of course we lose all local control over the rates and services, since all major decisions for the utility will be made in Edmonton, not Collingwood. So your electricity rates will rise on top of your tax hikes.

UPDATE (Aug. 31): The deal was approved. EPCOR also agreed to assume an $8 million debt Collus took on (the recapitalization, of which more than $4 million was paid to the town…).  “The press release further states the town will receive between $12.5 million and $13 million from the sale of its remaining 50 per cent Collus shares. ” Which is still less than it received in 2012(more than $14 million).

And then this council also sold our airport to a private company for $2 million less than the appraised value.

Between these two deal, I suggest the town has lost between $5 million and $7 million from what the actual appraisals were. That speaks to our council’s lack of financial acuity more than anything else.

5. What was in the OPP document and who got it?

A. The OPP document obtained and made public by the CBC (not by a local blogger as was suggested) is an affidavit filed in 2014. It’s more properly called an ITO – Information To Obtain. As lawyer David O’Connor explained at the inquiry, an affidavit is presented to a judge or justice of the peace for a search warrant. Therefore it contains allegations necessary to convince a judge or justice to issue the warrant, but not evidence of any guilt.

As explained on this page on “Canadian Criminal Procedure and Practice/Search and Seizure/Warrant Searches,” search warrants must provide both reasonable and probable grounds:

The standard of reasonable grounds to believe is greater than mere suspicion but less than on a balance of probabilities when the totality of the circumstances are considered. 

As Mr. O’Connor further explained, all of this took place four years ago. After the search warrant(s) were executed and the evidence examined, no one was charged with anything. In fact at least until the CBC released that document, none of the people who were the focus of the ITO had even been interviewed by the police, let alone charged.

From that, one can reasonably assume there was no evidence of criminal activity. Maybe it’s time to stop looking backwards and move on?

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