Open vs secret at Collingwood Council part 2

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ScamIn the previous part of this story, I provided dates of meetings and events in the terms of the previous council (on which I sat) and the current council. I documented how last term, the sale of one half the share of our electrical utility (Collus) was sold to the municipally-owned PowerStream (now Alectra) through a very well-documented, open and transparent process. I compared it to the secretive, deceptive process used by The Block on Collingwood Council, and the administration.

Last term, residents and stakeholders were engaged and informed. This term we have been ignored, avoided and lied to. Last term, there was a single in-camera meeting during the 18 month-long process, and that was to open sealed bids.

This term there have been at least 37 closed door meetings about the utility in three years to date, and perhaps more than 40. Last term, everything about the process and the public discussions was covered in the local media (even the number of proposals received was reported last term). This term, only the barest coverage exists, in part because the process has been so secretive that there has been little to report (this term even the number of bids received from the RFP has been kept secret).

Keep in mind, too that in July 11, 2016: Council voted 7-2 (The Block vs Mayor Cooper and Councillor Lloyd) to “explore” selling its share in Collus-PowerStream, even though by then they had already, secretly appointed a sole-sourced lawyer to oversee the share sale. At that meeting, Councillor Madigan disingenuously said, “I will assure you, no decisions have been made, we are just exploring our options with any interested parties.” He also said, “You can never be in control if you own 50% of anything,” then voted to sell 100% of the utility! Deputy Mayor Brian Saunderson said, “By bringing it out in the public, we’re just letting all parties know that we’re kicking the tires and seeing what’s available.” The hypocrisy and deception was – and remains – rampant among The Block.

In this post I will cover the final year for the process in both terms: 2012 compared to 2017. Since this is still ongoing, and likely will continue until the end of this term (Nov. 2018), I will report on the subsequent events in later posts. But even a to-date comparison shows clearly how much the public has been misled and deceived this term.

There were also public discussions about how to spend the money from the sale last term, and a meeting where public suggestions were invited and received. The council discussion about the sale money continued until mid-2013, when the final decision was made. I have listed those dates, below.

Alectra has recently rejected a demand from the town to buy the town’s share for $12.5 million. The Block’s plan to privatize all of it to a for-profit corporation (and next year to follow through by selling that same corporation our water and wastewater services) is in motion. Under their plan, all of the utility will be owned by an out-of-province company with no local representation, no local say, no transparency or accountability, no local control over services and rates. And all done with no public discussion or consultation.

This process has gone far beyond merely unethical. It has the stench of corruption about it. Secrecy always does. Sole-sourced lawyers and consultants were brought in at great expense to taxpayers to push a one-sided agenda. Public consultation was ignored. Requests from our own utility board and from our municipal partner to make public presentations were refused. Secret deals to pay money from taxpayer funds even if the sale doesn’t go through have been signed. The former interim CAO was retained as a “consultant” at taxpayer expense after he allegedly resigned – done at another closed-door meeting. At the very least, a judicial inquiry into the process should be held, but perhaps the OPP Rackets Squad should be called, too, to determine if public money has been legally and ethically used.

I trust you have read my many previous posts (for example, here and here and here) about this process and the ongoing deception. They detail much of this sad, secretive story. And if you have – now, read on…

Last term This Term
Jan. 23, 2012: Council made a public notice about accepting the pending sale of 50% of the Collus utility to PowerStream.

Council unanimously and publicly passed a bylaw with a recorded vote to start the process of the share sale and to enter into discussions with the OEB about the sale. The bylaw noted, “THAT the Town enter into the Share Purchase Agreement and the Unanimous Shareholders Agreement with PowerStream, once those agreements are in a form and content to the satisfaction of the Mayor.” A media release about the sale was sent out and made public online.

The meeting and the vote were covered extensively in the local media. The weighting of the responses based on the respondents’ answers (70% given to corporate culture, 30% to money) was also mentioned in the local media as the reason PowerStream was chosen.**

March 9, 2012: Lawyer Scott Stoll, working for Aird & Berlis on behalf of the town, sent a letter to the Ontario Energy Board (OEB) outlining the proposed sale of 50% of the Collus share. PowerStream posted that letter and the complete 610-page application online for public access.

The OEB examined the application during the spring and summer of 2012. The application was also shared with the NGO, Energy Probe, for comment. Energy Probe also approved the application.

On July 12, 2012, the OEB published a letter approving the transaction. In that letter, it noted, ” the Board concludes that the Proposed Transaction is not likely to have an overall adverse effect in terms of the factors identified in the Board’s objectives in section 1 of the Act. Accordingly, the Board finds that the Proposed Transaction reasonably meets the “no harm” test.”

Aug. 16, 2012: The official signing of the deal was held in public, in Collingwood. At that event, Barrie Mayor Jeff Lehman said,
“You’ve come up with a model that is truly innovative, and in every sense of the word, a true partnership. We’re in a time of great change in the power business in Ontario, and what that means is there is strength in numbers. This will give you the resources to deal with a complex and challenging environment, and the chance to look to the future with a great deal of optimism.”

In Sept. 2012, the EDA Magazine – a respected industry journal – carried an article about the partnership and its strategic goals.

Dec. 1, 2012 Council held a PUBLIC meeting to get ideas and suggestions from ratepayers and local organizations about how to spend the money.

The comments and suggests were tabled in a report from the treasurer, and presented to council and the public in Feb. 2013 as report T2013-04. Council asked for further discussion on the options and clarification of some of the financial details.

June 10, 2013: The staff report T2013-04 was again presented to council, with updates and amendments. As reported in the local media, Council decided to use a portion of the funds received to build its new recreational facilities, with the remaining portion to be used to upgrade and widen Hume Street.

In the 2013 Collus-PowerStream Annual Report, the company announced its, “First ever regular annual cash dividend of $367,000 paid to the shareholders.” CPS board chair David McFadden wrote, “The Board of Directors has benefited from the expertise which PowerStream’s nominees have brought to Board’s discussions and decisions… In addition … our company has benefited
greatly from services provided by PowerStream in such areas as conservation and demand management, training, regulatory compliance and the provision of a 24/7 control room capability.” Co-chair Brian Bentz added, “This innovative strategic partnership approach to serving customers is not only unprecedented in Ontario’s electricity distribution sector but also continues to serve as a viable alternative to the traditional merger and acquisition consolidation model for other utilities and their municipal shareholders to consider. ” CPS CEO Ed Houghton added, “…since the formation of our strategic partnership, each and every staff person at Collus-PowerStream believes we are now in a much better place and now able to better serve our customers for many years to come. We believed this and we knew this to be the case but we felt compelled to prove this. So at the end of 2013, we contracted the services of Consol Asset Group Inc. to perform a “Third Party Review” of the Strategic Partnership and in practical terms identify and quantify the benefits and successes that we have been able to experience. We are also pleased to provide to you this very comprehensive study, simply titled, “Delivering Value to the Customer”. Please read Appendix A and see how our unique partnership will allow Collus PowerStream to face the difficult challenges of the near future.”

Aug. 2016: The Ontario Energy Board released its 2015 Benchmarking Report. in it, Collus Powerstream moved from the third tier (of five) up to second. It’s a remarkable accomplishment, due to the hard work of staff and the excellent, cooperative partnership. However, The Block ignore it.

2017 began with more secret, closed door council meetings. During the winter 2016-17 it was leaked that the town was secretly negotiating with EPCOR to privatize our water and wastewater utility services, although that was allegedly an unsolicited offer by the for-profit corporation. However, the RFP was never released to prove this claim.

Without any public or staff input, town administration granted EPCOR access to its data, to its facilities and to make presentations to staff on their own behalf, with EPCOR representatives present during staff question and answer sessions, reportedly making notes when anyone raised a hostile question about the proposed takeover or job security.

There was no public discussion of the sale of the water utility, or even official report about the offer until after it had been leaked. During those presentations to staff, town administration admitted that the shared services agreement with Collus-PowerStream was dead. No public statement about this was made. Local media were not informed and did not cover that story.

Jan. 2017: After another closed-door meeting, and with no public explanation why they did so, the Block rejected the offer to purchase the town’s share by the town’s utility partner, PowerStream (Alectra). Industry insiders say the bid was $9-$11 million.

Jan. 30, 2017: The town announced it was negotiating the utility sale with EPCOR, even though no one in the administration or on The Block had publicly retracted previous statements about “kicking tires” or “exploring options.” That release also promised, “The Town plans to hold a public information session once more information is available that will provide more details of the EPCOR proposal and seek public input. ” However, no such meeting has ever been held.

Feb. 2017: At a budget meeting, it is revealed that the town has a $280,000 “contingency” for its new IT services. Those services had been taken away from the shared services provided by Collus-PowerStream, during an in camera discussion. CPS had provided IT services to the town at roughly HALF the cost to taxpayers ($145,808 in 2016). The town’s new IT budget is expected to be triple the shared services cost in 2018. The Block provided no explanation why they preferred to waste taxpayer money on an vastly more expensive service. Plus the town hired three new employees to handle the work, but still has to contract out (at additional expense) for management of OPP phone services, previously overseen by CPS staff.

By now, the combined costs to taxpayers for sole-sourced lawyers and consultants hired to push the administration’s agenda without any public discussion or input had exceeded $750,000. And the $750,000 a year savings the interim CAO promised the town would get when it separated the water utility from the electrical in 2015 mysteriously never materialized in any subsequent budget, with no explanation why it vanished. In fact, the move has cost taxpayers considerably.

Mar. 13, 2017: A letter from Collus PowerStream on the council agenda explains that the utility board decided it could not afford to pay a dividend for the 2015 year. It notes, “The board decision was based on the dividend policy of the corporation, including consideration of an appropriate capital structure and working capital levels required to continue to operate as a viable business.” This sends The Block into conniptions. Councillor Doherty expressed concerns that suggest she didn’t understand what a dividend was. She also acknowledged the utility is a 50% partnership, but then added,“It’s not a partnership when the other side holds all the cards,” suggesting a further misunderstanding that 50% means equal halves. Deputy Mayor Saunderson huffed “I think it’s appropriate to ask … why in their business plan there would be a case for not declaring a dividend,” without ever suggesting he or his Block minions had ever read or intended to read the policy quoted in the letter.

April 22, 2017: Collus-PowerStream responded to The Block’s lack of understanding about dividends, finance and business, with a letter to council explaining why a dividend was not possible. It noted, “In 2015, the Town decided to assume control of the operation of its Water Department which resulted in changes to the Shared Services Agreement between the Town and Collus PowerStream Solutions Corp., a wholly owned subsidiary of Collus PowerStream Corp. The result was that the annual revenue to the Corporation was reduced from $760,000 to $260,000 for the 2016 fiscal year. The Corporation had to therefore manage in 2016 with an income reduction of $500,000 (and no corresponding cost reduction) which was approximately 50 percent of the Corporation’s 2015 annual net income and amounted to more than the total dividend paid in 2015 with respect to fiscal 2014.” Regardless, none of The Block appeared to understand the response.

May 29: 2017: Although the town advertised for applications to a seat on the town’s half of the Collus-PowerStream board, The Block rejected all public applicants and appointed on of their own members – Councillor Doherty – to the seat. At no point did they explain why they rejected actually qualified applicants and chose instead to appoint someone unfamiliar with the concept of a dividend.

Aug. 2017: The town issues a media release on its website stating, “In order to ensure the process carries on uninterrupted, Council voted to direct the municipality’s legal counsel at Borden Ladner Gervais LLP, and CAO John Brown to continue negotiations with EPCOR and prepare the required draft agreements… The public will continue to be advised of any further updates when available, subject to the limits of the existing Unanimous Shareholders Agreement.” This broke the January promise to hold a public meeting. However, there is nothing in the shareholders’ agreement that precludes council from either asking for public comment or explaining why it wants to sell a successful operation.

Oct 18, 2017: CPS makes a mandatory public presentation about its cost of service application. All members of council are invited. Five of The Block choose not to attend. Coun. Doherty – the recent appointee to the board – arrives, doesn’t greet any of the staff, eats the free lunch, then leaves without a word of thanks or welcome. No word on whether the OEB is still investigating the town over its board appointments.

Oct. 23, 2017: At council, several members of The Block, including Coun. Tim Fryer (former CFO of Collus) expressed their “disappointment” over the town’s “investment” into CPS, despite the fact the town didn’t invest anything in the utility (PowerStream did). Deputy Mayor Saunderson said, “the status quo won’t work,” and complained the rate of return on the town’s investment wasn’t enough. However, he and his fellow Blockheads agreed to demand $12.5 million from Alectra for the town’s share. In doing so, they inadvertently recognized that the value of the share had risen by 56% in the past four years. None of The Block or the administration have publicly stated why such a stellar increase in value was a “disappointment.”

By Oct. 30, Council had held at least 16 (and possibly 17) closed-door meetings about our publicly-owned utility out of 27 council meetings this year, but never once explained to taxpayers why they wanted to sell it.

Nov. 9, 2017: Alectra refuses the town’s demand to buy the town’s share of Collus-PowerStream for $12.5 million.

It was a good deal in 2012: well-crafted, legal, open, transparent, good for the town, overseen by the top consultants, lawyers and experts in the industry and open to public discussion and comment along every step. It brought us a terrific community partner, who has lived up to every commitment and promise made during the process. It paid for new recreational facilities and much of the Hume Street revitalization. Council should be celebrating the partnership. This term we have had only lies, deception, secrecy and betrayal of public trust. That is the legacy of this council and this administration.

I say it again: at the very least, a judicial inquiry into the process should be held, but perhaps the OPP Rackets Squad should be called, too, to determine if public money has been legally and ethically used. This stinks of corruption and backroom deals. We need an outside authority to look into it.

Collingwood deserves better.

~~~~~

The 2013 decision how to spend the money was not, of course, part of the sale process. I wrote about this myself back in June, 2013. Back then, the CFO for COLLUS/PowerStream Corporation (now Coun. Tim Fryer) provided the following estimates of the money:

  • Promissory Note $1,710,170
  • Cash Dividend $11,598,389
  • Funds held in Escrow $1,000,000
  • Future Dividend $150,000
  • Total $14,458,559
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