Council’s financial follies part 1

This is the first in what I expect will be a long series of posts about the financial follies and shenanigans of our council.

Another fine messOur council begins its term not with a bang but a groan and the shaking of heads. To quote Oliver Hardy, “Well, here’s another fine mess you’ve gotten us into.” I’m sure it won’t be the last time I get to say that to this council.

To be fair, the debacle is not the responsibility of everyone at the table – that falls squarely on the shoulders of the four re-elected incumbents. However, since most of the newcomers hitched their horses to the Saunderson Campaign Bandwagon, the continuing debacle is an albatross they too will have to wear this term.

First up, a story in Collingwood Today about the Saunderson Vindictive Judicial inquiry (SVJI) that suggests the SVJI’s skyrocketing costs are just beginning. It notes (sic):

Public hearings will take place from April 15 to 18, April 22 to 25, April 29 to May 3, May 13-17 and May 21-24. The policy phase hearings are expected to take place on June 10, 11, and 1.

(I assume that last number was truncated and should read 12 – and BTW, the story wasn’t even covered in The Connection. Surprise.)*

The SVJI was initially scheduled to begin its hearings last November, but they are running late. Five months late, in fact, and then 25 days of hearings are scheduled from mid-April into mid-June. After that the inquirers have to judge the input, come up with a conclusion, write a report and present it. Likely they will not conclude until mid to late fall. During this time the cash register continues to sing its chirpy song.

Meanwhile the number of documents continues to pile up (more than 400,000 already and more still to come… as I wrote about earlier). So many that the SVJI has had to hire two more lawyers to handle the paperwork. Ka-ching!

Last April, I predicted the SVJI would cost taxpayers at least $6 million, based on comparisons between the Mississauga judicial inquiry and the SVJI. But it now looks like that was a conservative estimate. Its original cost estimate was $1-$2 million, too. Here’s what I wrote back then:

The Mississauga inquiry interviewed nearly 100 people and collected about 35,000 documents and held hearings where 35 people testified over a period of 38 days. And cost the city $6.2 million.

Money grows on trees in CollingwoodThe SVJI has already interviewed more than 60 people (as of early November) and hasn’t even started the public inquiry portion. There are more than TEN TIMES the number of documents involved (so many that the earlier deadline to submit documents had to be extended another six weeks). This suggests to me the SVJI is going to cost us a lot more than we were led to believe. Millions more.

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Deception, The Block, and EPCOR

Spy stuffThe Ontario Energy Board (OEB) is currently conducting hearings about the proposed sale of our publicly-owned electrical utility, Collus, to the for-profit, out-of-province corporation, EPCOR. Several documents have already been entered into the record and you can read them here.

Most of them are fairly technical and steeped in opaque legalese, but download and read this one: EPCOR_IRR_SEC_EPCOR Collingwood MAADs_20180503.pdf. There’s some interesting content here and I think it’s stuff that The Block, the town and maybe even EPCOR don’t want you – the public – to know about. After all, The Block and town administration conducted this whole process in secret for three years – why would they want to be open about it now?

To start, turn to page 3. You’ll find a report on the profitability of Collus-PowerStream and its return on equity (ROE). Remember when we were assured by the Blockheads that it was a bad deal, it wasn’t successful, that the “status quo couldn’t continue”? Well look at the REAL numbers:

Please provide the achieved ROE (Return on Equity), calculated on a regulatory basis, for each year from 2013-2017, and file any forecasts of the Applicants that include ROE forecasts for 2018 and beyond.

Year/ Deemed Profitability/ROE:
2012: 8.01% /0.10%
2013: 8.98% /8.40%
2014: 8.98% /11.21%
2015: 8.98% /10.86%
2016: 8.98% /10.03%

Every year they operated as Collus-PowerStream, the utility had an ROE GREATER than 8% and almost 9% for most of those years. The ROE (which was understandably low the first year because it was partial) grew to more than 11% per year! That’s almost as high as the OEB will legally allow a utility’s profits to grow.

Here is what the actual OEB Scorecard for Collus PowerStream says:

Profitability: Regulatory Return on Equity – Deemed (included in rates)
Return on equity (ROE) measures the rate of return on shareholder equity. ROE demonstrates an organization’s profitability or how well a company uses its investments to generate earnings growth. Collus PowerStream’s current distribution rates were approved by the OEB and include an expected (deemed) regulatory return on equity of 8.98%. The OEB allows a distributor to earn within +/- 3% of the expected return on equity. If a distributor performs outside of this range, it may trigger a regulatory review of the distributor’s financial structure by the OEB.
Profitability: Regulatory Return on Equity – Achieved
Collus PowerStream achieved a ROE of 10.03% in 2016, which is within the 8.98% +/-3% range allowed by the OEB (see above paragraph). This is indicative of a healthy financial organization. This trend is expected to continue into the foreseeable future. The 0.10% result for 2012 was an anomaly year with a low net income, which was the result of the additional expenses incurred during the sale of 50% of the company’s shares to PowerStream.

Not profitable? Not successful? Even the sale application document says otherwise:

The 2017 deemed ROE is 8.98% and the 2017 achieved ROE, as filed with the Board in Collus PowerStream Corp.’s April 30, 2018 RRR filing, is 11.65% and remains subject to the Board’s review. The ROE forecast for 2018 and beyond approximates the OEB’s most recently approved ROE.

Would that my sad little RRSP returned half that percentage annually! The financial performance was raised again and again by The Block as a reason for the sale yet here it shows the utility was flourishing. Someone lied to the public about the financial situation. The judicial inquiry has to look into who it was.
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EPCOR and The Block’s Big Lie

The Big LieFor all their evils and their wrongs, the Soviets did some things very well: propaganda and disinformation. As one writer commented in the Spectator, “Communist ideology dismissed the idea of truth as a bourgeois construct. What mattered was power; and you baptised as truth those doctrines which provided it.” Stalin defined truth as what he said it was.

The Soviets were such masters at it from an early stage that George Orwell declared that history stopped in 1936; after that there was only propaganda. So good were they at it that their methods and techniques were copied by other states and are still in play in the West, today. And they’re not just in what comes from the Trump administration: both are in play right here in Collingwood, alive and active this very week.

Yes, Collingwood has been subject to the sort of propaganda and deception that has its historic roots in Soviet propaganda.

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The secret costs of the EPCOR deal

Scheming BlockheadsWhether or not The Block sell our share of our public electrical utility to the for-profit, Edmonton-based EPCOR, it will still cost taxpayers millions. And I don’t mean just the rising costs of sole-sourced lawyers and buddy consultants the administration has hired (well over $1 million already, and the bills keep coming in). I’m talking about the hidden costs The Block won’t divulge because they don’t want taxpayers to realize how really bad a deal they’ve made with this devil.

And it all happens behind closed doors, Monday, Oct. 23, 2017. No public input allowed on the sale of our own utility. The Block intend to privatize our utility without informing the public of the costs or the consequences.

My industry sources tell me there are many costs associated with the sale that will be built into the selling price, but paid back to the buyer after the sale. In other words: it’s a shell game. We taxpayers will pay the buyer’s costs and their fees, but these will be hidden in the contract, which will be kept secret, so you won’t know what they really are. Sneaky and underhanded – The Block’s way.

Let’s start with the transfer tax: the Ministry of Finance applies a 22% tax to sales made to out-of-province buyers. So if the sale of the town’s share is $8 million as it was in 2012, the MoF will demand a $1.76 million transfer fee. But the buyer will probably offer more, an inflated value of, say, $10 or even $12 million, and the town will repay the buyer the tax from the total. So the town doesn’t actually get the extra cash: that pays the buyer’s taxes. Did I mention the shell game?

Then there’s the “break fee” or termination fee we will pay even if the deal falls through. This happened to Innisfil when its council decided not to sell InnPower to EPCOR (as I recall from media stories, the amount was $1.2 million, but I may be incorrect). Wikipedia tells us this is:

… a penalty set in takeover agreements, to be paid if the target backs out of a deal (usually because it has decided instead to accept a more attractive offer). The breakup fee is ostensibly to compensate the original acquirer for the cost of the time and resources expended in negotiating the original agreement. A breakup fee also serves to inhibit competing bids, since such bids would have to cover the cost of the breakup fee as well.

Which my industry sources tell me has already been agreed upon – in secret of course – by The Block and the town administration. We’ll pay it even if we decide not to sell. How much will it cost us? It really depends on what sort of slimy deal The Block cut, but again my industry sources suggest it will be between 8% and 13% of the offer.

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The Block’s worst abuse of power yet

Abuse of powerI warned you. I warned you The Block would blame others for their own evil acts, that they would scheme and connive to sell your assets behind closed doors, and they would find a way to keep the much-disliked interim CAO on, no matter what the cost to taxpayers. I warned you they would lie, scheme in secret, and behave unethically in order to get their own way. 

And I was right. They did it all, Monday night, behind closed doors.

This week, the town issued a media release that can only be described as the most flagrantly disingenuous statement this municipality has ever made. It says:

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 Block intend to keep paying the sole-sourced lawyer (who, I understand, has already billed the town around $500,000) and its unpopular interim CAO (whose salary is higher than that of the premier of Ontario!) in order to continue the vendetta against our publicly-owned utility, Collus-PowerStream.

These are the same people who not long ago promised they were only “kicking tires” and would get public input before they made any decisions. They lied.

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Betrayal by the Block, again

Betrayal of the public trustMonday night, The Block will engage in their favourite political activity: betraying the public trust. In fact, it’s the only political activity they’ve engaged in this term, in which the public has been concerned. Everything else they’ve done has been to further their own personal agendas or entitlement. But Monday, they’re doing it up in style. And, of course, in secret.

At the council meeting, Monday, there is what promises to be a lengthy in-camera session:

Items for Discussion: a) Hydro Share Sale; b) Committee/Board Applications; c) Sale of 70 Huron Street property; d) Proposed Land Acquisition; e) Airport Lands f) BMA Report

During this closed-door session, council will get a presentation from its sole-sourced, $700-an-hour lawyer, and from the for-profit, out-of-province corporation EPCOR, with which the town is negotiating to buy the public’s share of our electrical utility. And I expect The Block will vote to sell the utility to EPCOR, knowing full well it will end any pretense of accountability with the utility and will result in skyrocketing electrical bills in the very near future. EPCOR will have a clause in its contract GUARANTEEING them a profit. And if you conserve electricity as you should, and the usage goes down, they will be able to raise rates to get their money and the town will be forced to pay the difference (via your tax dollars). All done behind closed doors.

The Block have never discussed in public why they want to sell the utility, what the town will get for it, what the benefits are to the residents, why they chose EPCOR instead of our partner PowerStream, or whether local people will still continue to have jobs after the sale. Nor do we know whether any of them, any staff members, or any of the sole-sourced lawyers and consultants involved will get a commission or any other kickback from the sale. The Block have never once reached out to the council of the 4,000-plus Collus-PowerStream customers outside Collingwood, to even inform them of the sale.

We, the public, deserve to know. It’s OUR utility. But The Block don’t give a damn about what we think. They’ve proven that over and over and over.

Compare Collingwood’s secretive, highly deceptive and unethical process with that of Wasaga Beach. The Beach council recently decided to investigate selling its electrical utility and went through a lengthy process of open public meetings, online surveys, public engagement and presentations. But then, Wasaga Beach has an ethical council – that’s the difference. Not once in the past two-and-a-half years has this council done any of that. And the local media, in collusion with The Block, have remained silent on this abuse of power.
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