The secrecy and deception behind Collingwood’s utility sale

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Shady dealsMeetings held behind closed doors late into the night. Personal vendettas. Kickbacks. Conspiracy theories. Scams and phony reports. Backroom deals. Unethical politicians conniving. Dubious legality. Shady characters pulling strings from the shadows. Scheming. Minions acting like thugs. Cowardice. Hidden contracts. Lies and deception. A deal they can’t refuse. A financial shell game. The betrayal of public trust.

If that sounds like the ingredients for a crime novel, to me it reads like Collingwood Council’s secretive, unethical “process” to sell our public utilities. The public was betrayed by The Block. The process has a stench of corruption about it. And don’t say I didn’t warn you.

Monday night, The Block voted to sell our electrical utility; only the remaining two ethical and honourable members of council – Mayor Cooper and Councillor Lloyd – voted against the deal. And what a “deal” it is – crafted in secret, without any public consultation or input, and giving away the keys to the candy store to a for-profit buyer. It screws Collingwood. What little we know about it only illuminates the devious scheming that went on behind it. For example:

Other terms of the sale include a 25-year lease of the Collus PowerStream property and operations centre from the Town, job and location guarantees for Collus PowerStream employees, and a contribution of $150,000 towards the Waterfront Master Plan, one of the community’s biggest priorities, as identified in the Community Based Strategic Plan.

Since when does a utility sale become contingent on a “contribution” for an unrelated project like the waterfront? When you buy a car, do you have to “contribute” to the dealership’s coffee fund? Or to the salesman’s kid’s little league uniforms? Sure sounds like blackmail to me. And who signs a 25-year lease for anything, let alone an old, outdated building without any commitment by the owner to upgrade or maintain it?

And will the OEB permit a utility sale to be contingent on a 25-year lease? Or a kickback for the waterfront? My industry sources suggest not.

Council “offered” the share sale to its partner, Alectra simply because the shareholders’ agreement (USA) required it. Alectra already offered to buy it earlier this year (outside the RFP process; the amount undisclosed, but industry contacts suggest the offer was likely $10-11 million) but The Block turned them down. Without saying why, of course. But we know they were already in bed with EPCOR.

The latest price demanded by the town is highly inflated – it includes unrelated items to bump up the asking price by $2-3 million (or more) above the actual value. Why? Because The Block want the municipally-owned, Ontario-based Alectra to refuse so the town can buy it back and then sell the whole thing to the out-of-province, for-profit EPCOR:

If Alectra opts to buy the Town’s shares at the same price as EPCOR has offered, Alectra will become the sole owner of the utility. If Alectra opts to sell its shares, EPCOR will become the sole owner of the utility.

See? It’s already decided. EPCOR wins. The deal was made behind closed doors.

That’s a direct quote from the town’s own media release. This whole deal was connived in secret to sell it to EPCOR, without any public discussion, much less consultation. It’s very dirty; from my viewpoint, it’s negotiating in bad faith with our existing partner. If this isn’t corruption, then the definition has been changed since I was in office.

EPCOR will get $1 million even if Alectra buys it. That’s $1 million of YOUR money paid out as a kickback. Plus the town has agreed to pay a portion of EPCOR’s legal fees. Why? As the Connection reported, that was one of those sleazy backroom deals The Block cut:

If Alectra chooses to buy the town’s shares, $1 million would be transferred to EPCOR for their time during the process. Rodger said the town would pay a portion of the legal fees for the deal, as would the purchaser.

Imagine if, say, you wanted to sell your house. As part of the deal, you agreed to pay the buyer a commission just for making an offer, AND to pay his/her legal bills, too. Crazy? Not to The Block. That’s how bad this deal is for residents of Collingwood. But it’s just great for EPCOR since they can’t lose.

I warned you last week there were hidden costs in the deal. And that’s been proven true.

But it gets worse. The former, much-despised interim CAO was at the in camera meeting, Monday, “advising” (for a fee) The Block on what to do. He is still being paid by your tax dollars – despite his “resignation” – solely to make sure his seven puppets vote as they were told. And they did: all seven of them voted to sell our public asset without any public consultation.

In his speech to council, Monday, Coun. Lloyd remarked:

From the very beginning, there has been zero public engagement; no consultation to speak of with Collus-PowerStream, no consultation whatsoever with our partner Alectra, no business analysis on the pros and cons of retaining or selling the utility – only scant and poorly-prepared consultants’ reports that weren’t even vetted through the senior management of either Collus-PowerSteam or Alectra until I requested at council that they be reviewed. The results were astonishing: abundant misinformation and factual errors were identified, so many that they filled two binders.

Of course, The Block refused to read those binders, and they were deliberately kept hidden from the media and the public by the administration.

The Block howled in protest when the utility couldn’t afford to pay the town a dividend this year (although it was thanks directly to The Block’s actions to strip their revenue stream). Instead of working with the utility and our partner to rebuild its revenue sources, The Block frothed in anger that they weren’t getting something for nothing.

The Block also howled over the refusal of Collus to disclose personal and legally-protected private information. Now they want to sell that same utility to a for-profit corporation that won’t pay any dividend at all to the town or be open and transparent or provide any personal information. What hypocrisy! What lies!

Coun. Lloyd also added a poke at the attempt by The Block to justify their ongoing cult of secrecy and utter lack of public consultation through terms in the Unanimous Shareholder’s Agreement (USA):

Don’t let anyone try to justify this situation by blaming the shareholder’s agreement. That excuse is absolute hogwash.

The USA has no provision that says anyone can’t explain why they want to sell the utility or take their concerns to the public and ask for input. But The Block – who have likely never actually read it – claim it has. More lies.

Will the town really get $12.5 million if Alectra accepts the deal? Or if they refuse, get double that when EPCOR takes over the whole thing? Not at all. It’s just a shell game. And we still don’t know if public or private money has changed hands to “expedite” this deal, nor who will get any kickbacks or commissions from it. But we might, if Coun. Lloyd follows through, as the Connection reported:

Lloyd was not pleased with the decision, calling it a “closed process,” and committed to asking for a third-party inquiry on the process surrounding the sale. “This will be a sad day for the residents of Collingwood,” he said.

Will he recommend either a judicial inquiry into the process, or an OPP investigation (public money is involved)? Complain to the Ombudsman and Information, the OEB and Privacy Commissioner about the process and the egregious secrecy? At the very least, conduct an independent audit of the deal and the contract terms (including the secret RFP the town refuses to release). I wouldn’t be surprised if something illegal turns up – and I am positive it will prove unethical and immoral when examined objectively.

But back to Collus. The utility is in debt for about $4-5 million because of the recapitalization (Collus went into debt, borrowing the money in 2012, and paid the town that amount: the total amount received by the town was actually $14 million). So that will have to be dealt with.

Getting approval for the sale to or from Alectra through the Ontario Energy Board will require many lawyers too (hopefully not including the one who engineered this debacle): expect another $200-$250,000 in fees to see it through.

Those extras guilefully added to the actual share value (an additional $2-$4 million) are a one-time add-on, not part of the value of the total of both shares combined. That total is somewhere around $16-$20 million. So let’s say Alectra says no, and the town buys the share for $12.5 million from them. Then EPCOR steps in (as The Block planned all along) and buys the whole utility for the actual value. They’re not going to be paying for waterfront upgrades or whatever other junk was stuffed into the share price to inflate it. But the town (you, the taxpayer) will still have to pay for them.

So let’s say EPCOR pays $20 million.* Subtract $12.5 million from that for what we will have to pay Alectra for their share.** That leaves $7.5 million. Minus the legal fees we promised to pay for EPCOR (at least $1 million I suggest) and the legal fees to go through TWO OEB approval processes ($500,000-$1 million). Minus the provincial departure tax (22%) we promised to pay for EPCOR ($4.4 million on a $20 million sale). That leaves us under $2 million. Maybe even under $1 million. Some deal, eh?

And that doesn’t include more than $1 million already spent by the town on lawyers and consultants. Or the amounts in the inflated selling price earmarked for other projects. The deal may likely end up COSTING taxpayers money instead of making any money. Typical Block accounting: less is more, as long as it achieves their vendettas.

So in the end, Collingwood gets essentially nothing, but it loses control over its electrical utility, loses control over service and rates, never gets another dividend, and sells to a corporation that doesn’t offer openness and transparency. And we STILL have The Block in power. What a great deal, eh?

And you can bet the sale contract GUARANTEES a profit to EPCOR every year. So your electrical rates – currently among the lowest in the province – will go up and by a lot. We’re screwed by The Block. Again.

If Alectra says no, the town buys the share and ends up owning 100% of the utility with a $12.5 million debt. EPCOR then steps in and applies to take over,ma process that may take a year or more, during which time the town has control over a lot of disgruntled, angry employees and a broken service.

But what if the OEB says no to their offer? The town ends up owning the utility with a $12.5 million debt. We will have lost a great partner and have to look for another buyer. But in the meantime, we still have to run the utility and provide service, support, billing, etc. We will have to hire new people, create a new billing process, start a new database of customers, and buy new hardware… all very expensive! We’re screwed.

The Connection noted what the sole-sourced lawyer who’s behind this deal said:

Rodger said the town’s terms also includes a small distribution rate decrease for customers for five years, a two-year job and location guarantee for existing employees and the owner must sign a 25-year lease for the current operations centre or they can build their own after 10 years.

Note that he didn’t say the utility would lower the rates of business and industrial customers. I suspect these will be raised to cover any residential decrease simply because EPCOR is there to make a profit and does not tolerate any revenue loss. Which goes along with The Block’s war on business and industry here.

And note that existing employees aren’t being guaranteed their jobs: they will be offered a “location guarantee” which wasn’t defined, but could be janitor in the old building, or maybe it means they will be offered a job in Edmonton, EPCOR’s HQ. And it’s only good for two years. What happens to the employees’ pension plans if the HQ is in Alberta? How does this affect the retirees who already get these benefits? The Block are screwing our employees, again.

As I wrote in my previous post, Collus-PowerStream is going through a mandatory cost-of-service review at the end of the five-year cycle as required by the OEB. But EPCOR is promising to keep residential rates unchanged without the mandatory review. Can they do that? Will the OEB allow them to go another five-six years without that review? Without increasing rates? Not likely.

Does the lease cost come out of the sale price, thus making the value worth $5 million less? Or is it at a reduced rate? We weren’t told. And will the OEB permit a utility sale to be contingent on a 25-year lease of the seller’s property? My industry sources suggest not.

And then there’s the water service billing The Block don’t want to mention in public. Right now, the water and electrical bills are sent out together by Collus-PowerStream at minimal cost to the town (a sweet deal that will end once either company buys Collus). Once the utility is sold, the town has to do the water billing itself: that means it must hire new staff, buy new software and equipment, get printers and pay for postage. And do it right away. That will cost you, the taxpayer.The billing alone is em>at least $50,000 a month. And The Block thinks that’s perfectly acceptable. Why? Because they get their way and that’s all that matters.

The Connection noted just how asleep Councillor Fryer has been at the wheel this term. Keep in mind he was CFO of Collus when the share sale was made, and creating the shared services agreement was HIS responsibility while employed there:

Coun. Tim Fryer said the goal of the previous deal was to grow the regional utility and provide dividends to the municipality. “The past five years did not achieve the desired outcomes,” Fryer said.

Any growth was curtailled by Fryer and his fellow Blockheads when they illegally fired the original utility board and replaced it with drones to keep the utility stagnant and underperforming, while alienating our neighbouring municipalities where growth was possible. Then they gutted the utility’s revenue stream and killed the shared services agreement, guaranteeing there could be no more dividends. He and his cohorts are the sole reason the utility didn’t “achieve the desired outcomes.” But either he isn’t bright enough to recognize that or he is – as The Block always do – blaming others for his own machinations.

Here’s the sad truth about The Block’s collective business acumen: there isn’t any. They don’t get any of this because numbers confuse them.

At the meeting, Monday, three of them spoke about how disappointed they were in their investment. But the town NEVER invested anything: PowerStream did. In fact, The Block have worked aggressively to undermine Collus-PowerStream, destroy staff morale, and reduce their revenue stream this term. The only investment they put in was their time spent in vicious attacks against our own utility (from the shadows since nonce of them had the spine to actually go to the utility and speak to anyone face to face).

It was clear that none of The Block understand even the elementary concepts of finance, that none had any clue what an “investment” was. No wonder none of them want anything to do with budget documents this term: they have no clue how to read them.

The Connection wrote:

Deputy Mayor Brian Saunderson said the “status quo won’t work,” and the rate of return on the town’s investment wasn’t enough. “At the end of the day, this is business,” he said.

Well, the status quo DID work until Brian and his minions stuck their fingers into the gears and did their best to run the operation off the rails. The partnership was lauded and praised province-wide as a model arrangement for utility management and operations – until The Block interfered. As for being “business” – I doubt a man who doesn’t understand what the term “investment” means could even identify what business is.

Consider that we are being offered 50% more for our share than it was worth four years ago. That’s a huge growth in a short time, much more than anyone would get in stocks or bonds. But despite this growth Brian is disappointed and says the status quo isn’t working.

That increased value is directly the result of the status quo and the innovative work of PowerStream to develop and improve the business. And before Brian and his puppets got involved, the utility paid the town a dividend of around $200,000 a year – which will be lost once it gets sold. But Brian doesn’t get it. That speaks volumes how little he understands actual business.

The audience included a large number of Collus Employees and not everyone was pleased with the decision.

Well, that’s an understatement of the first water. NO ONE is pleased with this decision outside the cabal at the table, the former interim CAO and his sole-sourced lawyer. It’s a disaster everyone else can see, except The Block.

The Block have created a toxic environment in the community, in town hall, in our utilities, among developers and our municipal neighbours, among our partners, and among the public. As the Connection noted, one of the audience members at the meeting said what everyone in the community is thinking and saying about this group:

“Shame,” he said. “Absolute shame. I will actively campaign to ensure all of you are not re-elected. It’s not business, it’s a public service, that these people own and you sold it off.”

Which is just what several hospital supporters told Saunderson and his minions after The Block sabotaged our hospital’s redevelopment. No one likes them, no one trusts them, no one respects them, no one wants to see even one of The Block re-elected in 2018.

Collingwood deserves better.

~~~~~
* Even if EPCOR offers $25 million, we will pay $5.5 million for their taxes, leaving $19.5. Subtract the legal costs (at least $1 million) and the payment to ALECTRA ($12.5 million) and you get $6 million left. That’s less than what half the utility is worth. Minus >$1 million already spent in legal fees and another $1 million for the OEB process and approvals. Minus any of those inflated amounts that were supposed to go to other town projects (perhaps as much as $3 million already allocated). We end up with less than $4 million, and maybe even less than $2 million for our share. Much of which will go to cover the wildly escalating costs of our new IT department (at least double but likely more than triple the costs we paid for the shared service from Collus), the costs of having to duplicate services and staff when The Block broke our water utility away from Collus – together totalling more than $1 million extra costs to taxpayers every year. Plus don’t forget the water bills… another $50,000 a month in new expenses… so The Block screw us again.

** Where will the money come from? The town passed a bylaw that says it can’t borrow money until the debt is paid down – will it have to deplete its reserves? Or gouge us raising our taxes (again)? I suspect EPCOR will front the money at a high premium (they’re a for-profit corporation, after all), so we’ll have that premium to pay back out of the amount we receive, too… we’re so screwed.

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