Initially published in the Alliston Herald on February 20, 2009
In advance of my Jan. 30, 2009 column on the dreadful state of New Tecumseth's financial position, the Herald inquired of Mayor Mike MacEachern as to the amount of debt that was "still" owed in relation to the water pipeline. The mayor's response: $31.3 million. A subsequent column referred to the pipeline debt and suggested that the town is poised to walk away from the asset and instead hand it over to a designate of the province.
The mayor evidently did not like the assertion and a series of e-mail communications between he and I followed where he complained that my facts were wrong. In particular, he advised that $4.5 million of the $7.0 million loan (made by the town as its contribution towards the construction of the pipeline) has been repaid.
Now, as you might imagine, I take an assertion that a column is not factual quite seriously. In the circumstances, I invited the mayor to provide me with copies of the financial statements of the New Tecumseth Improvement Society (NTIS), the corporation that was set up for the benefit of New Tecumseth taxpayers and is the formal owner of the pipeline. I advised that if these financial statements confirmed the mayor's claim then I would be quite willing to correct any error.
I regarded this as a reasonable solution given my experience that accountants tend to be a rather diligent and responsible lot and are trained to accurately depict the financial affairs of a corporation at a particular point in time. If any portion of the debt owed by NTIS to the town has been repaid, the NTIS financial statements will absolutely reflect this fact.
The mayor replied to this request and advised that if I wanted the financials I should "get them" and that "...the information is available should you want it." Given that NTIS was set up for the benefit of the residents of our town this response made sense.
Unfortunately, my efforts to obtain the documents from town hall have been met with a stone wall. Notwithstanding the earlier invitation, the town now refuses to provide the financial statements on the basis that they are those of a private corporation.
Well, as you might imagine, refusing to provide relevant documents to a litigation lawyer (especially after being told they are available) is akin to placing a steak in front of a hungry dog. It sets off every warning bell imaginable. Open and transparent it is not!
Several sources have now confirmed that the $31.3 million pipeline debt referred to by the mayor in January 2009, consists of $21.3 million payable to the Ontario Clean Water Agency (OCWA) and $10 million payable to the Town of New Tecumseth (which is more than the $7.0 million identified in the initial column as the town's contribution). In fact, OCWA's portion of the debt ($21.3 million) is specifically referred to in its own financial statements.
I understand from town staff that the most recent financial statements available for NTIS are for 2007. How much do you want to bet that these statements reflect a liability of $10 million to the town? I'll give 100 to one odds to any takers.
If the assertion that $4.5 of the $7 million (which we now know to be $10 million, not $7 million) is no longer payable to the town, I suggest that such news will come as complete shock to NTIS and its accountants - professionals who are duty bound to accurately portray the financial position of NTIS. Indeed, if any part of the $10 million has been paid off, why do the mayor and town staff continue to refer to the total pipeline debt as being $31.3 million?
No matter what manner of internal accounting the town may use to claim some of the $10 million has been repaid, the proof is in the pudding of the NTIS financial statements - documents that the town now refuses to produce.
It's time for the town to end the vague mumbo jumbo and provide a full and complete explanation as to what's going on with the pipeline debt and the asset.
Openness and transparency need to prevail. If there is a plan to "walk" from our $10-million investment the taxpayers are entitled to know.
Friday, February 20, 2009
Monday, February 16, 2009
Initially published in the Alliston Herald on February 13, 2009
The Good: Over the years I have occasionally poked fun at Tottenham Counc. Jess Prothero and in the process he has revealed a relatively thick skin. Prothero also appears to possess a characteristic that is particularly admirable in a politician. Specifically, if he commits to support you, or advance a cause on your behalf, or vote a certain way, he will honour that commitment come hell or high water. He will follow through no matter how unpopular the decision may be. It's a refreshing contrast to some who have a fence firmly planted in their bottom and lift a leg from one side to the other with remarkable, yet predictable, frequency.
The Bad: Last year Councillor Dennis Egan resigned from several committees. The decision, and the fact it was picked up by the press, did not go over well. Egan subsequently acknowledged that he regretted the resignations and has expressed a desire to return. By all accounts Egan was a dedicated member of the committees on which he sat. Further, it is not as though there is a long line of individuals seeking the positions - the work is often time consuming and thankless. Unfortunately, although Egan has made it clear that he wants to return, his overtures have been met with stone cold silence! Surely it's time to let him return and do the work he is eager to resume.
The Ugly: I don't purport to know all the details of why the town changed the locks to the premises it leased to Hutchinson Sports at the new recreation facility. I understand that Hutchinson encountered some difficulties when the expectations of the parties did not pan out and traffic at the new facility (especially during the summer months) turned out to be far less than anticipated.
Ironically, the town found itself in a similar predicament a few years ago when its expectations did not pan out and it was "unable" to sell water to another municipality. As was outlined in this column last week, the result was an inability to make payments to the Ontario Clean Water Agency (OCWA) towards the water pipeline debt. Fortunately, OCWA didn't turn off the water. Instead, according to its 2005 Annual Report, steps were taken to "write down" the pipeline loan.
The town's actions with Hutchinson were far less conciliatory. Significantly, Hutchinson had not asked the town to take a write down on any rent. Rather, a central feature of his recent proposal was the negotiation of terms that adequately reflected the reality of summer traffic. As he said in an e-mail this week, "To go through a second summer in a negative revenue situation was just not an option."
We should all be grateful the OCWA was more conciliatory than the town was with Hutchinson Sports.
More Ugly: Back when the initial request for proposal was issued for the pro shop, Hutchinson submitted a proposal that contemplated rent would be paid based upon a percentage of gross sales. In the course of the negotiations that followed the town declined to enter a deal on this basis in part due to "accounting" issues.
You might therefore imagine Hutchinson's surprise when the town entered into a lease agreement with respect to the operation of the new restaurant facility at the arena that provides for rent to be paid based on a percentage of gross sales.
The Good: Kudos to Ann-Marie Craig (president of the Alliston Soccer Club) and Chris Barnett (president of South Simcoe United FC), together with their respective executives, for taking steps to merge their rep soccer programs. It is a welcome move that I expect will make each club stronger.
The Final Ugly: Last week I referred to the current pipeline indebtedness as being $31 million. If one assumes that the current practice of not making any payments towards the debt continues, then the total pipeline indebtedness will be approximately $67 million when it becomes due.
The Good: Over the years I have occasionally poked fun at Tottenham Counc. Jess Prothero and in the process he has revealed a relatively thick skin. Prothero also appears to possess a characteristic that is particularly admirable in a politician. Specifically, if he commits to support you, or advance a cause on your behalf, or vote a certain way, he will honour that commitment come hell or high water. He will follow through no matter how unpopular the decision may be. It's a refreshing contrast to some who have a fence firmly planted in their bottom and lift a leg from one side to the other with remarkable, yet predictable, frequency.
The Bad: Last year Councillor Dennis Egan resigned from several committees. The decision, and the fact it was picked up by the press, did not go over well. Egan subsequently acknowledged that he regretted the resignations and has expressed a desire to return. By all accounts Egan was a dedicated member of the committees on which he sat. Further, it is not as though there is a long line of individuals seeking the positions - the work is often time consuming and thankless. Unfortunately, although Egan has made it clear that he wants to return, his overtures have been met with stone cold silence! Surely it's time to let him return and do the work he is eager to resume.
The Ugly: I don't purport to know all the details of why the town changed the locks to the premises it leased to Hutchinson Sports at the new recreation facility. I understand that Hutchinson encountered some difficulties when the expectations of the parties did not pan out and traffic at the new facility (especially during the summer months) turned out to be far less than anticipated.
Ironically, the town found itself in a similar predicament a few years ago when its expectations did not pan out and it was "unable" to sell water to another municipality. As was outlined in this column last week, the result was an inability to make payments to the Ontario Clean Water Agency (OCWA) towards the water pipeline debt. Fortunately, OCWA didn't turn off the water. Instead, according to its 2005 Annual Report, steps were taken to "write down" the pipeline loan.
The town's actions with Hutchinson were far less conciliatory. Significantly, Hutchinson had not asked the town to take a write down on any rent. Rather, a central feature of his recent proposal was the negotiation of terms that adequately reflected the reality of summer traffic. As he said in an e-mail this week, "To go through a second summer in a negative revenue situation was just not an option."
We should all be grateful the OCWA was more conciliatory than the town was with Hutchinson Sports.
More Ugly: Back when the initial request for proposal was issued for the pro shop, Hutchinson submitted a proposal that contemplated rent would be paid based upon a percentage of gross sales. In the course of the negotiations that followed the town declined to enter a deal on this basis in part due to "accounting" issues.
You might therefore imagine Hutchinson's surprise when the town entered into a lease agreement with respect to the operation of the new restaurant facility at the arena that provides for rent to be paid based on a percentage of gross sales.
The Good: Kudos to Ann-Marie Craig (president of the Alliston Soccer Club) and Chris Barnett (president of South Simcoe United FC), together with their respective executives, for taking steps to merge their rep soccer programs. It is a welcome move that I expect will make each club stronger.
The Final Ugly: Last week I referred to the current pipeline indebtedness as being $31 million. If one assumes that the current practice of not making any payments towards the debt continues, then the total pipeline indebtedness will be approximately $67 million when it becomes due.
Friday, February 6, 2009
The Pipeline Mess
Initially published in the Alliston Herald on February 6, 2009
It would appear that some at New Tecumseth town hall were not particularly fond of last week's column that focused upon New Tecumseth's rather enormous debt. As a result I have been told to expect a public rebuttal that will correct my alleged errors.
If the town should respond in this fashion we might consider the famous quote from Hamlet: "...thou doth protest too much, me thinks."
As the first line of attack one can anticipate an assertion that the $31 million debt related to the water pipeline from Georgian Bay does not belong to and/or is not the responsibility of the town. The explanation will no doubt be factually complex and thoroughly confusing.
As has always been the case, the formal "owner" of the pipeline is a corporation known as the New Tecumseth Improvement Society (NTIS). The transaction was structured in this manner for tax reasons. Indeed, past financial statements of the town have confirmed this fact by acknowledging that NTIS is "organized to benefit the residents of the Town of New Tecumseth."
New Tecumseth paid around $7 million (in effect, think of it as a down payment) towards the cost of the pipeline. The remaining funds came from various parties with the largest amount being a loan (think of it as the mortgage) from the province via an entity known as the Ontario Clean Water Agency.
The New Tecumseth Council Minutes from November, 2000 reflect the Town's investment in the pipeline. They refer to a transfer of up to $7.2 million from the hydro reserve fund to finance the "water pipeline capital project." The same minutes provide that proceeds from agreements with various developers in the Alliston Secondary Plan would replace, and replenish, the $7 million from the hydro fund.
Guess what? We've never seen the $7 million. We likely never will!
As for the pipeline debt, it was expected to have been repaid from revenues generated by the sale of water to other communities. Unfortunately, when a 2003 deal for the sale of water to Bradford was near, the Town of Collingwood started to grumble and claimed that this was not permitted.
Tragically, the town played the role of a weak-kneed patsy and folded like a cheap suit in response to this assertion. It gave up without a fight. Our town was analogous to Charles Atlas on the beach with the bully before Charles bulked up!
The deal with Bradford never happened as, it would seem, we were too stricken with terror to conclude the transaction. I fear that our paralysis on this issue is likely to haunt our community for decades to come.
Quite simply, the town's inability to deal with the pipeline debt in the future arises in large part as a result of the failure to stand up for its rights on this issue and instead appease more assertive third parties.
As a result, we have a mess on our hands. Lest there be any doubt that the debt is the town's problem, I quote from a 2005 press release issued by the town: "New Tecumseth Council has been working with the present government to address the pipeline debt problem."
The release includes a reference to the town's "...insistence that the burden of the pipeline debt must be removed from the water users in New Tecumseth...".
Unfortunately, it appears as though New Tecumseth is posed, when the debt becomes due, to hand over the pipeline - an asset that I suggest is conservatively worth more than $100 million - with no strings attached. In the process I expect the town's original investment of $7 million will be forever lost.
Why? I suggest it is because the town will be too eager to take the easy way out. In this case the easy way out means that we passively hand over this wonderful asset to the Ontario Clean Water Agency with but a whimper.
Let's hope it doesn't happen. If it does the biggest losers will be the taxpayers of New Tecumseth.
It would appear that some at New Tecumseth town hall were not particularly fond of last week's column that focused upon New Tecumseth's rather enormous debt. As a result I have been told to expect a public rebuttal that will correct my alleged errors.
If the town should respond in this fashion we might consider the famous quote from Hamlet: "...thou doth protest too much, me thinks."
As the first line of attack one can anticipate an assertion that the $31 million debt related to the water pipeline from Georgian Bay does not belong to and/or is not the responsibility of the town. The explanation will no doubt be factually complex and thoroughly confusing.
As has always been the case, the formal "owner" of the pipeline is a corporation known as the New Tecumseth Improvement Society (NTIS). The transaction was structured in this manner for tax reasons. Indeed, past financial statements of the town have confirmed this fact by acknowledging that NTIS is "organized to benefit the residents of the Town of New Tecumseth."
New Tecumseth paid around $7 million (in effect, think of it as a down payment) towards the cost of the pipeline. The remaining funds came from various parties with the largest amount being a loan (think of it as the mortgage) from the province via an entity known as the Ontario Clean Water Agency.
The New Tecumseth Council Minutes from November, 2000 reflect the Town's investment in the pipeline. They refer to a transfer of up to $7.2 million from the hydro reserve fund to finance the "water pipeline capital project." The same minutes provide that proceeds from agreements with various developers in the Alliston Secondary Plan would replace, and replenish, the $7 million from the hydro fund.
Guess what? We've never seen the $7 million. We likely never will!
As for the pipeline debt, it was expected to have been repaid from revenues generated by the sale of water to other communities. Unfortunately, when a 2003 deal for the sale of water to Bradford was near, the Town of Collingwood started to grumble and claimed that this was not permitted.
Tragically, the town played the role of a weak-kneed patsy and folded like a cheap suit in response to this assertion. It gave up without a fight. Our town was analogous to Charles Atlas on the beach with the bully before Charles bulked up!
The deal with Bradford never happened as, it would seem, we were too stricken with terror to conclude the transaction. I fear that our paralysis on this issue is likely to haunt our community for decades to come.
Quite simply, the town's inability to deal with the pipeline debt in the future arises in large part as a result of the failure to stand up for its rights on this issue and instead appease more assertive third parties.
As a result, we have a mess on our hands. Lest there be any doubt that the debt is the town's problem, I quote from a 2005 press release issued by the town: "New Tecumseth Council has been working with the present government to address the pipeline debt problem."
The release includes a reference to the town's "...insistence that the burden of the pipeline debt must be removed from the water users in New Tecumseth...".
Unfortunately, it appears as though New Tecumseth is posed, when the debt becomes due, to hand over the pipeline - an asset that I suggest is conservatively worth more than $100 million - with no strings attached. In the process I expect the town's original investment of $7 million will be forever lost.
Why? I suggest it is because the town will be too eager to take the easy way out. In this case the easy way out means that we passively hand over this wonderful asset to the Ontario Clean Water Agency with but a whimper.
Let's hope it doesn't happen. If it does the biggest losers will be the taxpayers of New Tecumseth.
Subscribe to:
Posts (Atom)