Welcome to London Civic Watch

"Ever wonder if City Council is as contentious and chaotic as it is sometimes portrayed? Here you can get a progressive perspective on some of the issues from someone who spent four years in the trenches. Totally unbiased, though! Feel free to comment but keep it respectful, just like they do at council."

Monday, October 24, 2011

It's a small world after all

Good news at Finance and Administration Committee last week. The city has retained its AAA credit rating. No wonder it attracted the attention of an Edmonton Company with an A low and BBB+ rating. It wants to show us how it can help us do even better.

Last week I spent some time reading E.V. Buchanan’s history of London Hydro. It was not just a recreational pastime; I had volunteered to do some research for the London Historic Sites Committee of which I am a member. But it reminded me of the run on London Hydro that that occurred shortly after I joined council in 2006 when council was asked to approve a Shareholder’s Agreement which would encourage our utility to look for opportunities to “grow the asset” through mergers and acquisitions or realize some ready cash by selling off Hydro. Despite my best efforts, I was not able to get the word “sale” stricken from that agreement. Eventually there were offers, and a public meeting on the whole concept was undertaken.

The public response was clear: keep your hands off our utility. Despite grumbles from one controller that “we were set up” at the public meeting, there was no more talk of partnerships, mergers, acquisitions or sales.

But that was three years ago, before council committed to tax freezes or had visions of $800M projects dancing in their heads. Where to find some money?

London Hydro is one of two businesses owned by the City of London- the other is the Western Fair- and the only one that makes money. Every year without fail, London Hydro pays the city $4.2M in interest on a promissory note. That’s 6 per cent, a pretty good investment. It also pays another $2.5M in dividends and from time to time even more. Over 2009 and 2010 London Hydro put an additional $20M into the city coffers to help us come up with enough cash to take advantage of the stimulus package offered by the federal and provincial governments.

Even before the new council took office, there were rumblings about cashing in on the promissory note in order to raise some ready cash. With the new council that option pretty much became a mantra. When you want to build a new city hall with a beach and a lake and a performing arts centre, when you want to extend services well beyond the urban growth boundary, when you want to spend $500K per year to subsidize people’s parking, you need a source of ready cash.

So I shouldn’t have been surprised when a delegation came before the Finance and Administration Committee last Wednesday to express interest in the very successful utility that is owned by the ratepayers of London. But I was. And so, I discerned from the audio tape of the meeting, were some members of our administration and our council. You may say they were blind-sided.

With no report on the agenda to give members of the committee any heads up or background, a delegation from Edmonton’s independent municipal utility, EPCOR, offered to enter into a “confidential cooperation agreement” for a period of six months with the objective of letting EPCOR take over the management of our hydro company. And maybe our water, wastewater, parking and garbage collection as well. Well, probably not; after all, EPCOR is really interested in only electrical distribution and water. It hopes to expand those businesses by taking over some utilities in south western Ontario, and, like the good business it is, save some money from economies of scale and send the profits to its sole shareholder, the City of Edmonton. It too would like to keep down taxes.

So EPCOR came a-courting, with blandishments and assurances galore. We could keep London Hydro; it only wanted to look after it for us, manage the assets for us. We were doing a good job, but maybe they could help us to be even better. And nobody would lose a job; that could be handled by attrition. But they really couldn’t discuss this in public, under the watchful eye of council. To really find out if EPCOR and London Hydro were compatible, they needed to go somewhere private and confidential for six months or so. They needed a “cooperation” agreement.

The mayor was enthusiastic. It’s not like EPCOR was a private company; it’s owned lock, stock and barrel, by a municipality. Not our municipality, mind you. But a municipality nonetheless. It has the interest of the ratepayers at heart. Not London’s ratepayers, mind you, but still, ratepayers.

Some others were not as enthusiastic. Judy Bryant didn’t like having something come forward with no warning and no background report to peruse in advance. Surely London Hydro, including the mayor who sits on the London Hydro board, knew about this. Surely the delegates from EPCOR didn’t just happen to drop in without an invitation. The mayor threw the question to London Hydro board chairman Peter Johnson.

Johnson was apologetic. He should have provided a report. But the offer could make a “compelling contribution to the tax base”.

And EPCOR wanted to move forward. It wanted to work with the city and hydro on “an exclusive and confidential basis to determine if it makes sense to move forward together”.  Agreements would be brought back to council for review and final approval.

All this was moving too fast for Nancy Branscombe, who argued that it would be premature to jump to the next step. “What’s in it for EPCOR? What’s in it for us?” she wanted to know.

She was assured by EPCOR that “we are not after your assets; we just want to invest. We are looking for growth.”

Johnson argued that EPCOR’s experience could come in handy since the city was looking at expanding the utility model to water, wastewater, garbage collection and parking. And EPCOR pointed out that it “frees up your balance sheet” for other projects and activities. London Hydro CAO Vinay Sharma, when put on the spot, agreed that it “will facilitate the financial balance sheet”.

Dale Henderson was intrigued. He wondered if EPCOR might show London how to take over St. Thomas's utilities.

Joni Baechler didn’t like any of it. She sits on a joint water board and has experienced the problems of getting compliance with safety standards from an outside contractor. She was not convinced of the merits of a “corporatized model”.

“These guys are going to tell us that their model is best,” she pointed out. “But what is best in their minds is what will work for EPCOR.” In fact, utility rates account for 20% of Edmonton’s budget, a matter helped by a 60% water rate increase in 2009. In London, council sets the water rates. If EPCOR took over, it could set the rates.

Bryant and Branscombe moved to receive the EPCOR report and that it be separate from the city’s report on a combined utility corporate model requested previously by council. They wanted to see that independent report before any consideration of EPCOR’s overtures. The city engineer, Pat McNally, protested that the report would take some time to complete. You don't restructure all your services overnight, not even theoretically.

Henderson wanted to hurry things along. If the city couldn’t finish its own report by the end of December maybe they should hire a consultant. No one supported him on that suggestion.

Paul Hubert thought that Bryant and Branscombe had asked some really good questions but the way to get answers would be to enter into the agreement, subject to a review by the legal department. After all, it wasn’t a partnering agreement, it was a cooperation agreement. Then he noticed city solicitor Jim Barber waving his arm.

“I haven’t seen a cooperation agreement,” Barber pointed out. “It would be desirable to see what one would look like.”

However, despite such red flags being raised, Hubert and Henderson moved the next steps, to enter into an exclusive and confidential cooperation agreement which, after being reviewed by the city solicitor, would be brought back to the committee and council for approval.

The motion passed, with Hubert, Henderson and Fontana supporting it and Branscombe and Bryant voting against it.

Subsequently we learned in the London Free Press that EPCOR had obtained the consulting services of Stratford mayor Dan Mathieson who just happens to be the chair of the South West Economic Alliance which is attended by Joe Fontana on behalf of the City of London.

It’s a small world after all.


Sir Adam Beck said...

I sincerely hope this misguided proposal from Mayor Joe Fontana et al. goes down in a ball of flames.

Will it? Time will tell.

But it's interesting that today's paper-thin London Free Press story reports that Ward 9 Councillor Dale Henderson (who supported the "exclusive, confidential cooperation agreement" at committee) now has problems with the proposal.

Sober second-thought perhaps? Londoners are not pleased with the way this thing has unfolded and now have Mayor Joe's number in spades.

Clearly, it's an attempt to raise taxes through the back door of London Hydro rate increases. It's an insult to our collective intelligence.

Menno Meijer said...

Thanks for your digging Gina. It's good to have this information.
Our only real option is to keep Hydro in our own hands. Privatizing water is a slippery slope to commodification of a human right and paying more for Hydro to fill the pockets of a private firm and pay for new downtown development is nothing more than a double tax increase.
Mr. Fontana, dealing in the back rooms to sell our assets, should be a reminder to us that the next election needs to be watched very closely and serious candidates put forward who have the interests of Londoners first and foremost on their minds.

Anonymous said...

I mean no disrespect to EPCOR but my opinion of Edmonton has been adversely effected by numerous reports that have lead me to believe they have an out-of-control over-the-top residential crime-rate involving guns and dead children.
I wouldn't object to sharing our policing services with The City of Edmonton. I think they need that more then any capital they might generate from managing London Hydro...I don't want to sell off the potential profit and assets of London Hydro but let's not send EPCOR back to The City of Edmonton empty handed...they need help!!!

Anonymous said...

It's the aside that caught my attention. You're saying that Western Fair owned by the city does NOT make money? Where is all that slot money going? Fodder for another article, I hope.

Thanks for digging for us.

Anonymous said...

Gina, Your title, "It's a small world after all," is most appropriate. I recall hearing that song ad nauseam when I took my daughter to Disneyworld in Florida several years ago.

The EPCOR saga is filled with Disney characters. The whole scheme is Goofy. The Mayor of Arva is showing Pinocchio traits, the other local mayor involved is too Daffy to see his conflict of interest and they both take London taxpayers for a bunch of Dumbos.

Instead of the doctor's comment at the end of Bridge on the River Kwai, "Madness, Madness!" the appropriate comment here is:


anon one

Anonymous said...

And Judy Bryant comes out Snow White.

Secret Admirer

Gina Barber said...

The money from the slots are a separate provincial revenue stream. For some information on the Western Fair, check out http://ginabarber.blogspot.com/2011/03/no-fair-taxation.html

Anonymous said...

Disneyworld continued at last night's meeting, with Grumpy in the chair. But lioness queens Nancy and Joni refused to be intimidated by his heckling.

Even poor Bambi, who was just trying to be helpful, came in for harsh treatment.

It seems like EPCOR got a bad review, but don't be surprised if there's a sequel after the dust settles.

Captain Hook

Truth Serum said...

Let's cut to the chase and remove all the smoke and mirrors from the equation.

We don't need to spend hundreds of millions of dollars on the downtown and we don't need to roll a whack of core City services into London Hydro.

The reason Mayor Joe et al. want to roll these core City services into London Hydro is to attract suitors such as EPCOR and to implement hefty rate increases while purportedly holding the line on taxes. They're trying to do through the back door what they don't want to do through the front door. It's fundamentally dishonest.

And I don't buy for a moment that this whole thing wasn't orchestrated as a 1, 2, 3 sucker-punch. The restructuring of London Hydro and the EPCOR bid go hand in hand. Which came first, the chicken or the egg?

Since the restructuring of London Hydro remains on the table, this baloney is far from over.

And since when did Councillor Joe Swan become the personal valet for Mayor Fontana?

Anonymous said...


I agree the Swan song was sickeningly sycophantic. Maybe Arva needs a deputy mayor.