Any concerns about having to endure a lengthy dissertation from Rob Kent of Entegrus on the utility merger with St. Thomas Energy were quickly put to rest Monday evening.
And, we do mean quickly.
His presentation on the 15-month process to complete the merger, which was executed on April 1 of this year, came in at four seconds shy of two minutes.
That’s right, two minutes, with little in the way of enlightenment or answers to the many questions surrounding what is more a fire sale than a merger.
The city gets a 20.57 per cent stake in Entegrus Inc., meaning we will have little say in the operation of the entity.
In his three-page report to council Kent, the former acting CEO at St. Thomas Energy, revealed the total debt of the city’s utility on March 31 was just under $17.7 million with $6.4 million of working capital and fixed assets of $27.5 million.
The city’s equity in Entegrus is expected to provide, on average, $1.17 million in dividends for the period 2018 to 2022.
Now you might think that’s a pretty decent rate of return. Don’t forget, however, in its glory days, St. Thomas Energy was regularly paying an annual dividend to the city in excess of a million dollars and, on several occasions, it approached $1.5 million.
Kent did not address numerous key points such as the fact, as we are led to believe, all of the positions at St. Thomas Energy are only guaranteed for three years. After that, all bets are off.
Is there a possibility the St. Thomas operation could be shut down at that time, to be consolidated elsewhere?
No mention of that or questions raised by the existing board members on council: Mayor Heather Jackson, who was chair of the competitive side of St. Thomas Energy/Ascent and councillors Gary Clarke and Linda Stevenson.
And how much did the utility pay for the companies it acquired: Tall Trees, Lizco and Tiltran? How much did it sell those firms for?
There was a $5 million surplus when the city took over the utility when it no longer was under the Public Utilities Act. So where did that money go?
When the various entities under the Ascent Group umbrella were disposed of, only the assets were sold and not the shares. As the shareholder, the city kept ownership of the company so anybody who had a claim against the company could proceed with legal action. It appears some legal action is still before the courts.
The city could have avoided that by claiming bankruptcy. Why wasn’t that process undertaken several years ago?
In a 2015 interview with St. Thomas Energy Holdings Inc. CEO John Laverty, he advised it would take several years to get the utility back on the road to profitability. That would be achieved through a return to its core business.
“We need to do our core competencies really well,” stressed Laverty. “Once we’re back doing them really well and profitable again, then there will always be opportunities to reach out.”
If the utility was just beginning to see the light of day, why the rush to merge when it could have been a much more attractive partner in another year or two.
Who at city hall wanted to rush the process? Was it the mayor or city manager Wendell Graves.
Was it a recommendation of the consulting firm the city hired, Grant Thornton – retained at a cost of almost $1 million?
We have filed a Freedom of Information request to obtain a copy of the firm’s final report to council.
If you have an hour or so to whittle away, Google “Grant Thornton and lawsuits.”
We found in 2017, InterCloud Systems, Inc. filed a lawsuit in New York Supreme Court “for breach of contract as well as fraudulent inducement in connection with their engagement as the auditors of the Company in 2015,” according to Globe Newswire.
In November of 2013, A Kentucky circuit court judge ruled Grant Thornton is liable for more than $100 million in damages to be paid to a business owner and his family after he was sold an offshore tax shelter that the Internal Revenue Service considered abusive.
Or how about in 2002, “in a $2.1 billion action against Grant Thornton, a Baltimore Circuit Court has appointed a Special Master to investigate a possible violation involving the withholding and willful destruction of audit records in a manner likened to the contemporary but better-publicized Enron case.”
You can find more about that one at accountingweb.com.
And finally, following Kent’s brief summary to council, Mayor Jackson noted in 2007/8, when a possible merger with Entegrus was under discussion, the city would only have obtained a 22 or 23 per cent share in the Chatham-Kent utility.
St. Thomas Energy was quite healthy at that time and we understand that figure could have been closer to 40 percent.
We have asked city manager Graves for a copy of the document Jackson was quoting from to verify the accuracy of that figure.
So many questions, so few answers.
There is still, however, plenty of time prior to the Oct. 22 municipal vote to put some of them to Jackson, Wookey, Clarke, Stevenson, Laverty and also Jim Herbert, board chairman at one time. The latter two are seeking a seat in the council chamber.
MUNICIPAL CANDIDATE PROFILE: JOHN LAVERTY
He played a key role in pointing St. Thomas Energy/Ascent back toward its core values and now John Laverty wants to bring that business acumen to the council chamber at city hall.
Although he says he has been retired for the past four years, Laverty has remained active, until recently, as chairman of Ascent Group Inc. and acting CEO of St. Thomas Energy for the period of a year.
His lengthy tenure in the utility market dates back to the 1990s when he served for two terms as an elected public utilities commissioner in St. Thomas.
He sat on the board of directors locally for the United Way and also served on boards at Fanshawe College and the Kettle Creek Conservation Authority and most recently is the vice-president of the retired teachers’ association.
But for many in the city, Laverty is best recognized for his association with the St. Thomas Soccer Club, a relationship that dates back to the 1970s.
So, it is no surprise Laverty says part of his strength he would bring to municipal council would be his business prowess and attention to detail and finances.
“I’m one of those people who don’t believe you should carry debt unless you have to,” he stresses. “Debt is one financial piece in an organization that can get you into very serious trouble if you don’t deal with it.
“I get a little nervous looking at some of those financial statements with the amount of debt that’s out there.”
When it comes to listing the challenges awaiting the new council in the coming year, Laverty points to job development and creation.
“We marketed ourselves as a bedroom community to London and that was great to bring people who would work in London to live here. But along that line, we also have to work to determine what kind of jobs do we create for the people who are going to live in St. Thomas.
Laverty continues, “It takes some innovative thinking to get the right kind of job creation programs in a community of our size. Traditionally you relied on the big manufacturing sectors. For a hundred years we were the Railway City. And then it was automotive, but those things have gone away. We now need to replace those with some kind of high-tech thinking. We need to begin setting this city up for that kind of work. It’s going to come in the form of smaller-based industries that are probably less than 20 or 30 employees. And that requires a very specific infrastructure in a community.”
Laverty is acutely aware no one member of council is going to lead the way, it is most certainly a team effort.
“I think you create that chemistry. Once you are part of a group, you figure out that chemistry. A great part about having eight or nine people around a table is, you would hope, that brings eight or nine different perspectives. People who come to council with an agenda, sometimes I think you have to let go of that agenda in order to move the larger organization forward.”
Another of Laverty’s attributes is relationship building with various groups to try to get things done and move the agenda forward.
“Councils can’t do this alone,” points out Laverty. “In today’s world, you rely so much on relationships with others. They help you get things done more efficiently with less economic strain on the groups involved. And delivering a service to a broader spectrum.
“I think there is a lot of opportunity for the City of St. Thomas with surrounding groups. We are going to have a housing issue, if we don’t already have one. We’re probably not going to be able to expropriate any more land. We are going to have to look at very unique ways to intensify the lands we have.”
Hand in hand with housing is public transportation.
“I’m not sure Uber is the answer. I think there is probably a solution out there that somebody has tried that we need to think about in terms of how do you get at public transportation.
“And, we are faced with other issues . . . with things like opioids, poverty and homelessness. One of the biggest blights on our world is the impact poverty has on people and communities.”
While Laverty intends to develop an online profile to help connect with people and encourage people to vote, he doesn’t lose sight of the importance of getting out and talking to people.
“It’s important to meet the people where they live. It’s important to go and tell them what you stand for and what you are going to bring. In a smaller community like St. Thomas, that is very critical. I intend to go door to door. People want to hear from you.”
ALMA COLLEGE PROPERTY: HAVE YOUR SAY
As announced at Monday’s council meeting (Aug. 13), a public meeting is to be held from 7:30 to 9 p.m. on Sept. 4 to outline and seek public input on the proposed development by Patriot Properties on the site of Alma College at 96 Moore St.
Michael Loewith of Patriot Properties is urging council to begin the process of rescinding a 2008 Ontario Municipal Board decision that determined any new development on the Moore Street property must recreate the north façade of Alma to a depth of three metres.
At the upcoming open house, Loewith will outline his proposed development which would include three apartment towers and restoration of the amphitheatre at the southeast corner of the property.
Following Loewith’s presentation, council will invite comments from the public regarding the proposal and the request to remove the OMB facade order.
If you have been following this corner over the last month, you understand the facade has been an emotional and divisive issue for the Alma College International Alumnae Association and, no doubt, both sides of the debate will be forthcoming at next month’s meeting.
The presentation will be held in the auditorium at the St. Thomas-Elgin Memorial Centre and more information can be obtained from city manager Wendell Graves at 519-631-1680, ext. 4120.
THE READERS WRITE
Pat Morfee took umbrage with our recent item indicating Lori Baldwin-Sands, who is taking a run at a return to city council, may also be gearing up to seek the Liberal nomination for Elgin-Middlesex-London riding in next year’s federal election.
She writes, “Your bias is showing. You could try being a neutral observer in the municipal election instead of attacking Lori-Baldwin-Sands. As far as I know, this is a free country and she can run for a political position.
There are rumoured to be several candidates to run for the Liberals in the next federal election and she may not get the nomination. So in your world, she is to sit out the municipal election?
Several councillors have left the city over the years for various reasons. Lori has much experience being on former councils. How do you know other candidates are not thinking of running federally?”
The Alma College facade debate continues to generate plenty of feedback with John Vigars checking in with, “I am appalled at the small town attitude Wendell Graves is wanting council to follow in the treatment of Patriot on the former Alma property. How patient do you folks think this developer is?”
Vigars continues on another note, “Can anyone tell me where the millions of dollars of value of the St.Thomas PUC went?”
FOR THE CALENDAR
The St. Thomas Police Service welcomes the public to an open house to showcase the new Colin McGregor Justice Building at 45 CASO Crossing. You are welcome to take a self-guided tour through the facility, meet staff and enjoy a community barbecue afterward. The event runs from 1 to 4 p.m. on Sept. 8 and is free of charge, although you are encouraged to bring a non-perishable food item for the Caring Cupboard. Additional parking will be available at the Joe Thornton Community Centre.
Sarah Noble, the tourism coordinator at Railway City Tourism, passes along a savory note alerting us to Conductor’s Choice – A Culinary Experience on Rails.
It’s a full-day adventure “exploring local flavours” and an opportunity to celebrate “our agriculturally rich surroundings.”
The day kicks off at Las Chicas del Cafe in the CASO station, after which participants will board the train to enjoy “a savory pairing experience with Salt & Pepper Meals and Railway City Brewing on the journey to Wildflowers Farm.
The final leg of the rail portion of the day finds you in Port Stanley where it’s a short bus jaunt to Quai du Vin for a tour of the winery and pairings with Orchard Hill Farm.
But, there’s more.
To quote the release from Noble, “The day comes to a close at the Elgin County Railway Museum for a dining experience unlike anything you’ve seen before.
Surrounded with the historic rail assets and immersed in a performance by Zero Gravity Circus with live music by The Pairs. Dinner guests will have the opportunity to enjoy wood-fired pizza by Elgin Harvest and dishes prepared by the culinary programs at Fanshawe College featuring produce and ingredients from the farmlands and food creatives of St. Thomas and Elgin county.”
For more info and tickets, visit Railway City Tourism at 650 Talbot St. or call 519-631-1680 or by email at firstname.lastname@example.org.
Questions and comments may be emailed to: City Scope
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