An Educated Revenge Can Be Sweeter
Perhaps Eddie will learn that he should not have cast them aside so quickly. He will be taught a good lesson by the Professors very soon! There will be some pay-back as well, many millions of them.
I am sure that you have not yet been able to analyze fully the financial deal structured by the University set out in the newspaper recently so what I will say further on will make more sense to you. It was a brilliant move. If I am Eddie Francis or a member of Council, I am going to be hard-pressed in continuing to reject making the $5 million payment that the University thought ex-Mayor Hurst promised them (PLUS $3 million to St. Clair as well).
The issue arose over the $8 million that the two educational institutions thought they were to receive from the City. As the Star reported about 2 years ago:
- "St. Clair College president John Strasser said a signed letter from Hurst saying he would recommend to council a $3-million contribution to the college was instrumental in securing $12 million in provincial Super Build funding for the college's Ford Centre of Excellence but has now placed St. Clair in a costly and embarrassing predicament.
According to Strasser, the college had to borrow the $3 million that it was counting on getting from the city and is now paying six- per-cent interest of more than $180,000 annually on that debt.
In a similar letter to the university, Hurst stated he would recommend the city contribute $5 million to support the institution's application for $10.7 million in Super Build funding.
The university contributed $5 million, private industry and alumni donated $8 million and the County of Essex gave $1 million. The money was used to build the new health education centre, a drama school and a centre for automotive research at a total cost of almost $30 million.
"It wasn't an outright promise, but it was a clear statement the city would be on board," University of Windsor president Ross Paul said. "We're $5 million short and it's the city's pledge."
- "that he carefully worded the letter in support of the projects and purposely made no promises to the institutions.
"The message was a very clear one and all it said was the mayor was prepared to recommend to council."
Hurst said the matter was never brought to city council for a decision because "other circumstances overtook" it.
"I didn't have an occasion before I retired to bring the matter through to Windsor city council."
- "Windsor Mayor Eddie Francis said he's been approached by Strasser and Paul about the written commitments made by Hurst but rejected their suggestion he should take the lead in approaching council about the $8 million.
The mayor said the city still has a debt approaching $200 million, one of the highest debt ratios in Ontario, and is committed, as a condition of this year's budget, to paying down another $10 million in 2005 on top of regular debt payments.
"Everybody's in a bind here," he said.
The two presidents have been meeting privately with members of council, but their reluctance so far to make a formal presentation to council stems from the frosty receptions they've received. Said Paul: "Nobody wants to go to council just to get shot down."
Paul said he will meet with Strasser next week to determine when to go to council."
Let me give Presidents Paul and Strasser some free advice. Now is the time to go to Council.
President Strasser has an agreement in principle with the City about the Cleary. It will take the lawyers several months to cross all the T'sand dot all the I's so that a final agreement can be prepared. Remarkably, that means that a signing ceremony could take place in the media spotlight very close to the date of the election. However, what would happen if St. Clair refuses to sign because of "irreconcilable differences." It happened before when St. Clair backed out of the "Income and Security Building" in City Hall Square at the last minute. If President Strasser decides to walks away again, then there goes the downtown strategy of Eddie and Council.
Ahhhh, but President Paul is in an even better position. He has a ton of free money to invest in Windsor. Eddie will be forced to grovel to get him to do it at a time when Eddie is desperate for a win to help get him re-elected!
As I understand it, the University hired a financial firm out of Toronto to look at their financial position. They suggested amongst other things restructuring of debt to take advantage of lower interest rates which will save the University millions. They looked at their working capital position and made suggestions to improve it. They put forward a brilliant financial structure that, in effect, repays the outstanding bonds when they come due by setting up a sinking fund which, when invested over time, will equate to the bonds outstanding at the due date and at the same time gives the University money for major capital projects.
Here are some juicy details:
- The University borrowed $108.3 million at 5.75 percent maturing in 40 years.
- The University immediately bought a bond for $14.742 million that matures in 40 years at $108.3 million and pays off the new debt, so there is absolutely no future obligation to the University and its students.
- about $55 million was re-invested till Dec 2008 since the University did not need the money till then --- the University gets $61 million at this time
- $29 million paid down existing debt
- $3.125 million was provided to students for their activities to be determined ( a student win!)
- $4.2 million immediately goes to renovations for residences and possibly a new residence(another student win)
- about $2 million was held back to pay for initial expenditures related to the engineering building. ]
Critical is that this is a non-amortizing bond (thus the sinking fund). The University doesn't have monthly principal repayments and saved a lot of interest payments by paying off inefficient debt. Thus the new bond does not cost the University a penny more to carry than the existing $29 million in debt.
The University is also re-structuring its working capital which will free up about $30 million in additional capital for our building projects.
With all of the financial zigs and zags, the University will have a huge multi-million dollar pot to spend in the City! They will also start an aggressive fund-raising program which will also raise mega-millions for more work in the City. (The University will only have to raise somewhere between $25 and 30 million from the community instead of $120+ million.)
The University Capital spending will be over $120 million over the next five years. This is the one of the largest current capital expenditure program in Windsor and will provide hundreds of real construction jobs and completely reposition the University within Ontario. The centre pieces of this investment will be a new engineering building focused on Automotive and a new medical school to feed physicians to the City. Music will likely be part of this as well but has not been formally approved.
Ross Paul will have a legacy of which he can be proud when this comes about. [See my BLOG about Ross Paul's Vision which may now come true unlike the dreams of certain politicians! October 13, 2005 "Pipedream Or Usefully Provocative Idea"] It is also pretty clear that the University Board is no slouch at financial activitites.
In their positions, I am sure Ross Paul and John Strasser understand how power politics is played.
Ross and John need to understand that they need some "momentum" to get their fundraising drive going. After all, look at the good things they are going to do in the City that will cause these terrific positive spin-offs. Wouldn't you think that a $5 million and a $3 million gift to our educational institutions may be something that the Mayor and Council will consider in a new light if they are approached before the November 13 election!
An insider told me however that the price has been increased. As he/she said
If the Mayor and Council want their hand on the shovel at the groundbreaking of some of these projects," I was told, "all they have to do is come up with about $10 million and the University will gladly allow their photos to be taken for their re-election brochure." I wonder how much more St. Clair will want too. Perhaps a Capitol Theatre and former Salvation Army building thrown into the Cleary mix.
Those ivory tower academics, they sure know how to give our City leaders a good lesson in politics and high finance right before an election, don't they!