Windsor's Financial Fiasco

There are two people smiling broadly after the big Windsor Star headline: "Water fees diverted"

Yes a load has just been lifted from the shoulders of our two Cabinet Ministers, Sandra Pupatello and Dwight Duncan. Now they do not have to be worried about Eddie pressuring them any more before the election. He is self-destructing in front of them

He will have his own concerns that will take up time over the next few months when the Province sends in forensic auditors to examine the books and records of the Windsor Utilities Commission and Councillors finally stop being a bunch of wusses and hire outside legal and accounting firms to do a complete and thorough investigation of the WUC.

The Province has no choice...either money was diverted as the Star story claimed on Friday or it was not diverted as the Saturday story said. What it means is that the WUC, of which Eddie is a member, has no idea what is going on with millions of dollars of taxpayer money if the story changes that dramatically and that quickly, virtually overnight. Doesn't the WUC understand its own books and records?

However, something does not add up. What is the real story here?

First there was supposedly a diversion of capital money into the operations account. We were told that on A-channel news and in the Star. Then we were told in the Star that

• "In a presentation Thursday at an open house to explain a water rate increase, Francis said that the money collected from the water main replacement levy was going into operation costs. He implied that the money wasn't being spent on water main replacement, but it turns out, that wasn't true. After implementing the water main replacement levy in 2003 that brought in about $3 million in revenue, the utility spent about $10 million per year replacing water mains. But it should have been spending $20 million per year, Francis said."

However, in the 2004 WUC annual report, Victoria Zuber, the Finance Director said:

• "On November 26, 2003, the Commission approved an increase of the water main replacement levy from 5% to 13% to become effective January 1, 2004. This provided additional water revenues of $1.8 million."

This was after Maxwell Zalev, Acting General Manager, said in the Report

• "We continued to invest in our aging infrastructure. We spent a total of $10.75 million in 2004; $9.5 million in capital improvements for the distribution system...
  
  Our capital expenditure program over the next 5 years is quite intensive. We are scheduled to spend approximately $40 million to improve our distribution system and water treatment facilities..."

Doesn't that seem to be people who knew exactly what was going on rather than a disorganized mess with money going every which way?

What we saw, as the Mayor stated on A-channel news, is what we have always suspected with elected representatives. The problem arose because of politics at its ugliest. The issue was never addressed apparently since no one sees the water pipes. What took place using the Mayor's word was a "shell-game" and taxpayers were the victim. Of course, now that it has come out, the problems will be dealt with so it never happens again. Sort of like what happened with MFP. End of story it must have been hoped!

Didn't Eddie understand the irony of his statement? He just denounced himself in the strongest of terms! He was one of the politicians involved. The Senators in Ottawa recognized him for what he was: a politican and not in the flattering sense. Eddie still must think that we will believe what he said in his kick-off speech when he ran the first time for Mayor or is deluding himself:

• " OVER THE NEXT FOUR MONTHS I WILL ENGAGE THE VOTERS OF WINDSOR IN A DISCUSSION ABOUT OUR FUTURE, THE FUTURE OF WINDSOR. I WILL DO THIS NOT AS A POLITICIAN BUT AS A CITIZEN WHO WANTS TO SERVE YOU... I SAID TO YOU EARLIER THAT I AM NOT A POLITICIAN."

It is pretty clear from what the Mayor said that this is not inadvertence or mere negligence but is deliberate action on the part of someone. Whoever made the decision needs to suffer the consequences. The Mayor told us that numbers were picked out of the air for rates and were not based on any studies. Someone therefore must knowingly have decided that the rates were phony ones.

It is even more of a shock given what the Mayor said in the 2004 WUC Annual Report:

• "It is anticipated that the face of Ontario’s water industry will have a new look as the outcome of recommendations made on behalf of the Swain Report, which is scheduled for release in 2005. It has been suggested that there will be an unbundling of water rates, in much the same vein as had occurred in the electricity industry back in 2001-2002.
  
  With clarity brought forth on how water rates are established, the foundation will be laid for full cost recovery in terms of water services and, particularly, how they relate to infrastructure replacement projects."

Was it all for re-election? Keep the numbers down and then boost them after. We ought to be thankful to the WUC Chair/Councillor Ken Lewenza Junior for telling us previously what we should expect:

• "...there's very little wiggle room in the [2006] budget and taxpayers should not expect to see the frugality of the last two budgets repeated next year. "This is probably the last go- around," he said, adding that there will be either higher tax hikes next year or a reduction in services."

No doubt Gord Henderson must have been in shock on Saturday and found it easier to write about "Canada's penal system" rather than a major financial mess. Hmmmm I noticed that the Star used the word "fraud" in its first story. Was his column a Freudian slip?

Where is the Star Editorial in today's paper demanding that Council act tonight to do the right thing and clear the air. Can you imagine the noise if Mike Hurst was still the Mayor! Would the Editors be calling for resignations by now. I wonder why the Star is so silent on such an obvious issue.

The big loser, regardless what happens, is the Mayor. This financial fiasco clearly destroys the myth of Eddie as the successful businessman/lawyer. Trying to blame this mess on past Administrations is a nice attempt to divert attention except who was Mayor in 2004 when the rates increased from 5% to 13%? Yes it was Eddie. He was there when numbers were picked out of the air too. He was there when the money was diverted or was not diverted. Who knows---The WUC does not!

Eddie is a lawyer and he knows from Law Society rules that you do not put "Trust" funds into a "General" account to be used for other purposes. Eddie made this astounding statement at the WUC meeting for which he expected to be praised I am sure:

• "If this is what dollars are going to be established for, this is where the dollars will have to go."

Nothing like stating the obvious!

I assume it was Max Zalev on A-channel News who admitted that the levy funds on the water bills were used for operations. He said that, now, separate bank accounts would be set up and that levy charges will only be paid out for infrastructure capital charges and not for operations. Except perhaps there was no diversion. Doesn't he know?

Zalev may have his own problem too. He is on the Audit Committee of the City. In the circumstances, should he be allowed to remain a member while this matter is outstanding!

We have seen the Tunnel operation go down the tubes with Eddie as its Chair and yet Council allowed him to be the CEO of new Corporations respecting the Tunnel and the airport. And they allowed him to try to do a US$75M deal on the Tunnel when the Bridge Co. offered a fraction of that! Is it any wonder the Capitol deal is such a mess when it could have been solved easily months ago.

The Eminence Greasie will have to work wonders to save Eddie's career now. Wait until people actually see their new water bills! If you want to see everything there is to know about water bills in Windsor and elsewhere, check out http://windsormunicipal.blogspot.com/ The outcry will be horrendous.

Let's ask a few questions assuming there was a diversion:

• Do WUC 's financial statements have to be restated and for how many years back
• Do the City's financial statements have to be restated and for how many years back
• What assurance do we have that the books are proper today
• If this has been going on for years, have any dividends been paid from the WUC to the City that may now be improper
• It was said in the A-channel news report that the WUC admitted it was operating unsustainably.... Does that mean it was insolvent and money was diverted really for that purpose?
• What will KPMG do now? Will they revoke their Opinion Letter that "In our opinion, these financial statements present fairly, in all material respects, the financial position of the Commission." Will they resign as auditors? Why didn't they catch the diversion if there was one? Should Council fire them if they missed it?
• Will Standard and Poor's put the City on CreditWatch and will the City's bond rating decrease which could then cause Arena financing problems
• Whose heads will be cut off or who will be the sacrifical lamb to take the fall
• Have the problems of Enwin really been cleared up

On Monday night, there is a Council meeting. Will Councillors work out a solution to this problem in camera over a lambchop or two? Or will Councillors refuse to discuss this matter in secret and have a full and open debate about next steps in public.

Poor Junior. What a baptism of fire as Chair. We should not blame Councillor Lewenza as WUC Chair for his unfortunate statement:

• "We've been focused on how do we fix it, we haven't been looking at blame," Lewenza said.
  
  "I don't want to say I'm not concerned (about the practice). (The issue about whether the practice is fraud) hasn't been raised before. I would refer to legal on that question..."

Instead of the diversionary statement re legal counsel, he should have acted decisively! Why all he needed to do was to have called up the Chair of another Commission in the area who is a governance expert and he would have told Junior what actions a Chair of a Corporation should immediately take in a situation such as this!

Junior better get advice quickly or he may wind up in serious trouble too.

Councillors who have been on the WUC may now be personally at risk as well given the standards that Board members face after the scandals in the corporate world. To protect themselves, they have no choice but to demand that an independent outside investigation be undertaken immediately along side of the Provincial investigation. They must do so on Monday. They also need to pass a resolution to call for a Provincial audit. They have no choice now.

The Municipal Affairs Act provides:

• Provincial municipal audit
  
  9. (1) The Ministry, upon its own initiative or whenever requested by any municipality expressed by resolution of its council, or on a petition in writing signed by not less than fifty ratepayers assessed as owners and resident in a municipality, may direct a provincial municipal audit of the financial affairs of the municipality.
  
  Extent of audit
  
  (2) Any direction given by the Ministry may extend to an audit of all the financial affairs of a municipality or may be limited to the financial affairs of any local board thereof, or to any specified phase of such financial affairs or to any specified books, accounts, registers, records, vouchers, receipts, funds, money or financial transactions, kept by or under the charge of any officer of the municipality designated by the Ministry. R.S.O. 1990, c. M.46, s. 9.
  
  General inquiry
  
  10. The Ministry upon its own initiative may make an inquiry into any of the affairs of a municipality. R.S.O. 1990, c. M.46, s. 10; 1993, c. 27, Sched.

Oh there is a silver lining to all of this for the Councillors. Here is Councillor Lewenza again:

• "It's been a long and drawn-out process," Lewenza said. "We are finding out things every day. We still need to do a lot of things to better run the utility."

That means many more meetings over the WUC and that means more payments for their attendance at Commission sessions. Why look how much all of them received as extra salary on top of their regular pay-cheque with Enwin's problems. Now that Enwin was fixed up, they can get some extra cash to fix up the WUC!

Such good luck! At least they will be able to afford the new rates.