Thoughts and Opinions On Today's Important Issues

Wednesday, March 12, 2008

Windsor Assets---Going, Going...

Now perhaps you will understand, dear reader, why I took such an aggressive position opposed to what was being proposed when the Mayor and Council wanted to incorporate private companies for the airport and the Tunnel.

You should know by now what I think of the the ability of the City to do sophisticated business transactions. What is the next asset that is going to be sold or leased or otherwise disposed of without full Council and Taxpayer knowledge? What will the impact be on taxpayers? Will I be proven correct about the sale or P3 of the Windsor Utilities Commission or perhaps Enwin itself as is being proposed in London or the Detroit/Windsor Tunnel.

Will we be dazzled by proceeds of the hundreds of millions of dollars that I fear will be squandered leaving taxpayers holding the bag?

These private companies deal with Taxpayer assets however you want to look at it. As private companies, they are able to do whatever they wish without Council oversight. There is that legal separation that can be used to prevent Councillors from knowing what is going on.

Oh sure, some members of Council might be on the Board, as with Enwin, but with the airport and the Tunnel, even though I believe the Tunnel company has not yet been incorporated, the Board consists of the Mayor and several subordinates of his. At least that was the position at startup and I do not know if it has changed yet. As one Councillor pointed out... on the Tunnel Commission there were a number of Councillors on the Commission but with the Tunnel company there were none proposed.

Remember what the Star reported only a few months ago:
  • "Council shot down a bid Monday for councillors to get their hands on the minutes of meetings from the city's growing roster of arms- length corporations.

    "I'm surprised," Coun. Drew Dilkens said. "What I put forward was a motion for open, transparent and accountable government -- something I thought everyone would support with a unanimous decision.

    "But tonight it wasn't the intent of this council to move in that direction."

    The city in recent years has continued to form a number of new corporations including Enwin Utilities, Windsor Canada Utilities and new companies to run the airport and Windsor-Detroit tunnel.

    Dilkens has suggested actions of board members behind the corporations have been too secretive and not accountable to taxpayers...

    Dilkens said that made him uncomfortable because every councillor is held accountable by taxpayers. Yet councillors can be in a tough position to respond because of a lack of information, he said.

    He pointed to issues surrounding WUC's controversial 86 per cent water rate hike in the summer, and also what he felt was a lack of information from city administration regarding the recent response to a request for proposals to operate the airport.

    Dilkens brought forward a motion Monday calling on all minutes from board meetings of the corporations to be sent to councillors on a monthly basis, including agencies funded by the city such as the library, art gallery and development commission.

    It was shot down by a 6-4 vote."

Do you see what I mean with the Maxess transaction and why everyone ought to be concerned!

It is a terrible shame that Enwin sold Maxess. Where a number of cities are developing a wireless network for their citizens using their fibre network, we just got rid of ours. It is so short-sighted.

I tried on two occasions on behalf of clients to structure an arrangement with Maxess but was unsuccessful. I had a vision of how I believed Windsor could become a leading technology city through the use of fibre and wireless. It was my belief that, if we had structured something properly, technology developers from all over North America would have flocked to Windsor if they wanted to do anything at all with wireless. It would have made Windsor a true technology centre, not just a location for low paying call centre jobs. In fact, part of the deal that I was working on with a major technology company was to make Windsor a "showcase city" for their customers.

At the same time, Windsor residents and businesses would have had a huge communications advantage over other cities. At a relatively low price, we would have blinding speed Internet, cheap telephone costs, the ability to upload and download documents in seconds rather than minutes or hours for commercial applications and wireless hotspots for tourists. We could provide improved telecommunications for the Police and Fire departments as well as enhanced security in our downtown. The possibilities were endless as far as I was concerned.

I remember one of the City Administrators that I was dealing with who called a broadband network as important to the City as roads for the future.

Oh well...

Maxess was an interesting organization. It was one of a number of telecommunications companies that Hydro utilities built out in the past, primarily for schools, hospitals and other Government organizations. While they had commercial divisions, I'm not sure how profitable some of them ever were.

I think that Cogeco did well with buying Maxess. Its network spreads from Windsor to Chatham to Sarnia. The population served was almost 650,000 with a fibre network of over 650 km. It certainly will give them a huge competitive advantage since they have a fibre network in place already. I would expect that the cost of duplicating this today would be substantially higher.

I am surprised that the sale was made considering that in the latest available Enwin Annual Report, it was recognized that "wireless connectivity is a springboard for future growth." Moreover it was expected that Maxess "would operate at or close to breakeven in 2007 following many years of disappointing financial performance."

The Star reported that there was a confidentiality clause in the Sales Agreement that may mean that Windsorites will never know how much the sale price for this asset was. That's fine for Cogeco but not so good for taxpayers. All we really know was that there was a related party deal at Enwin where the asset went from Enwin Utilities to Enwin Energy at a cost of $16.7 million. That doesn't necessarily mean that this was the amount that Enwin received on the sale.

I must admit that I would be curious to know what the cost of building all of that fibre was and then add into it the "many years of disappointing financial performance" to see if this is a good deal or not for taxpayers. If it is starting to make money, why sell it?

What was the sale process? Was this a transaction only with Cogeco? Were Bell and Telus invited to make an offer to purchase? What about other potential broadband operators, did they participate? Who determined the sale price? Was there an appraisal done and if so by whom and were they experienced in the business? Will the City get cash up front, are their covenants that could reduce the sale price, indemnities or guarantees?

I wonder where the sale proceeds will go. Will they stay in Enwin or will another dividend be declared and the money transferred to the City. If transferred to the City, how will the Mayor and Council decide to use the funds... don't hold your breath for a tax reduction.

This sale has opened up all of the questions that were raised at the Council meeting about these private corporations. We need answers and we need them quickly. We need to have in place protection to ensure that our assets are not sold out from under us. We need a process in place that allows for taxpayer involvement and full and informed consent.

These are taxpayer assets, not those of a private, closely-held corporation nor of the Mayor and Council either. Just wait until you may have to pay a toll on EC Row! If you think I'm kidding, take a look at what happened in Chicago.