CityWest screws over PR taxpayers - 2% tax increase coming

General Forums Prince Rupert Forum
21

[quote=“MiG”]

Of course we can’t sell Citywest now. It would be admitting that the actions that lead to the present situation were mistakes.[/quote]

I have no idea what to make of Citywest. I don’t know if it was a mistake to buy it in the first place. I don’t know if it should be sold now. Maybe it is too late to sell for a price that will be worthwhile. I don’t know.

But the whole idea of selling/keeping public assets has become as much a political football as it is a financial one. And it is hard to ever know if it is being done in the best interests of the public or to score political points or to protect or shame previous proponents. For example

The Liberals selling fast ferries at scrap prices.
The Liberals using the sale of public assets to balance the budget.
The NDP floating the idea of selling BC Place and the Convention Centre.

(And that isn’t even mentioning how a public asset is sold and to whom like BCRail.)

As i said, I have no idea what the best approach should be for the future of Citywest. But something needs to be done - quickly and transparently - for no other reason than to halt he swirling controversy that can’t be doing anything good for its business and bottom line.

22

Well, it’s not really a ‘public asset’ like the other things you’ve mentioned (ferries, BC Place, convention centre).

It’s a business. Competing with other businesses.

I don’t think we’d even be having this debate if you replaced “Citywest” with “Tim Horton’s Franchise.” Of course the City shouldn’t own a Tim Horton’s franchise. Of course a (very broke) City shouldn’t expand its Tim Hortons franchise to Terrace & Kitimat and compete with national corporations. I think everyone would agree with that, wouldn’t they?

But you throw technology into the mix, and all of a sudden nobody can use any logic to think about it at all. That’s why you have so-called conservatives supporting a government-owned company competing with private enterprise. The chamber of commerce, which is as pro-business as you can get, essentially voted a communist company as ‘company of the year’ ? Okay then.

Both Bill Belsey & Herb Pond were very tied to Citywest (one as the guy who insisted that we ‘didn’t have time’ to consult with the community before buying a cable company, and the other as chairman of the company when some disastrous market decisions were made).

Not that there aren’t NDP guys all over Citywest as well, but I still can’t get over how many BC Liberals, supposed fiscal conservatives and free-market advocates, think that Prince Rupert owning a coffee shop telephone & cable company is a good idea.

The Northern View published a very pro-City-owned-Citywest editorial. A supposed right-wing publisher supporting government subsidized competition in the market. Awesome. Of course, the city and Citywest are probably its biggest customers. Think about that when the taxes go up – how much of your tax dollars were spent buying ads to try and convince people that their phones from 2007 are the wave of the future?

So what’s the difference between the City buying a cable company and the City buying a Tim Hortons shop? Nothing. And the city bought that cable company, and forgave millions of dollars in loans, without any consultation with the public. Now it can’t build a new emergency services building, and can’t keep up its infrastructure. Great.

But nobody wants to be the one to say that the emperor has no clothes.

23

By far the biggest subsidy from the City to Citywest has been in the form of interest-free loans. At the end of 2011 Citywest had $21,742,820 in interest-free loans from the City; that was after $20,000,000 in loans were ‘forgiven’ in 2008. Try to get that kind of deal from a bank or credit union. Dividends, if any, are paid on the City’s shares (at the end of 2011 the City had $6,304,000 in equity in Citywest).

Even if the City only charged prime lending rate, which is currently 3% and the most favourable rate possible, the City would be collecting $652,285 a year in interest (whether Citywest paid a dividend or not). That is a conservative estimate of how much the City subsidizes Citywest each year. Realistically, the cost would be considerably higher if Citywest had to borrow those funds at market rates. That goes on year after year.

Interest on the loans to Citywest would take care of a large part of the City’s current budget shortfall, which has some council members totally beside themselves and their heads spinning since Citywest announced that it would not be paying the City anything this year on its $28 million investment in the business.

Meanwhile, at the end of 2011 the City had $6,742,820 of outstanding debenture debt through the Municipal Finance Authority, on which it pays interest at variable rates. The City now needs to look at borrowing more money to build a new police station and possibly a fire hall. But it apparently doesn’t even have enough money to pay for the cost of a one day referendum, let alone the cost of servicing that debt if expenditures on new facilities are approved.

24

[quote=“bthedog”]
Perhaps you couple go to the next meeting and ask all of these questions of them. Highlight the financial issues and gauge their reactions.

And I mean that literally…you seem to know what your talking about.[/quote]

I echo that sentiment.

I have said before that I am no expert here. I am not taking any sides. But I am a big fan of bloggers. I am a big fan of the comment sections from online newspaper articles. And I am a big fan of sites like HTMF. People in authority put themselves in peril if they choose to ignore the new reality of online commentary. Even if most of the comments are loonie or just crazies with an axe to grind, there are still golden nuggets out there that are worth looking for. This thread is one.

If anybody at City Hall or Citywest is reading, my experience may be instructive. Don’t press me on the details because I am talking a long time ago, but I can remember getting calls - Sprint comes to mind - asking me to switch to their long distance(?) service. And my answer was always the same. “Not interested. I am proud of my city owned phone company.” And I was. I didn’t care if I had to pay more to see that company succeed. And while I still want Citywest to succeed my loyalty is now somewhat suspect. I have no desire to switch my cable to satellite nor do I have a compelling reason at this point to switch my internet or landline if an option were available, but I have been a Rogers customer for almost five years.

If we had had a referendum on keeping/expanding Citytel, I am not sure how I would have voted. Maybe my pride in our city owned company would have blinded me. I doubt that I would have been alone in that regard. I don’t know what arguments would have persuaded me to vote one way or another. (And sorry Mig, the Tim Horton’s analogy on its own wouldn’t have swayed me. If the city had a Tim Horton’s that was making a ton of cash, I would be OK with that. If Citywest were piling in the dough and paying out big dividends, we would not be having this discussion. I am not saying you are wrong, it just wouldn’t have swayed me.)

But all of that is in the past. We need to address the present. Governments can make mistakes and I have no problem accepting that. But to not address a mistake is also a mistake. If there is a problem, it must be fixed.

And remember, I am not even sure if there has been a mistake or what we should do if there has been one. But obviously there’s a controversy. This has been going on too long to be left unresolved.

Some of you are amazingly knowledgeable about the workings of Citywest. You make compelling arguments. On the other hand, somebody else seemed to have compelling arguments as none of the candidates in the last municipal elections were prepared to make the selling of Citywest an issue or even make it a top priority. But things seem to be going sideways right now.

While bthedog and I would like to see somebody go in and ask the questions, I can understand why you may not want to or maybe you have tried and been thwarted. But from someone who sees great potential in blogs and social media and giving citizens a chance to actually influence government, what is the next step?

What should the city be doing and what is the best end result that can be expected?

25

Sure, but remember, the city bought the cable company when Prince Rupert was on the brink of bankruptcy.

You think the City should be buying businesses? Is that the primary role of a city government? I don’t think it is. I think the reason we have a city council is to pay for roads, firefighters, police, parks, etc. All of which are suffering because someone decided that Prince Rupert would buy and subsidize a cable company.

But I understand left-leaning people being ok with government subsidizing companies in the marketplace. I get that.

What I don’t get are the so-called conservatives. I keep hearing “lower taxes!” “free market!” “less government” “the private sector creates jobs!” “more accountability!” from the right-wingers, and then many BC Liberals, Conservatives, right-wingers, free-market capitalists seem to completely contradict themselves when talking about Citywest.

They don’t seem to mind higher taxes thanks to Citywest. They don’t seem to care that the City bought a cable company without any consultation. They don’t seem to mind subsidizing Citywest, and forgiving 20 million dollar loans. From the Northern View, to the Chamber of Commerce, to the last couple of BC Liberal candidates, to a couple of good friends of mine who consider themselves conservatives – they all turn on their blinders when it comes to Citywest. Supposed right-wingers turn into Communists.

That’s the power of Citywest’s reality distortion field.

26

[quote=“MiG”]

Sure, but remember, the city bought the cable company when Prince Rupert was on the brink of bankruptcy.

You think the City should be buying businesses? Is that the primary role of a city government? I don’t think it is. [/quote]

I get all that and that argument - the cost to the city - might have been compelling enough to unblind me from my pride in the company to vote differently IF we had had a referendum.

I totally get what you and BTravenn and Dex and others are saying. Anybody, even the most fervent supporters, would be foolish to at least not listen and consider what you are saying.

My problem is where do we go from here. What are we supposed to do next. Businesses (and governments) are always looking at rate of return. If buying a new garbage truck is going to be more cost effective than repairing the old one than buy a new truck. If holding on to a employee used car is costing more than if the employees used cabs than sell the car. If a company that is no longer giving us the rate of return that we were expecting and the rate of return on the money we got from selling it is better, then sell the company.

So my question: How do we get a clear answer to all those questions about citywest so the best decision for the future can be made.

27

Well, first, we need someone to take control, both politically and financially.

When Citywest comes out with a statement like “we are self-funded” when it’s not true, then you have a problem.

How can you make an informed decision about the finances of Citywest when they’re not being honest? And why aren’t they being honest? No accountability.

If I owned a company and I had one of the company’s officers stretch the truth like that, I’d fire them. Simple.

That doesn’t seem to happen with Citywest. Ask yourself who was held accountable for a 20 million dollar loss? Nobody. They were probably promoted. Who was held accountable for all the trouble with the mobile division, the northwesttel fiasco, the ‘nobody wants it’ strategy? Nobody. They were probably promoted. Etc, etc, etc.

So ask Citywest how much it’s costing the taxpayer to keep the company, and they say “we’re self sufficient.” Bullshit. Interest free loans, forgiven loans, are all subsidies. Is anyone going to hold that person accountable? Nope. They’ve probably been patted on the back for doing a good job.

Nothing’s going to happen, because nobody wants anything to happen. Which city councillor will ask for accountability? None of them. Who will ask for a Citywest employee to be fired for bad decisions? Certainly not the city councillors who swallow every other piece of propaganda that Citywest feeds them.

What can you do? Elect someone who will have the guts to do something. Stop allowing Citywest to ‘present’ their version of the facts to City Council.

Get someone with no ties to the City or to Citywest to independently audit the company and give a real evaluation of the company. That won’t happen, of course. That would also take guts.

28

[quote=“DWhite”]

What questions do you think should be asked of the council? And what makes you think that they know more than the rest of us?

The council was surprised, even angry in some cases, that no dividend will be paid in 2013, but this is the third year since 2006 that no dividend will be paid. So why the shock? The council gave themselves the power to direct the board to pay a dividend. According to the minutes they used that power last year, both to order that a dividend be paid and when. Why are they not using that power this year? Why doesn’t the City charge interest on its’ loans to Citywest? They could charge the same rate of interest as the City pays on its’ loans through the Municipal Finance Authority.

The purpose of the brief question period at the end of a council meeting is to ask for factual information, not ask elected officials why they appear to be clueless.

In a few weeks the City’s audited financial statement for 2012 will be available. The auditor will report Citywest’s profit/loss, assets/liabilities, the City’s interest-free loans to the company, the value of the City’s equity, and whether and the amount of any dividends paid past year. I would not assume that the council would pick up that information from their own financial statements. But it will be reported here, and others can follow up as they see fit.

29

To illustrate the limitations of question period at council meetings, the minutes for the May 9, 2011 meeting show that a representative of the Chamber of Commerce asked whether Citywest would be paying a dividend that year. Here is the question and answer, as recorded in the minutes on page 2:

“3. The CityWest dividend is an important part of the City’s budget. Will there
be a dividend paid this year? What is the dividend policy at CityWest? Who
represents the interests of City Council on the CityWest Board of Directors?
Staff responded that yes a dividend for 2011 has been declared by CityWest to be
paid to the City of Prince Rupert and the City Manager is Chair of the CityWest
Board of Directors.”

princerupert.ca/images/edito … inutes.pdf

But if you look at the City’s 2011 audited financial statement, Note 7 on page 13, the auditor reported that a management fee had been paid, but no dividend was reported there or elsewhere in the statement:

“The City is the sole shareholder of City West Cable and Telephone Corp. (the “Company”). The investment in
the Company is reported using the modified equity method. During the year, the City received income of
$60,000 as management fees.”

princerupert.ca/images/edito … tement.pdf

30

[quote=“BTravenn”]

I hope I haven’t implied that you or Mig or someone else needs to be the shining knight riding to the rescue.

My question is what can be done? What is the next step? Mig gives an almost hopelessly depressing outlook. It’s almost like there is nothing that can be done. If that is the case then why beat ourselves up talking about it?

I would like to think that something can be done so let me rephrase my question. If you or Mig or someone else were on council or had the power to influence council what do you think should be done? And what do you think would be the outcome of that action. We need to worry about the best for the future not defending or criticizing the past.

31

Citywest won’t start acting like a real company until Prince Rupert starts acting like a real owner.

32

If citizens are happy paying higher taxes to cover a budget shortfall while the City subsidizes Citywest with interest-free loans and does not receive a return on its’ equity investment, there isn’t much to talk about. But I don’t think that’s the situation. Even the council seems unhappy with the situation. I’ve heard that at least some of them are willing to talk about selling the company.

The next step for the City should be to make sure that Citywest’s financial statements (including the statements for the subsidiary companies) are made available to the public so that there can be informed discussion. The City 100% owns the company and the directors are all council appointees, so there should be no excuses. As a ‘public body’ Citywest has disclosure obligations under FIPPA.

If the council doesn’t insist on greater disclosure of financial information, it’s only a matter of time before the information becomes available through access to information requests. It is interesting that Dex and I have been independently researching how to do this; there may be others out there working through the same issues.

It’s seems clear from the May 21, 2011 meeting that the council and the public do not always get accurate information. The council’s surprise on being informed at the last meeting that there won’t be a dividend this year suggests that they’re not much better informed than the public. The council should also consider getting independent financial advice.

The condescension towards those who question the City’s investment in, and subsidies to, a telecommunications company also has to end. A company that does not pay interest on $21.7 million in loans from the City, and that for three of the last four years has missed making dividend payments isn’t in a position to talk down to anyone.

33

I can’t believe someone from Citywest told council that “no amount of funding that comes from the City of Prince Rupert to fund CityWest.”

It’s definitely not true, as has been shown in this thread. Loan forgiveness – 20 million dollars? That’s “no amount of funding” ? And interest-free loans, that’s also “no amount of funding”? How about actually buying the cable company in the first place, is that “no amount of funding?” Does Citywest pay property tax in Prince Rupert?

Anyway, the person who said that either:

  1. Really doesn’t understand that interest free loans and writing off loans are not something that a broke city can afford, and yes, it is, in effect, subsidizing Citywest. So I’m not sure how competent they are to be advising City Council about Citywest’s finances if this is the case.

or

  1. Does understand the above, but is blatantly lying to City Council. With the hope that the Citywest Distortion Field will keep Council from asking any tough questions.

Can someone ask Citywest to clarify which of those is the case? Or is there is another explanation that I’m missing?

Either way, here’s a thought experiment for you. Imagine you’re the owner of a company and an employee says something to you that you know is false. You conclude that they’re incompetent or they’re lying. What is your reaction?

Like I said, Citywest won’t start acting like a real company until Prince Rupert starts acting like a real owner.

Time to start holding them accountable, and if I were on Council, the “no amount of funding that comes from the City of Prince Rupert to fund CityWest” comment would signal the very last time I trusted Citywest to provide honest and truthful answers.

34

Well. After reading 3 pages of factual data, I must say that I am more confused than ever.
That in itself is not hard but…
Why does it seem that with all the decisions made on investing by City West, nothing seems to be making them a profit.
Also, who makes these decisions that seem to put City West deeper and deeper in Debt?
I read back on page 1, that “we’ve done some checking around with businesses in town and they don’t see a demand for mobile
data services and texting”.
What Businesses and what about the rest of the population that would use this service. All anyone needing answers would have to
do is take a look and see how the big phone companies everywhere else are expanding with it.
The town with the Leading Brains thinking we’re an Empire…Well We’re Not!
Wouldn’t it have been better for us to have let Rogers come in, in the first place.
City West dropped the ball on Cell Phones, and you can bet they’ll get nailed again when a New Internet Provider comes to town!
Can’t go with the flow. Has to do something better. Look what thats caused, a 2% rise in taxes and a bunch of the City"s projects
will either get cut or get mothballed.
Guess the only paving that will get done this year will be Rudderham Place. Barrow Place drew the lucky straw last year. This Sucks!
Just My Opinion!

35

I watched the video of City Council’s last session. It appears Mr. Roden, the Chief Financial Officer, knew before the City Council session about City West not paying a dividend. At least long enough to include the “recommended option” which he included on page 2 of his report and page 11 of the agenda which council members were given. I wonder how long he knew? It would have been nice for council members to have known about City West’s bomb shell before council session so they could be prepared and confronted City West directors and officers while in public spotlight. Maybe Councillor Thorkelson could have put some jeans on. Anyone going to next meeting?

start at 0:43:25
princerupert.ca/page.php?id_ … _section=5

36

I misspelled Mr. Rodin 's name. apologies.

[quote=“Dex”]I watched the video of City Council’s last session. It appears Mr. Roden, the Chief Financial Officer, knew before the City Council session about City West not paying a dividend. At least long enough to include the “recommended option” which he included on page 2 of his report and page 11 of the agenda which council members were given. I wonder how long he knew? It would have been nice for council members to have known about City West’s bomb shell before council session so they could be prepared and confronted City West directors and officers while in public spotlight. Maybe Councillor Thorkelson could have put some jeans on. Anyone going to next meeting?

start at 0:43:25
princerupert.ca/page.php?id_ … _section=5[/quote]

37

Very very true statement! When it comes to CityWest, the city has turned a total blind eye to it…when they clearly need to be taking a 2nd and 3rd look at exactly what CityWest is doing and why they are in the financial situation they are in, resulting in no dividend or loan repayments for the city…

38

Well, here we are, April 30, the deadline for filing our taxes and also the deadline for Citywest to present their 2012 audited financial statements at a public meeting of the City council, according to their articles of incorporation. That’s a legal obligation no less, but one that they are apparently incapable of carrying out; or perhaps it would not be hard to do, but informing the elected council and the public about how things went last year is something that they’d rather just keep to themselves. After all, who’s going to take them to task?

“11.3 Disclosure of Financial Statements
For so long as the City of Prince Rupert, British Columbia, is a shareholder of the Company, the Company will present at an open meeting of the municipal council of the City of Prince Rupert the financial statements of the Company presented to the annual general meeting of the Company and the report of the auditor on those financial statements within 120 days of the Company’s fiscal year end.”

39

An interesting article in Black Press about Monday night’s City council deliberations to balance the budget, with a decision to cut $462,000 from the City’s operations as a partial solution to a situation that has become a crisis of sorts. < thenorthernview.com/news/205344581.html >

Mr Rodin explained that most of the cuts will come from public works, which is not good news for those who are concerned about the state of the roads and other infrastructure. It will also not be good news for those civic employees facing layoffs, with an expected 6.5 positions to be lost.

The vote was split, with councillors Ashley, Garon, Kinney and the Mayor voting for the cut - a difficult decision no doubt - while councillors Rice, Thorkelson and Carlick-Pearson took the easier route and voted against without offering clear alternatives.

There were some blue sky thoughts about the Port providing a bail-out, although the likelihood of that happening seems uncertain at best, even leaving aside the council’s somewhat testy relationship with the Port, with comments about ‘laying the boots’ to them and other unfortunate remarks having been voiced on previous occasions. The City, like any other community group, could have applied for funds from the Port’s community investment fund, but the deadline for that passed in February.

The $462,000 budget cut would be more than made up for, with cash to spare, if the City charged interest at prime - the lowest commercial lending rate - on Citywest’s $21.7 million dollar debt to the City. Perhaps that possibility could be discussed once the dust settles and the City turns its’ thoughts to next year, where another shortfall appears to be on the horizon.

Another potential solution would be for the council to exercise its’ powers under Citywest’s articles and declare a dividend- its’ the council as the shareholder that decides whether a dividend will be paid, not the board or the large delegation of managers that attended last week’s council meeting. Make Citywest tighten its’ belt, rather than laying off some of the public works crew, who fill potholes and provide essential services.

40

… and while the City will have to lay off public works employees in Rupert because Citywest cannot pay a dividend, Citywest advertises two management positions in Terrace:

citywest.ca/images/uploads/p … anager.pdf

citywest.ca/images/uploads/p … osting.pdf