The CityWest Group of Companies

Unfortunately the trend to closed door governance is hardly a 2008 phenomenon with councils under the soon to be former Mayor Pond. I also find the present PR campaign by CityWest to be amusing given they are generally as close mouthed as their operations as City Council is about the business of the city.

As a counterweight to the present one sided pr campaign I thought I’d revisit the very simple questions I recently asked Mayor Pond and the less than enlightening responses I received from his minions.  I thought I’d also provide my opinion on the answers I received in this thread to stimulate debate.

The citizens of Prince Rupert can make their own judgment as to the propriety of a municipal corporation launching an advertising program during the lead up to Municipal elections. However, seeing as CityWest has launched this PR program, it’s worthwhile to reflect on what we are not being told in this expensive publicity program.

To quote the fine words of our outgoing Mayor Herb Pond,

“We need a wide range of opinions for our democracy to flourish.  We also need to be grounded in the facts.â€

However, since many people in Prince Rupert seem as interested in each other’s motives as they are in the actual opinion being expressed and Mayor Pond has seen fit to publicly speculate that my firmly held opinions on his dismal record is due to some dissatisfaction with my term as one of the founding directors of CityWest, let me provide a bit of background and insight into my motives for speaking out.

To quote from the British Columbia Local Government Corporations guide,

“Corporate directors and municipal councilors have different obligations. A corporate director is required to “act honestly and in good faith with a view to the best interests of the company.â€

As a director of CityWest I was unable to speak out as a taxpayer when I gained insight into the secretive manner in which the council of the day chose to divest CityTel and incur large debt to acquire the outdated assets of Monarch Cable.

As my first exposure to the inner workings of City Hall, it was educational that a Municipality that was in such dire financial difficulty would even consider embarking on a risky and expensive venture such as the acquisition of Monarch Cable without holding a public referendum on whether the taxpayers were either;

a: Willing to undertake the risk
b: willing to fund the corporation by virtue of foregoing historical dividend levels

On June 27th, 2005, the previous council that was comprised of Mayor Pond, Councilors Kathy Bedard, Tony Briglio, Nelson Kinney, Paul Kennedy and Jack Rudolph, and Ken Cote elected to incorporate the city department known as CityTel as a private company to be owned by the City of Prince Rupert. Councilor Ken Cote was absent during the votes.

It was only later that I understood that city council under Mayor Pond’s leadership chose from the outset to use the counter petition maneuver to avoid a refererdum and the public debate that accompanies major decisions of import to a community.

Council on it’s own did not have the authority to proceed with the divestiture of assets and formation of the CityWest Group of Company’s.

Accordingly Councilor Briglio put forward a series of motions to choose an alternative approval process also known as the counter petition process.

The British Columbia Municipal Affairs Publication on the local government act has this to say about the use of the counter petition process;

“When the Local Government Act requires voter approval for local government actions, the two most common forms of approval are voting and counter petition. In some cases like the disposal of water utilities a vote requiring majority approval is mandatory; in others approval may be gained through the opportunity to counter petition. In many cases, the legislation gives local governments the option of choosing to hold a vote or to provide a counter petition opportunity.”

Counter petitions are generally used in less controversial matters as a litmus test of public opinion. Under a counter petition, the local government may proceed with an action unless five per cent of the electors petition against it within a set deadline.

***If the citizens of Prince Rupert had understood council’s intent was to incur significant debt to purchase Monarch Cable and that this would have a significant negative impact on their taxes, I can assure you that this would have been one of the most controversial ideas ever put forward by a council and would certainly have been debated at length in a referendum. ***

As for Mayor Pond’s excuse that negotiations with the owners of Monarch needed to be kept confidential, perhaps he can explain why there were no other buyers lined up to pay full price. In any event, he also has said that

“every deal was signed with a clause that says it must then be subjected to a thorough public process”. and “With competition heating up it became clear that without bold action we risked losing a very valuable asset.”

I would argue that since the Mayor and council of the day were playing with Taxpayer’s monies, it was incumbent on them to educate and involve the public so they were very clear as to what risks and costs to their pocket books this **“Bold Action” **entailed. There is a fine line between boldness and foolhardiness and  since it is the citizens wealth at stake, they should have been given the chance to decide for themselves whether the line had been crossed.

Again quoting from the British Columbia Local Government Corporations guide;

“When a municipality creates a corporation, local residents may have a reasonable expectation that the corporation will conduct some of its affairs in public. While local residents have no status or right to participate at the annual meeting at which the corporation conducts its formal corporate business, they are the ultimate stakeholders in its affairs. Therefore, in the interest of transparency, municipal council must include in the corporate articles a requirement for an annual public information meeting, as is required for the municipality itself under the Community Charter.”

As we may all remember, it took a public outcry to force the first CityWest public meeting long after the statutory 18 month grace period had expired. Why the board of CityWest took such a long time to meet the public is a mystery as planning had started for the first meeting well over a year before when I was still on the board.

In an effort to obtain facts for the democratic process, I sent off a request to Mayor Pond to answer the questions highlighted in  maroon below and for information on CityWest. What follows is their official response highlighted in navy.

What is the current market value of City West as determined by the last independent study completed? In other word, what would the City receive net from the sale of City West?

“As per the Freedom of Information (FOI) legislation, the release of this information would put CityWest and the City of Prince Rupert in a compromising negotiating position should the Shareholder consider selling the assets of CityWest to a private-sector competitor. The firm that completed the fair market value of CityWest was very clear in stating the document is confidential and is only intended for use by the management of CityWest.”

I don’t buy this answer for the following reasons;

  1. Market Valuation is based on current financial information and this valuation is no longer useful to a potential purchaser as it was done on old financial data.

  2. Any potential purchaser interested in CityWest is more than able to and will arrive at its own industry valuations based on their oftentimes superior industry knowledge their financial analysts possess.

  3. Valuations are the property of CityWest and are available to the shareholder to do with as they wish

  4. In this case the question was addressed to Mayor Pond of the City of Prince Rupert. As the sole shareholder it is free to advise its citizens a range of values if not the exact dollar figure provided by the valuation. 

In any event, my opinion would be that the CityWest group of companies likely carries a gross valuation of some 50 to 60 million. Having this amount of money invested in a Telecommunications company that is struggling to pay dividends seems a bit extravagant for a city that is facing daily breakdowns of it’s primary infrastructure.

Taking the Mayor at his word, would you forward the following.
December 31, 2007 Financial statement for the City West Group? In addition as is common practice for public companies would you release the interim financial results as of June 30, 2008? Please ensure all subsidiaries are included for both sets of statements.

“The 2007 consolidated and audited financial statements are available on the CityWest website and enclosed in this correspondence. For clarity CityWest is not a public company as it is not a “reporting issuer” subject to regular reporting requirements under security law. Such reporting issuers are subject to very onerous financial reporting regulations because they have been given the privilege of distributing their securities to and having those securities traded by the investing public. The same considerations do not apply to CityWest. CityWest’s financial statements are prepared on a consolidated basis to take account of all of its subsidiaries. There is no requirement for CityWest to prepare separate statements on its subsidiaries or to prepare interim financial reports. Starting with the 2007 year, the parent company was audited and a Review Engagement (rather than a full audit) was done on the CityWest subsidiaries.”

I take exception to this answer for obvious reasons. The first is that we were assured that when CityTel became a corporation we would still have access to the same type of information that we had access to while it was a city department. As a city department, we had access to monthly statements which we no longer receive.  Further it is a reasonable expectation that while CityWest is defined as a private company, this private company is owned by the public and it is not unreasonable to expect at least quarterly financial and operating performance from a company owned by the citizens of Prince Rupert.

As for their refusal to release the subsidiary company statements, I’m not clear on what they are attempting to hide from public view but one can only guess that current cellular service may be taking a financial toll on the CityWest cellular subsidiary.

I will be repeating my request to be provided with current financial statement information once the new council takes it’s place before I complain to the FOI commissioner about CityWest’s response.

Since the companies in the CityWest group are separate and distinct entities, there is little justification for withholding annual reports of the subsidiary companies from the citizens.The British Columbia Local Government Corporations guide has this to say about this request.

“The audited financial statements and corporate articles must be available for public inspection at the municipal office of any local government shareholders. A request under the Freedom of Information and Protection of Privacy Act is not required to access this information Although the corporation’s summary financial information and articles must be kept at the corporate records office, as required by the Business Corporations Act, it may be impractical to provide public access to the documents at that location, especially if it is not a public location. Therefore, the articles must stipulate that statements and the articles will be available at the municipal office, where citizens expect to find a wide range of public information.”

What is the current compensation paid to the chair and directors of City West?

“The current compensation to all directors including the chair is $600.00 per month plus $200.00 of CityWest services or benefits.”

While I have no doubt the directors earn their keep, what is interesting is that during the formation of CityWest, Mayor Pond and his council assured the city taxpayers that sitting on the board was part of the City Manager’s duties and that no further compensation would be provided to him or her. How things change in such a short period of time.

What was the original level of dividends that was planned for when Mr. Kumar under your leadership had the first Business plan prepared for CityWest to incorporate and seek bank financing to acquire Skeena Cable?

“For clarity we assume when you refer to Skeena Cable, you meant to say Monarch Cablesystems. A business plan was developed relating to the Monarch Cablesystems transaction however disclosing that information would be unduly harmful to the competitive business interests of CityWest. CityWest must defend its interests whether from competitors or in conjunction with future negotiations with potential acquirers.”

What a crock! The only interests that would be hurt by disclosure of what the original planned level of dividends are those of Herb Pond, Tony Briglio, Kathy Bedard, Nelson Kinney, Ken Cote, Jack Rudolph and Paul Kennedy, the politicians who failed to provide the public with the information necessary to understand the risks and costs of this venture. 

The bold plan that Mayor Pond referred to with the grandiose vision off competing with Telus and Rogers across the north and beyond required huge amounts of capital not available from the banks. While confidential until the FOI commissioner rules on whether this is indeed such sensitive information, I can assure you that the City has received a great deal more in dividends since incorporation than was originally planned for. When the taxpayers find out the true amount of planned dividends I expect more than a few would gladly take Pond and company to the woodshed as they review what this venture has cost them on their tax bills. 

Who did the original valuation of the Skeena Cable acquisition and what compensation did this firm or individual receive for the valuation and any other services that were completed in the year Skeena Cable was purchased?

“For clarity we assume when you refer to Skeena Cable, you meant to say Monarch Cablesystems. The companies that did the valuation of Monarch Cablesystems feel that by disclosing this information might be unduly harmful to their competitive business interests and have requested that CityWest not release the requested information.”

Unbelievable, a company owned by the citizens of Prince Rupert purchase a company for some $23 million dollars and we are not even entitled to know who did the due diligence on the purchase nor what other compensation this firm or firms received from this deal?

Here’s my two cents.

I would strongly advise you (and everyone else) go to the city’s website and listen to the presentation from Rob Brown and Jack Payne of CityWest during Monday’s council meeting (which was poorly attended). It is an interesting and somewhat lengthy presentation, and very informative. It can be found at … ber_10.mp3 They address a lot of the questions/concerns you pose and answer some questions from council.  These include:

  • Rogers is able to come to town because they are using the services of CityWest (like the fibre-link) and Rogers is (I believe) a customer of CityWest.
  • CtyWest welcomes Rogers because they offer GSM technology that many visiting tourists and business people need and is not available on any other network (Bell/Telus etc…)
  • CityWest registered a net gain of 300 new cell phone users to date since the start of 2008, so they are holding their own when it comes to competition.
  • If CityTel would have stayed as it was, every lost customer would have been lost revenue as there was no room for growth. Incorporating the company allowed it to expand outside of Prince Rupert and replace customers who migrate to competition locally with customers for different services in other communities.
    -Contrary to the “deterioration of the profitable cell service”, there are now 200+ Blackberry users and hundreds of people subscribed to unlimited web browsing and text messaging that would not have been available without the NorthwestTel partnership.
  • There are over 50 people employed in Prince Rupert because CityWest centralized their customer service center.

I’m not seeing the connection between running a PR campaign and the election. As a business CityWest is trying to promote its local advantage, and does so throughout the year. Anything linking that to the election is simply speculation.

And finally, I encourage further discussion on the matter. Healthy debate is a cornerstone of a good democracy.

Would you confirm whether or not the city has clawed back the power to declare dividends from the directors in the amended articles of incorporation for the parent company in the CityWest group? Would you also send me an electronic copy of the amended articles of incorporation?

"The change you refer to in the articles did take place in 2007 and are outlined in Article 22.2 and state the following:

“Subject to the Business Corporations Act, the company may from time to time declare and authorize payment of such dividends that, pursuant to section 137 of the Business Corporations Act, the shareholders may by an ordinary resolution.”

The section actually reads, … the shareholders may determine by an ordinary resolution. In other words there is no need for an independent board of directors as the city in it’s wisdom will take what it wants out of the company.

While some may feel this is only fair, the Mayor and Council have taken great pains to tout the independence of the board of directors and have deflected all hard questions based on the so called independence of the CityWest board.

Of more serious import, they have also assured us that the city would not be liable for anything the CityWest group of companies becomes involved in. The power to declare dividends is regarded as one of the prime responsibilities of the board of a corporation and when a shareholder chooses to exercise this power, it runs the risk of “Piercing the Corporate Veil” and becoming liable for the corporations’ debts and other liabilities.

Quoting from the British Columbia Local Government Corporations guide once again;  

Shareholder liability
Unless a shareholder has been instrumental in directing a corporation in actions that accrue liability, liability is normally limited to the value of the shares held. However, municipal shareholders often wish to exercise more control over the decisions of their wholly owned corporation than is typical.

• Council should consider seeking legal advice on the risk of liability to the municipality as shareholder.

According to the B.C. Business Corporations Act, “a company has the capacity and the rights, powers and privileges of an individual of full capacity.â€

In closing, CityWest is a valued asset of the city and a major employer. With the competing priorities facing the community, it is reasonable to suggest that an informed public debate be held on the future of Citywest and whether it can compete in the telecommunications world of today and tomorrow.

Change in this industry happens overnight. Witness the recent decision of Bell and Telus two fierce competitors to adopt a new cellular standard that CityWest is not equipped for.  Or the recent breakthrough’s in wireless transmission technologies that allow cell providers to pump 100 MBS to your wireless devices.

What impact will these and other innovations have on CityWest’s present investment in it’s copper telephone lines and television cable and it’s overall market value. When Rogers and Telus are able to beam telephone, Internet and video from their cell towers to any spot in Prince Rupert, how will CityWest compete?  What value will the company be then to the City of Prince Rupert or as an employer?

And finally, is it the place of a struggling city to be competing with better capitalized and much stronger players in an industry that our elected officials have little knowledge of?

Thanks Shaun, I watched the presentation but thank you for pointing out it’s availability on the city’s website and the link. I expect it is a rather large file to download but I hope people do so.

Rogers could also purchase bandwidth to come to town from Telus but that’s great that CityWest has the contract. That will help pay for the 10 million or so that the fibre optic line to Terrace cost.  Great stuff that they are signing up new cellular customers but I’m looking for financial information from the company.  We don’t know how the transfer of the Cell Services to Northwestel impacts the company’s bottom line.

As for linking your employer’s advertising revenues from CityWest to the election, as podunkian is apt to say… the optics are terrible.

Wow that’s a pretty intense bit of information to try and digest in one fell swoop, but thanks for taking the time to put it all together for us.

While I understand S Thomas’ point of view on the adversiting thing, it is of course disingenious to not point out that the local papers benefited greatly from the advertising splurge of the last month… jingle jingle jingle

(BTW for whatever reason I can’t get that city link to download the audio, but I suspect that is more my technostupidity than anything else)

For City West’s current media blitz, You only need to go back to a year ago and a very well thought out column from the now exiled Leanne Ritchie then of the Daily news who pointed out that in the past CityWest was rather hesitant to make much in the way of public comment on their developments … 6576738395

So its quite fascinating to watch the multi media public relations campaign of the last month, a true conversion on the road to Informational Damascus I guess.

It shall be interesting to see if your outline of the telecomunications sector plays out locally as you describe, as it will be to watch the replies come in on this topic.   

Thanks for the well-crafted explanation, Wilf! :smile:  Hopefully CityWest will be very profitable.  My taxes are already ridiculous. :imp:

I probably should have mentioned that, but the thing is I wanted my opinions separated from my work. To be honest, that is one of the reasons I have been hesitant to post. Had I posted anonymously this wouldn’t have even been raised, so I find a bit of a dilemma in encouraging people to post under their real name (as was done with eccentric) and then pulling their jobs in to their post. 

Simply put, my job doesn’t define me.

My belief that CityWest’s PR campaign has nothing to do with the elections is not impacted at all by where I work and is, as I said, speculative. I would have said the same thing if I were working at the grocery store, Zellers or anywhere else. If the campaign stops on November 15 then say what you will, but we don’t know that at this point in time. And CityWest has been saying that being local is one of their main advantages ever since Rogers announced it was coming to town.

Personally I (not my workplace) think CityWest being incorporated was the right move to grow the company’s customer base. That being said, I (not my workplace) wish you all the best is finding the information you’re seeking and hope more people weigh in on this matter.

I agree with you Shaun, incorporating CityTel was a good move to remove it from the core business of City Hall. City Hall had bled CityTel dry over the years leading up to incorporation and no doubt will continue to be an easy pocket to pick when politicians refuse to face up to reality and make hard choices about what the town can really afford.

In fact unless the telephone company was incorporated into a separate entity, it was impossible to either sell the operation or to sell equity to a telecom with deeper pockets and expertise than CityWest has or can have.

What I do not agree with is the manner in which Pond and Co. did it and how they saddled the taxpayers with increased taxes to fuel CityWest’s expansion without being candid with the city on the acquisition of Monarch and what that would mean to their taxes.

Thanks to Podunkian, I reread the Leanne Ritchie Article and I have to agree with her closing comment;

“People should be outraged about this- they’ve been lied to and left blind when it comes to an important legacy left to them by the city’s founders, a municipally-owned telephone company. It’s time to pick up the phone and demand some answers.”

All of the previous shenanigans are water under the bridge now and the citizens now have an opportunity to elect a new council hopefully that will bring real openess and transparency to local government. Frankly, the future of CityWest is too important to too many people to leave it up to the politicians.

In the next decade this company will face challenges that will threaten it’s survival and it does not have the human or financial capital to withstand these. The demographics of the baby boom generation and innovations in wireless are just two trends that will rock this company to it’s foundations.

The competition for skilled workers in the telecommunications industry is already intense and anyone with experience with attempting to hiring specialized workers in Prince Rupert will attest to the difficulties Citywest will face as a good portion of it’s workforce reaches retirement age within the next decade.   :-) In fact if my memory serves me correctly, Mayor Pond used the difficulty of recruiting specialized help as an excuse to hire Tanalee Hess without going through the proper motions!

As for innovations in wireless, CityWest has already moved from being a provider of Cell Services to being a broker for Northwestel. In time, it is quite possible it will lose the very inhouse expertise that would allow it to compete as new wireless technologies continue to erode it’s land line base and erode it’s internet and cable operations. 

There are options available now to the owners of CityWest that won’t be available when it begins to fail and the city needs to have an informed debate on one of it’s most important assets and how 100% ownership fits within a city struggling with it’s finances and attracting investment to one of the highest taxed communities in the province.

It’s not uncommon for sales to be structured with guaranteed employment for a community nor is it uncommon to sell portions of a company to acquire both financial clout and expertise.  Who is to know whether any of the major Telco’s would pass on the opportunity to have a Northern base of operations to service NorthWestern BC.

Lastly Shaun, if my comment was construed to suggest you were simply a mouthpiece for your employer, I sincerely apologize as I welcome your honestly held opinions.

To quote from the British Columbia Local Government Corporations guide, “Corporate directors and municipal councilors have different obligations. A corporate director is required to “act honestly and in good faith with a view to the best interests of the company.â€

Mr. Rimmer, thank you for your contribution.  As another founding director of CityWest, I shared your views (not appointing Mr. Howie as CEO) on CityWest. [/quote]

Thanks Cyril. Good to hear that you’re still watching events unfold in our community.