TDRA questions council
on sale of Bruce Telecom
By Liz Dadson
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The Tiverton and District Ratepayers' Association (TDRA) had a list of 15 questions it wanted answered by the Municipality of Kincardine regarding the sale of Bruce Telecom.
In committee-of-the-whole Wednesday night (March 19), mayor Larry Kraemer addressed 14 of those questions.
However, the TDRA came armed with more questions which Kraemer declined to answer.
TDRA president Bob Wilson was joined by director Dorne Fitzsimmons and an audience of followers, demanding answers to what they believe has been a complete lack of transparency by council and the mayor regarding the sale of the BMTS (Bruce Municipal Telephone System, now Bruce Telecom).
They are asking why Bruce Telecom was sold for at least $9-million below book-value, and want council to explain why there were at least 10 months of closed-door meetings regarding the sale of Bruce Telecom.
"Jan. 23, 102 ratepayers requested that the TDRA executive arrange a general meeting and have the mayor address the sale of BMTS (now Bruce Telecom)," said Wilson. "During a short meeting with some of our executive, the mayor did not want us to advertise this meeting in the town of Kincardine or Bruce Township, and he followed with an E-mail placing seven rules on our proposed meeting - rule three, there would be no Q&A session. How can you have a meeting without a question-and-answer session?
"The TDRA operates with total transparency and, therefore, we could not meet his demands for a meeting in Tiverton."
Wilson said that at council's Feb. 19 meeting, most members expressed that they were betrayed by incorrect and incomplete information regarding the problems with the Huron Ridge sewage system.
"Could it be that this same council has been fed incorrect information re: the financial structure of BMTS (now Bruce Telecom)?" asked Wilson.
"It is our understanding that the same consultants established a value of BMTS (now Bruce Telecom) and then sought out potential purchasers and are to be paid about $540,000 for this input. Could this be a conflict of interest, and who was present when the bids were opened?"
Wilson then cited the following four additional questions for council to answer:
Kraemer said he had prepared a list of answers to the questions originally submitted by the TDRA and would not answer any others.
He noted that he had been prepared to address the community meeting in Tiverton, organized by the TDRA, under the following rules:
The TDRA's original questions, with Kraemer's answers are as follows:
Please explain the entire process re: the sale of BMTS (now Bruce Telecom) in detail.Council had five options regarding Bruce Telecom and the best option was to sell it.
BMTS (now Bruce Telecom) is owned by the ratepayers of the Municipality of Kincardine and not the council. Please explain why a referendum was not held to authorize this sale.
Council was elected to make decisions about the assets of the municipality.
Please show us the motion where the BMTS (now Bruce Telecom) board or council authorized the expenditure of money to hire a consultant.
Staff can get that information for you.
Please explain the relationship between council and the BMTS (now Bruce Telecom) board, where council has deemed this board to be a "department of council such as the planning department." This was stated by your CAO. We point out that the planning department is a cost factor whereas BMTS (now Bruce Telecom) has at least 85 employees and continued to contribute millions to our municipality.
The Bruce Telecom board is under the authority of the council. Council delegates authority to the board by bylaw. The transaction is an asset purchase agreement, not the sale of a corporation.
Did Eastlink approach council or the BMTS (now Bruce Telecom) board before a consultant was hired?
How many consultants were approached to establish their value of BMTS (now Bruce Telecom)?
One, as recommended by senior staff at Bruce Telecom.
Did council delve into the quality of service that Eastlink provides in the area to ensure that the current BMTS (now Bruce Telecom) customers will receive at least comparable service?
No, that's why only quality companies were invited to the process.
Why was an appraisal of BMTS (now Bruce Telecom) requested in April of 2013, and by whom?
The appraisal was requested by council due to concerns about the loss in value of Bruce Telecom.
How many law firms were involved in this sale? What are the total legal costs for this transaction? What law firm was used?
Two law firms were involved, McMillan and Hicks Morley. We do not know the total legal costs because the purchase is not finalized.
How much money has BMTS (now Bruce Telecom) contributed to the Municipality of Kincardine in the past 10 years?
You can get that information from the treasurer.
"You've had five days to get this information together for us," said Wilson.
"I don't answer to you," said Kraemer. "I'm answering your questions and getting you information."
How and when will the $110,000 for the initial gas pipeline study, taken from BMTS (now Bruce Telecom), be repaid to taxpayers?
That is undetermined at this point.
Why has the consultant's report from Accelerator Strategies Inc. not been made public? Why has the "five-year plan" submitted by the BMTS (now Bruce Telecom) board in July of 2013 not been made public?
That information cannot be shared at this point.
What are the terms and conditions in the non-disclosure agreement with respect to which information cannot be disclosed to the public?
I'm not providing any information on that.
Audited statement for 2012 shows book-value for BMTS (now Bruce Telecom) at $33,273,000 and this council sold it for $24,000,000. Why the huge discrepancy?
The book-value of $33-million would include the cash-on hand of $3-million. So the actual value would be $30-million. There was a drop in value of the asset which was why council decided to sell the company. The profitability went down and so did the value of the company, which explains the difference of $4-million.
The $26.5-million sale price comes from $24-million plus $3-million, minus $500,000 in adjustments. That valuation was partly based on EBITA (Earnings Before Interest, Taxes and Amortization). In 2010, that valuation was at $6.5-million, but had dropped to $4.56-million by 2013.
The TDRA has grave concerns with this council in the way in which the sale was conducted and lack of transparency on this issue.
There were a number of factors, including a drop in the subsidy for hard-to-service areas; drop in long-distance revenue; competition with hand-held devices; competition for land-line services; and number-portability. Council had concerns about a loss of $1-million in profitability, and local competition hadn't even begun yet.
"Are you not going to answer Question 1," asked Wilson.
"That's all you're going to get on this matter," said Kraemer. "Those are my answers."
"So, that's a refusal?" asked Wilson.
"Yes," said Kraemer. "Your delegation is now over."
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Saturday, March 22, 2014