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Waterfront Trust – What’s next?

Waterfront Trust – What’s next?

In November 2000 a small group of citizens gathered at in the Standard Life Building in the boardroom of the law firm Gowlings. Among those present: lawyer Gary Graham, representing the Hamilton Harbour Commissioners, Ray Harris, Chair of the HHC, Bob Charters the lead negotiator for the City of Hamilton, and federal officials led by Alice Willems, representing Sheila Copps, Hamilton’s member of the federal cabinet. The purpose of the gathering was to officially sign off on a deal that would end decades of legal action between the City of Hamilton and the Hamilton Harbour Commissioners. As part of the deal the Harbour Commissioners would turn over title of all of the Hamilton Harbour shoreline west of Mary Street to the City. Once the documents were signed, Alice Willems reached into a small handbag and pulled out a cheque for approximately $22 Million—the Feds inducement to come to agreement. Out of the $22Million, 15 Million was earmarked for port improvements. But $6.3 Million was handed over to the City for the formation of the Hamilton Waterfront Trust with a mandate for the “improvement and the development of the (harbour) lands through projects such as the current Waterfront Trail.”

For Bob Charters it was a bittersweet occasion. A tough bargainer, he had seen the harbour negotiations through to a successful conclusion, but only days earlier he had been unseated after 9 years on city council due to the disruption caused by amalgamation moving from a two councillor-per ward system to a single councillor system. Returning to private life, however, he would only be out of the public eye for a short time. In May of 2001, on the recommendation of a committee chaired by his former Council colleague Chad Collins, Charters was appointed to the newly-formed Hamilton Port Authority. He also became a trustee of the brand new Hamilton Waterfront Trust which Collins chaired. As Chair of the Council’s powerful Appointments Committee Collins found places for two former city staffers who had also been displaced by amalgamation. Werner Plessl and Chris Firth-Eagland were appointed to the Hamilton Conservation Authority. As former city employees Plessl and Firth-Eagland had key roles in the development of the Pier 4 and Bayfront Parks and the subsequent trail connecting the two parks to Princess Point. They were reportedly passed over at amalgamation because they were deemed too “political” for City Manager Doug Lychak who was determined to change the culture of cronyism at Hamilton City Hall. (Lychak at this point had less than a year to go before he would be fired.) Soon Plessl would become Executive Director of the Waterfront Trust and Firth Eagland would become a contractor, consultant and provider of rental equipment to the HWT.

The Waterfront Trust embarked on an ambitious agenda, and from 2002 to 2005 had made significant strides, in “connecting people to the water’s edge” as was its self-proclaimed mantra. The Trust completed the extension of the trail system to connect Pier 4 Park with Pier 8. The old HHC sailing school was converted into the Williams Coffee Pub. On the shore of Lake Ontario a new trail was built along the Beach Strip and an existing trail through Confederation Park was widened and enhanced. Natural vegetation with public access encircled Windermere Basin. The trust had done a great job and the community was delighted. Nobody paid much attention to details like the lack of public tendering on some of the trails, and indeed a legal interpretation of the Deed of Trust that was the Trust’s charter determined that the Trust did not have to adhere to city tendering policies. Also no one knew that the HWT had become a source of jobs for relatives of Trust members and staff; or to relatives of city employees who were friendly to the trust. Nor was everyone who should have known, aware of a construction accident or accidents that occurred that eventually resulted in a damage settlement of more than $400,000 after interest and other charges, of which the city absorbed the lion’s share. These were early signals of the beginning of a culture of secrecy and lack of transparency at HWT.

The project that best exemplifies the byzantine role of interlocking directorships in the affairs of the HWT, was the agreement to construct the Lakeland swimming pool and recreational complex in Confederation Park. The project, located in Collins’ Ward 5 was advertised as the work of the Hamilton Conservation Authority. The HWT would act as project manager and would make a modest financial contribution.  Yet, at the time the project was being negotiated and approved, Werner Plessl, was simultaneously CEO of the HWT and until the end of 2003 a member of the Conservation Authority. During the same period Chris Firth Eagland was both Chair of the Conservation Authority and a contractor providing services to the HWT. Chad Collins too, was simultaneously a member of HCA while Chair of the Waterfront Trust. As well, Collins as Chair of the Council Appointments committee, had influence over the appointments of all the other members of both the HCA and 4 of the 5 members of the  Waterfront Trust. Under the terms of the Lakeland Pool deal the Conservation Authority would provide $2.5 Million toward the $3Million-plus project; but on closer examination the city was putting up the largest share of the funding. The Conservation Authority, ostensibly the proponent of the project, would only contribute about $750,000 of its own money and even that was financed by a loan from the city. An unusual aspect of the deal had the Conservation Authority receiving a “management fee” in excess of $400,000 even though the HWT was ostensibly the project manager. A large chunk of the management fee was subsequently rebated to the project,. Between them, the city and the Waterfront Trust had paid over $2 Million towards the pool and banquet centre. The Conservation Authority as proponent, ended up paying only 30% of the total project. Originally budgeted to spend $250,000 as its share, the Waterfront Trust actually paid $740,000 from the $6.3 Million that it had been given to develop trails and green space. The increase in the HWT share was not revealed until 2008 when an audit noted that the HWT contribution was recorded through writing down an invoice by over $700,000—effectively understating the HWT deficit for that year. It was that audit, that led to the “adverse opinion” by auditors Guyatt and Moffat who had thrown up their hands at the HWT’s sloppy accounting and questionable controls, not to mention potential conflicts of interest.  Whether a municipal swimming pool and banquet centre were even allowable projects under the Trust’s charter is unclear, but at the end of the day there was a new public swimming pool in Ward 5 – built without the need to compete with other recreation projects on the city’s capital budget.

 

 

An examination of the Waterfront Trust financial statements shows that after the surge of construction activity in 2005-06 the financial position of the Trust started taking a negative turn. The success of the waterfront trust was also its Achilles heel. By 2006 it had largely completed its original mandate to build waterfront trails. With no major construction projects on the horizon the Trust had to draw on its investments and whatever profit it was able to generate on the restaurant and other retail services to remain solvent. The Trust showed a profit of $820,000 in 2007, but this was only achieved by a bookkeeping entry that re-stated the way the Trust depreciated its assets. Without the entry the Trust actually lost over $500,000. From then to now the Trust has recorded annual losses of $211,000 in 2008, $364,000 in 2009, $893,000 in 2010 and the $461,000 loss declared for 2011 which could be higher depending on the interpretation of some of the accounting entries contained in that report.

The trusts’ supporters at  the city threw the HWT a lifeline in 2009 when the trust was commissioned to build the Pier 8 skating/rollerblading facility and to operate it for the city but neither the management fee for construction work nor the annual $150,000 operating feed paid to the HWT have stemmed the losses thus far. To try to help out, the city even up-fronted the money to build the rink despite a stated  purchasing policy that allows funds to be advanced only on completion of work and receipt of detailed invoices with backup. Things reached a point last year where the HWT raised cash by selling to the City an $80,000 Zamboni that the HWT that had only purchased a year before for the new rink.

Despite the financial uncertainty the city continues to vote significant sums to HWT. So far this year the city has authorized a $1.3 Million payment to the Trust to finish its expansion of the Williams Coffee Pub and another $500,000 for studies related to the development of Pier 8. The monies were voted even though there was no detailed budget provided to account for how the $1.3 Million would be spent, and further—the work was already well underway. Earlier this summer local entrepreneurs opened a high-end restaurant in the former Discovery Centre, and this was cited by Trust member Coun. Tom Jackson as “new revenue on the way this year… that will further transform the image of our City!” The restaurants reportedly will pay approximately $132,000  in rent to the HWT, and probably a percentage of proceeds; but with an annual permanent payroll of over $340,000 the HWT will need to find other sources of revenue—or does it?

When Chad Collins stepped down from the HWT in 2010 he noted as part of his reason for leaving that there was neither land to develop nor funds to carry it out. The city treasurer has also said the current HWT financial state was not sustainable. Accountants familiar with the HWT finances say when an organization reaches a point where there are steady losses year after year and no game plan to reverse the situation, at least none that has been shared with the public who are being asked to fund the organization; that it raises the question of whether the HWT is a “going concern”—an accounting term that determines whether an organization is viable or is effectively insolvent There are suggestions that there might be an opportunity for the HWT to participate in development projects for Pier 8 when it is turned over to the city. But how and why this would be better than to allow the normal development process to take place is unclear. To the question of whether we would have the current trail and park system without the HWT, as Tom Jackson suggests; it’s worth pointing out that a large portion of Hamilton’s bay front parks and trail system were built pre-HWT by the city. If the HWT is no longer a going concern, and if the HWT has essentially fulfilled its mission then the question that is starting to be asked is what is the urgency to keep it going as a parallel entity to the well established (and more important—much more publicly transparent)– city parks and works departments?

 

About John Best

John Best had enjoyed a lengthy media management career, in television and radio and now print. As Vice President, News at CHCH in Hamilton, John oversaw a significant expansion of the news operation. He founded Independent Satellite News, Canada’s only television news service providing national content to Canadian independent TV stations. John is a frequent political commentator on radio and television, a documentary producer and author of a book and numerous articles on historical and political subjects. John is a past recipient of the New York Festival’s award for writing in the International TV category.

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