We noticed that NewsNow printed an interesting update on the Biodigester in this week’s edition of the paper entitled “Bio Blues”. The article examines the numerous non-compliance issues at the Biodigester found by the Province, which we do not find surprising. You can read the entire article here: https://www.wn3.ca/2018/10/06/bio-blues/
Given that “thing” on Sobie Road is probably burning more money than it is organic material, we thought we would take a look back at the Bio and see how Council voted on one of many issues to arise out of that white elephant. It has been a hot item on the minds of voters for this election cycle and one that causes incumbents to seek shelter or provide excuses. So let the record speak for itself.
We searched through the Town’s online archives and a popular search engine and the first mentions of the Biodigester occurred way back in 2010 with a land consent application at the Committee of Adjustment on December 7, 2010. An excerpt from the minutes is as below:
This author did not realize that (now Regional Councillor) Tony Quirk was part of Grimsby Energy Inc. (GEI) until this hit came up… but this is not the point of this post. What is interesting is the comment that they will need all the land for growing their own “food” for the Biodigester. It sure looks like that idea fell through, a forewarning of things to come.
The COA application can be found at this link and the meeting minutes at this link. As an interesting side note, it seems these documents fail to come up in results when searching for COA material and “Grimsby Energy” on the Town’s document search engine… but Google sees it.
Back to the matter, in January 2015 James Detenbeck (who jumped ship in 2017) of Grimsby Eneregy Inc, the Town’s
private public privately held company, presented himself before Council to have them endorse GEI’s application for a government grant for the project and proclaim it an “approved” project. Unfortunately there was no recorded vote for that motion, probably because at that point GEI looked like they were taking care of their own affairs in their super-secret lair.
But the truth of the matter is that GEI only seems to appear before Council if it needs to deliver a puff piece about itself, beg or borrow something. And on the topic of borrowing, they did have to beg to get the borrowing for the Biodigester… to the tune of $4.5 million.
Issue Before Council
All the memos and correspondence on the loan matter were packaged up into an agenda and a Special Meeting of Council was called. The meeting was held on May 26, 2015 and was dedicated solely to the loan guarantee issue. Below we examine the documents included for the consideration of Council.
In an undated letter to the Town, received on April 24, 2015 from John Wolfe, solicitor acting jointly for GEI and the TD Bank, he stated for the bank to lend the $4.5 million to GEI that one piece of security was requested. Namely, this was “a guarantee given by the Town of Grimsby in favour of the lender, respecting the due performance of the borrower in repaying the loan”… in simpler terms a “co-signer”.
With little or no assets (we have no idea as GEI is misrepresented as a “private” company), the TD Bank felt insecure in lending $4.5 million for the project and wanted the Town to put their money on the line if GEI defaulted on payments. That should have been a tip-off right there. The letter also advises that the Town seek independent legal advice on whether to guarantee the loan or not.
You can read this correspondence including the guarantee document here: Correspondence of John Wolfe & TD Loan Guarantee Form
A subsequent memo dated May 22, 2015 from then Town Manager, Keith Vogl, stated that independent legal advice was obtained. We were unable to locate this documentation, as it’s probably classified “TOP SECRET” by the Town. While we can not look at that for now, we can look at some of the “matters of interest” from the legal opinion in the Vogl memo, as excerpted below:
Wow! The Town wanted to avoid violating the Municipal Act in assisting a “private” company… well, they found a sneaky way around that now didn’t they?
Wow again! So not only did GEI not have adequate security of their own, but even the Town would have to take out another loan of their own to payoff the GEI loan if in default.
Wow Unbelievable! The Town’s solicitor called it for what it is, no white-washing the significance of acting as a guarantor on a $4.5 million loan for such a project. But even better is the expert legal opinion and advice, which Council and GEI seemingly has not followed, regarding the “full public disclosure of the project”. Unknown is whether the solicitor made a recommendation for the Town to guarantee or not guarantee the loan for GEI.
You can read the full memo here: Memo of Keith Vogl – GEI Loan Guarantee
Another memo on the matter was received from Steven Gruninger, the Town’s Director of Finance, detailing the financial implications and concerns that would accompany guaranteeing the loan. While the memo contained several implications, we have picked out what we feel is the most significant as below:
This excerpt from the head of the Town’s Finance department confirms that the Town could potentially be putting itself between a rock and a hard place, if GEI defaults on it’s obligations.
You can read the full memo here: Finance Memo – GEI Loan Guarantee
Unfortunately this Special Meeting of Council was long before this site existed and before our contributors started taking notes at Council and various Committees, so we need to rely on the rather scant Town minutes that don’t detail who said what, who had this concern and so forth.
In hindsight, we know they missed that October 2015 target by a few years. It would be interesting however to know what the “considerable discussion” entailed. Unlike other municipalities who live-stream or at the bare minimum make MP3 recordings of their meetings available online, we will have to just be satisfied with those two words as a summary of what was discussed.
The vote was recorded but the minutes do not specify by whom. Presumably, it was Alderman Kadwell who requests recorded votes on key issues to ensure a clear record of how Council votes is captured. So…
How Did They Vote?
|YEAS - APPROVED THE $4.5 MILLION LOAN GUARANTEE|
|NAYS - DID NOT APPROVE OF THE $4.5 MILLION LOAN GUARANTEE|
Do you see a theme here with the voting patterns of Council? One leads and (almost) the rest follow, except for Alderman Kadwell who saw this boondoggle coming a mile away (1.6 km for those raised on the Metric system).
Discussion – 2016 – $4.5 Million Burned
A little over a year later in June 2016, GEI came back to tug at the apron strings of Council. Despite receiving the windfall of a Town-backed $4.5 million loan a year earlier, they obviously had burned through all that cash even before the Bio was even near operating status. We say obviously because if you have money on hand, you generally do not need to peddle for another loan.
This time GEI asked for and received a $600,000 short-term loan from the Town, approved by Council, to keep them afloat. This loan has since been re-paid, most likely from the $9 million resulting from the Town’s sale of their portion of Niagara Regional Broadband Networks (NRBN). That $9 million has disappeared into the black hole of the Town’s “private” hydro companies and nobody will say what exactly happened to it. For more info on the NRBN money, please visit this NTW article.
Here was the short-term loan motion passed by Council. Note again the voting pattern (sorry, no fancy table this time):
Discussion – Lack of Financial Disclosure & Conclusion
The Biodigester has been an over-hyped science-fair project from the very start. Couple that risk with management that has little or no experience in the energy sector and in at least one case, questionable ability in corporate compliance (link here), and you have the perfect recipe for financial disaster. While we may never know what the solicitor recommended on the loan guarantee issue, we know that almost all of Council voted to take on that large financial risk and move a dubious project forward.
Has it paid off? Like the $4.5 million loan that was burnt through rather quickly, how much of the $9 million in cash from the sale of NRBN have they used up? We all want to know, but the Board of Directors (which includes the Mayor and some Alderman) will not disclose the financials.
Unless voters elect for a major shakeup at Council including voting in new Aldermen and a Mayor who are willing to shine a light onto the darkness and secrecy of GEI, the public will just be led along and be told that “everything is fine”. Most of the new Alderman candidates have pledged to bring the secret financials out for public scrutiny, including Mayoral candidate Jeff Jordan who stated at the recent Chamber of Commerce debate that he wants “to open the books and have a full audit” of the Biodigester.
On the flip side, Alderman Berry, who sits on several hydro boards including GEI with outgoing Mayor Bentley, is quite clear on the matter. In that same debate, on the question of disclosing the Biodigester financials he stated “it’s a private corporation”. What was also interesting about his response was the following (YouTube link here):
“I don’t think it’s a business we should be in. […] When it came up on Council we went and debated it over and over. I wasn’t in favour. I don’t go around announcing that to people that I was not in favour.”
Considering Alderman Berry’s vote to guarantee the GEI loan, it seems there is a contradiction. The vote to guarantee the loan was a “make or break” moment for the Biodigester, if he was not in favour of the project he should have voted with Alderman Kadwell against the motion. If enough on Council had defeated the motion, there would have been no guarantee to the bank, the bank would have denied loan and without the funding, no Biodigester. Even if you feel we are extending logic a bit, the fact of the matter is someone who is against a project would and should not vote “yea” to guarantee a loan for it.
What about the rest of the incumbents? Well, Alderman Kadwell saw the writing on the wall and was the true “citizen’s voice” on that vote, but everybody knows that already. The rest of the current Aldermen are lining up behind the outgoing Mayor and maintaining more or less a code of silence on the issue. There has been some wavering with Alderman Wilson and Johnston on the Biodigester recently, but it is election season so it can be difficult to know if those questions on GEI/Biodigester finances are just “in the spirit of the season”.
Our instinct tells us that much like the Biodigester itself, the financials are not looking so well…. an educated guess as “GEI is a private company”. That does not mean they are forbidden to publish their financials, it is simply they do not want to. Why not? The CEO of GEI, Shaffee Bacchus has said he would release them if Council votes to do so… but so far nobody has put forth the motion to effect this. If everything is good and the Bio is making big money, why wouldn’t they vote to bring them out… what better way to top off a campaign than trumpet the success of the Biodigester they voted for? Sadly, the truth hurts and that is why the information is being suppressed.
What is not suppressed is the fact that GEI has a $4.5 million dollar loan for the Biodigester to pay back over a 12-year period. And if they cannot do it, guess who is on the hook for it?
Like our previous post on LJM, we will leave you with a question to ponder. If those who voted to guarantee the GEI loan which was “a siginficant contingent liability” according to the Town’s solicitor, what other big financial risks are our current Council willing to undertake, if re-elected?
This was a long one, but we are glad you stuck with us all the way through. Stay tuned for another post in this series!