BY BILL KARNER CPA, CA
Special to the VOICE
Unfortunately the recent term of council has seen much controversy and concern for the residents of Pelham. I have read with great interest all of the interviews with the various candidates running, and it is good to see such a large number of people throwing their hats in the ring to serve their community.
I myself seriously considered doing so, but in the end decided not to because of work, family and other commitments. I applaud the Voice for the effort it has put into covering the election, and in keeping the residents aware of issues going on at Town Hall. It was disappointing to see the treatment the newspaper was subjected to by Town Hall and our current mayor and council, but that is a whole different story.
I was born and raised in the area and my parents lived not far from St. Johns Conservation Area for many years. This is actually Thorold but we considered ourselves residents of Pelham. We played sports in Pelham, went to public and high school in Pelham, shopped in Pelham and my father proudly worked in the Town of Pelham Works Department for many years.
If you lived in Pelham you were obviously aware that the arena on Haist Street was reaching the end of its life cycle. The very first year I played minor hockey was the year the old arena opened, and I have very fond memories of time spent there.
The Town obviously needed new facilities and the real root of much of the controversy is how much the Town can afford, how will it be paid for, and what impact will it have on the other services that the Town provides.
My concern initially began back in 2016, with the announcement of the proposed new community centre and the subsequent release of the plan to pay for it.
When I saw the price tag of $36,000,000, the size of the facility, and the plan to finance it, I was surprised and concerned.
From the date of the unveiling of the price tag and financial plan, to the date of council approval, was a relatively short period of time. Being an accountant, I began to investigate the plan, and Town finances, and my level of concern grew.
I reached out to the Mayor, Council, and the Treasurer with various questions and concerns. I took the time out to review many reports and asked follow-up questions that were very relevant. The Mayor was the one answering, but in the end my follow-up questions went unanswered.
I sent a final email the morning that council held its special meeting authorizing the project. In part, it read as follows:
My message to each of you (and from many of my fellow residents) is to defer giving the green light to commence the project until much more financial due diligence and widespread consultation has been undertaken.
I would suggest you form a Committee, made up of a wide range of residents, council members and staff to review the cost projections (both capital/operating) to ensure the proper due diligence is completed. These people may well indeed be users of the facility but would be looking at the project from the financial impact it will have on the Town’s finances for years to come. I am sure you would find more than enough qualified residents (with a Finance, Construction background) who would volunteer.
In closing, I ask you please defer a decision on proceeding and insist that more consultation and due diligence be done on the project.
If you don’t I sincerely believe you will regret your decision when you look back in hindsight.
In the final vote, with Councillors Papp and Junkin voting against, I was appreciative that it appeared that these two had maybe listened to some of my concerns and wanted the Town to do some additional due diligence.
Since then, serious financial troubles have indeed surfaced and they were highlighted in the two KPMG reports that have since been issued. Those reports should have be very concerning to anyone who has a financing or accounting background.
Fast-forward to last week’s edition of the paper, in which Councillor Papp made the following statements when questioned about the initial KPMG report regarding the Town’s financial issues:
PAPP: At the time and based on what KPMG had given us, I’d say from a standpoint of— yeah, it took our breath away. So the question was, how did we get there? How do we fix it? What exactly is the extent of the problem or the— what do you want to call it? Yeah, the problem. So the fact is, we didn’t drain all the reserves because there are certain reserves mandatory that we have to keep.
INTERVIEWER: But others aren’t?
PAPP: No, others are discretionary. So along comes the famous debentures, and they work, so you can borrow for the future. But you’ve also got to be able to repay it and be sure that you can repay it, make sure that the projects and the services you’re doing are actually for the ultimate benefit for the whole municipality down the road.
The fact is the KPMG report was very clear—the Town did drain all cash from the reserves, even from those that Mr. Papp refers to as mandatory reserves.
In addition, this lack of cash to back-up any reserves continued to the end of 2017 and most probably to today. This “internal borrowing,” which for the most part likely relates to funds being poured into East Fonthill, has to be repaid by taking out future debentures (another word for loans), deferring or cutting back on capital expenditures, raising taxes, or increasing the tax base without increasing related expenditures (which this current council has had a hard time doing). This is all in addition to the current outstanding long-term debt the Town already has.
Last week I enquired of Mr. Papp—had he been misquoted in his interview?
He replied that he was not misquoted, and he would get me the information so that he would be perfectly clear and correct. I thanked him and guided him to the relevant pages of the KPMG report. I got a second reply later, acknowledging that he had misunderstood and had confirmed with the Treasurer that I was correct.
I do not bear any malice towards Mr. Papp, but I am shocked that he and others on council still do not seem to grasp what has been done financially.
Unfortunately, statements like Mr. Papp’s, and by others on council, including the Mayor, that the Town’s finances are in good shape and in good hands creates much confusion with town residents.
Town finances are clearly not in good shape, and unfortunately the new council is going to have some difficult years or a decade ahead.
For this reason I think there needs to be a clean sweep of council. A new council can start fresh. It can openly and candidly let everyone know what the financial situation is and come up with a plan to deal with it.
I do not believe anyone intentionally did something they initially thought was wrong, but a great deal of time and effort have gone into a public relations effort to convince the public that everything is fine.
I do not think the Town needs to spend more money on more forensic audits unless something serious comes to light after the turnover of council. The new council may want to attempt to draw on a volunteer Finance Committee and utilize some members of the community that could report directly to council as a way to restore taxpayer trust in Town Hall and council.
I would also like to compliment Treasurer Teresa Quinlin for doing an admirable job and sticking around after her initial contract was up. She obviously stepped into a hornet’s nest, and as I have followed along she has implemented a number of good things so far at the Town, including quarterly updates on capital spending.
I hope everyone takes the time to educate themselves about the candidates and then exercises their right to vote. Everyone should try and make it to the debate and candidates night being run by the Kinsmen Club this Wednesday at E. L. Crossley. ♦
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