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Town officials still dodging questions after five years

Minnehaha Bay losing money year over year, but how much?

by Suzanne Gammon
Tribune

“That’s a dead horse.” That’s how WN municipal CAO Jay Barbeau characterized questions on the financials surrounding the Minnehaha Bay development, which have dogged the project since its completion over five years ago. The matter came up again during the Jan. 9 council meeting, when mayor Joanne Savage referenced an “email from a constituent” asking for clarification on the numbers, after social media posts by herself and councillor Guilles Tessier gave contradictory figures.

Indeed on Dec. 27, 2017, Tessier posted “Here are the actual figures on the Minnehaha Bay project! This does not include the upgrades like hydro or amphitheatre! And it is also not the 1.3 million to the taxpayer, as stated by certain politicians! (…) The total costs, including marina, restaurant, radio, was $8,957,000. This does not include any additions, upgrades, ongoing maintenance that will have occurred since we closed the project in 2013. There was a large portion in grants. $6.8M was received in grants. That leaves 2.1 million! Certain people are lying to the public again!”

Tessier was responding to the mayor stating the town had invested only $1.3 million in the $8.9 million project. It was explained at the meeting that neither politician was lying, simply that the $2.1 million in “local contribution” included $700,000 from the contractor, Sturgeon Falls Brush, leaving just $1.3 million financed by the town. Staff acknowledged that when asked about the funding, they gave the $2.1 million figure without breaking down the town’s and the contractor’s portions, which led to the confusion.

“It was something that was posted by an elected official that escalated all this,” Savage chastised, saying the post “planted doubt in the public’s mind.”

Barbeau added that figures on Minnehaha Bay had already been presented and even reported in detail to the funding agencies, both federal and provincial. “Those numbers have not changed,” he stated, adding the town had “closed the books on that in 2013.”

Councillor Denise Brisson asked if the reports were public documents and if “anyone could come see them,” to which Barbeau replied “yes.”

The email that prompted the discussion was not shared in the meeting correspondence, but the Tribune requested a copy. The Dec. 28 email by WN resident Garry Serré asks for specific information not only on the infrastructure costs but also on ongoing maintenance and operational costs, and whether the development is making or losing money. “It would be an exercise in transparency to present these figures during a public council meeting and thus alleviate my concerns regarding how my tax money is being spent. I believe I am exercising my democratic rights in asking that these figures be shared in a professional and transparent manner,” Serré wrote.

With the town having responded only to one part of Serré’s query, the Tribune dug up its Minnehaha Bay file to see if we could answer some of the questions posed. What resulted was the realization that initial projections, figures presented in 2013 and currently provided figures are not in alignment, and indeed many questions we had ourselves posed in 2013 were left unanswered.

The Tribune addressed this with town officials on Jan. 19, asking how the project costs ballooned to $8.9 million, when initial projections had phases 1 and 2, excluding the suspended boardwalk which was not completed, at $6.253 million. Phase 3, projected at $3.89 million, was not initiated.

“I realize projects like this run over budget all the time, but could you indicate what the actuals are (…as) I want to make sure we have accurate info,” we wrote.

The Tribune also asked for a breakdown of the Sturgeon Falls Brush contribution, asking if the $700,000 was cash, in-kind or some other type of contribution. Documents obtained by the Tribune show Sturgeon Falls Brush purchased a house just above the bay for $200,000. The house was demolished and the land was then transferred to the town for $2, according to documents. Town officials were asked to explain this transaction.

While the town did not answer those questions, they did provide some answers to other queries. The Tribune asked how the town’s portion was financed, if we are still paying and how much is left on the debt. Municipal treasurer Alisa Craddock stated there were two loans taken out, one for $475,000, which was completely repaid in 2015, and one for $600,000, which we will be paying until 2027.

The Tribune also asked about a ten-year loan, at 4%, provided to Twiggs in 2012 for the purchase of $80,600 in restaurant equipment, such as espresso machine, refrigerators, chairs, cash register, ice maker, stove, oven proofer, pizza oven, cake display and more. “Was this repaid by the original operator or transferred to the current owners, and how much is left, if anything, on this loan?” we asked. Craddock replied that “the lease to own for the restaurant equipment has been repaid.”

The Tribune also learned that the town has been responsible for leasehold improvements at the site and also paid for cabinetry, patio tables, flooring and so on, to the tune of $73,300. This contradicts information we received from CAO Barbeau in 2013, when trying to get answers on the cost of the development. When asked specifically about leasehold improvements, Barbeau wrote “I do not understand since leasehold improvements are borne by the lessee.”

The Tribune also reiterated Garry Serré’s questions about ongoing costs such as maintenance, snow removal, taxes, insurance, hydro, gas, repairs and so on, asking if a cost-revenue analysis had been done to determine if the facility is making or losing money. While Craddock initially said she would provide these answers in the days following our request, several days later Barbeau indicated that “much of this information was requested by Council to be presented at budget deliberations. It would not be appropriate for staff to share before presenting to Council.” This echoed his 2013 response, which was as follows: “I hope to answer most of your questions. If I do not, it would be because I would have to generate a report that would likely form part of our budget submission.”

The Tribune pointed out that capital costs, which Barbeau said on Jan. 9 had already been reported to the funders in detail, should be readily available, as should be the operational costs and revenues for the past 5 years. We asked to have the information related to prior years, leaving out 2017, which we would wait to see at budget deliberations. We received no response.

Other questions left without answer were whether the town had ever had to pay for damages or repairs at Twiggs, for example after the break-in, since the lease clearly states that the lessor is responsible for any damage and repairs; and also whether rent was ever reduced or waived for Twiggs, since the lease states that “in the event that sales do not support the cost of remaining open on a daily basis (…) the rent payable shall be adjusted (…) on a pro-rata basis.”

While those answers were not obtained, Jay Barbeau indicated on Jan. 19 that a new lease with Twiggs had not yet been renegotiated, despite the fact that the old 5-year lease ended in October 2017. “We will be tackling it shortly,” he wrote. It should be noted that the 2012 lease shows the agreement is renewable for five years and the town cannot raise the rent by more than 5%. That rent has been $1,667 per month, all inclusive, for the first five years, excluding the first six months, which were free.

A similar deal was provided to Le Loup, who pays $1,040 per month all inclusive, getting the first 3 months free and the following 3 months at half price. That lease was signed in September 2013 and ends August 31, 2018. The town also provides space on municipal land for Le Loup’s radio tower, and it’s unclear whether that is included; Barbeau said in 2013 that this was part of a separate agreement which he would provide, but he never sent it.

When the Tribune asked some council members if they were aware of the lease arrangements, they said they had not been made privy to the leases, one saying this was a “kitchen item” left to the administration. When asked about the equipment loan and whether the town was in the business of providing business loans, they seemed unaware of this as well.

With the town covering hydro, gas, snow and garbage removal, repairs and maintenance and all other costs associated with the building, it was questionable the facility could even break even, much less make money, despite Barbeau’s assurances during a public meeting in 2013. At that time, in response to public backlash over the building and mounting questions, the town had produced a summary report showing the facility had lost approximately $80,000 the first year, but was expected to start making money in subsequent years.

One person who expressed doubt over the numbers at the time was Anne Lanteigne, co-owner of the two Tim Hortons restaurants in Sturgeon Falls and also an accountant. Lanteigne noted the town omitted several expenses such as snow and garbage removal, and she provided costs for her own two restaurants for 12 months ending November 2011. For restaurants roughly half the size of Twiggs, she showed $109,093 in property and building expenses at 82 Front, and $87,163 at 647 Coursol, and this was in addition to rent paid on both premises. She wondered how the town could be breaking even, collecting just over $32,000 in rent. Indeed, the town’s own report shows hydro and gas alone for the two tenant facilities cost over $29,000 in 2017.

It should be noted that for a time, the town also had an agreement with Fun Rentals, which may or may not have brought in some extra revenue, however the Tribune has asked for this agreement since 2013 and has never received it, despite assurances that it would be provided.

Finally, during the Feb. 10 budget deliberations meeting, the Minnehaha Bay 5-year cost and revenue analysis was presented to council. The report, covering 2013 to 2017, is broken down into three sections, namely the marina operations, the marina facility and the tenant facility.

For 2017, the marina operations cost $135,836 and brought in $71,549, for a deficit of $64,286. The marina facility cost $51,398, with no revenue reported, adding that full amount to the deficit. The tenant facility is shown to have cost $51,516 with rental income shown at $32,484, for an additional deficit of 19,032. All told, the reported Minnehaha Bay operational deficit for 2017 would amount to $134,717. Losses averaged over the five years are shown at $118,604 per year. Since 2013, the report shows the facility lost $593,032.

However, the report itself has raised questions, which the Tribune brought up with treasurer Craddock, to no avail. In addition to reiterating the unanswered questions posed on Jan. 19, our Feb. 12 query asked the following: “Your report on the facility does not show any property tax in the expenditures list. Is there tax paid on this building? What is the assessment? Also, I don't see a line for snow removal - is that included in another line? None of the 'maintenance' lines seem high enough to include snow removal, so I'm just wondering if that's in there.”

We also asked about the renegotiation of the Twiggs lease. “How far along are you in this process and are changes being sought to bring the lease more in line with the market and at least recoup operating costs?”

Another worrisome inconsistency was found in the report. The rental income is shown as $32,484 even for every year, from 2013 to 2017, broken down as $12,480 ($1,040 x 12) for Le Loup and $20,004 ($1,667 x 12) for Twiggs. There is no variation, appearing as though the amount was simply plugged in based on the rental agreements, not on actual money received. Indeed, the revenue from Le Loup in 2013 would be at $0 since their lease was signed in September of that year and they had the first 3 months free. Also, Twiggs was not to begin paying rent until May 2013, so the $32,484 in reported revenue should be only $13,336, assuming all Twiggs lease payments were made. Also, during the first two months of 2014, Le Loup was still only paying half price according to their lease agreement, so the revenue reported would be incorrect for that year as well.

With so many questions still looming, despite our best efforts to get answers, it’s clear that Barbeau’s “dead horse” is still alive and kicking. “I hope together, we can answer people’s ongoing questions about this project and finally put it to rest,” we wrote to town officials on Jan. 19, beseeching them for cooperation. Despite repeated requests, also sent to members of council, and our patience in putting off publication until we could get answers, recent responses have been either evasive or non-existent, leading to the conclusion that we may never truly know how much WN taxpayers have sunk into Minnehaha Bay.


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