Wednesday, April 24, 2013

A CityWest surprise?

Another council meeting and another financial bombshell for Prince Rupert City Council.

Last week Chief Financial Officer Dan Rodin relayed word that BC Assessment changes would mean less revenue for the City of Prince Rupert, this week Monday night featured a rather large group of Senior Managers from CityWest bearing most unfortunate news for Mr. Rodin's financial planning.

(You can view the CityWest Presentation from the City website the CityWest portion of Monday's council meeting runs from 11 minutes to 25 minutes)

The bulk of the Monday presentation offered a review of some CityWest history, in addition to a bit of a look to the future, highlighting how the capital spending of the recent past was setting the company up for future growth.

One of the key discussion points on the night, was a bid to clear up some "misinformation" that CityWest believes exists in the community.  The main themes being on the topic of the purchase of Monarch Cablevision  and the current financial aspects of the company.

With CityWest officials advising Council that there is "no amount of funding that comes from the City of Prince Rupert to fund  CityWest". CityWest officials explaining to council that the company "is a totally self funded organization".

All of which is a situation which may be correct at this moment in time, but for those with a long memory in the community, the past financial assistance provided by the City to the company perhaps should not be so quickly forgotten.

Especially when one considers how the City was at one time the main financial backer of the communication company, the past forgiveness of debt (page 38 City Council agenda May 11, 2009) just one of the many benefits of the city's historic travels with CityTel/CityWest over the years.

A bit of financial shifting, that surely provided for a helpful financial situation for the company to have been handed and able to work with at the time.

The presentation ended with a few questions from Council members, some of which even managed to focus on finances, which is where the dividend bombshell finally was delivered. Though even then, it did take a few gentle nudges to the delegation to get the full picture, all be it rather hesitantly.

After a couple of attempts on the theme (one, two three), Council members finally heard word that there would be no dividend provided for this year, and with no particular timeline provided as to when Council might anticipate a return to dividends from CityWest.

It was an announcement that seemingly caught the Six attending council members by surprise (Mayor Mussallem was not in attendance at Monday's meeting), at least if you consider their comments upon delivery of news of the unfortunate financial setback.

A development that puts the City of Prince Rupert further into a disconcerting financial situation, left to ponder how best to address the sudden shortfall of revenue once again.

Those City Council members that spoke to the issue in chambers, registered opinions from shock, to outright anger at the announcement.

From the reactions to Monday night's developments this apparently was the first that Council had heard that the dividend would not be forthcoming, a situation which leaves one to wonder just how much inter-action, let alone oversight that the City has on their investment in CityWest.

One would think (let alone hope) that perhaps they had better lines of communication in place with the communication company offices just one city block to the east.

However, it seems that is not the case, as it would appear that while the City was putting together it's budget plan for finances this year, no one thought to check in at CityWest to inquire about that dividend they had seemingly been using as part of their financial planning.

Looking back even just a few months though, one wonders just how surprised City Council should have been at developments. Particularly when the city has seen declines in the financial return over the last few years from those dividends of the past.

Perhaps if they had embraced a more hands on approach as to how the city owned communications business was reviewed by Council, Monday's announcement would not have been the bombshell it became.

Last fall, the CityWest group made a presentation in late October, a wonderful display of the future, offering up the topics of expansion to the East in Terrace, Kitimat and beyond, updates on added cable channels, tempered with concern over the cellular market in the city.

Yet, at that time, Prince Rupert City Council received that report without one question on finances coming from anyone on Council. Members content to nod along at the good news of expansion plans and such, with little actual concern over what return the City was going to receive from its investment in the company.

Likewise, when CityWest announced that Bill Craig, the then CEO of the company was no longer a part of the CityWest team, no one on council mentioned the change at any public Council sessions, let alone inquire as to the nature of his departure, or if there had been any financial impact to the company with his departure.

It seems to be a theme that whenever CityWest appears at Council, the session becomes more of a briefing on their operational plans, rather than a hard review of the communication company and its importance to the financial planning of the city.

With CityWest dividends apparently of some importance to that financial plan of the city, surely someone might have inquired about the dividend situation at that last gathering, providing a bit of lead time for this Council to work with as budget decisions began to loom.

Beyond those past Open council opportunities for discussion about the company,  perhaps one or two of those special "closed" sessions that this Council has held this year ( 11 so far in 2013) , might have been helpful to better gauge the nature of that all important CityWest dividend and to address that situation then and not at this very late stage of the Budget preparation process.

The City's relationship with CityWest has long been a topic of discussion in Prince Rupert, particularly since it went to its current corporate configuration, with what appears to be very much of a hands off (or at least an out of sight, out of mind) situation when it comes to accountability to the City and City council.

For those wondering just where the City factors into the scheme of things with CityWest, the City's own website outlines the relationship as this:

 "The City of Prince Rupert is the sole shareholder of this corporation, but CityWest operates independently offering landline telephone, cellular and internet services."

Considering the nature of the CityWest presentation from Monday, you have to wonder if the communications company completely understands the importance to the City of that first line of the mission statement, though it seems that they certainly appear to understand the second half, especially that "operates independently" portion.

Never more so it seems, than when the topic of dividends comes around.

For the historically minded, a trip to the Prince Rupert Library will find many an article of interest on the CityWest file, we in particular suggest that those so inclined for historical notes,  ask for some back issues of the city's one time Daily newspaper Prince Rupert Daily News.

A review of much of the work of the former Daily News reporter Leanne Ritchie, will provide for a helpful history lesson. Ms. Ritchie, was by far the best investigator of the CityWest file of the time and her reporting from 2006-08 clearly stands the test of time, prescient at times in the way of future concern.

Her work provided for much in the way of background on the topic through those years, right up to her surprising departure from the Prince Rupert news beat in the summer of 2008.

Perhaps her most instructive item on the theme of CityWest was "Lack of information Rings Alarm Bells" (October 17, 2007)

Alarm Bells that perhaps may now be ringing at City Hall some six years later.

Also from our glance at those now dusty files of old, a report from Christian Webber a Daily News staffer of the time, who noted that  at the time of CityWest morphing into its current corporate set up, Councillor Thorkelson was in particular concerned about losing control of CityWest.

“I think that the articles of incorporation give far too much power to the directors and take way power from the city,” said Coun. Joy Thorkelson. (August 17, 2007)

Judging by developments this week, where CityWest fails to deliver even a minor dividend (gone it seems for now are the days of financial returns in the millions) it would seem that the Councillor may have been on to something.

Surely by the anger and shock expressed by Council on Monday, it would seem that the CityWest situation deserves a rather extensive review from this City Council. With perhaps a reinforcement to CityWest of that opening line of the mission statement above, where the City is the sole shareholder of the company.

We're not too sure how many shareholders in the real world would accept the concept of no dividends today and no timeline for any future delivery of them.

For the moment and for the immediate short term, the obvious task at hand for the City is the need to fix their budget woes. A bit of financial turmoil that is now exacerbated by this weeks development and a mission that should be their only priority.  One that leaves council looking for a variety of options (open up your cheque books clearly will be one) to try and resolve their financial travails.

(A review of Council's deliberations on the topic can be found on our City Council Timeline)

But once the cuts or reductions have been considered or the inevitable tax increase is put in place. Maybe after the paving budget gets cannibalized and the operating surplus is reduced with that one time draw down, perhaps then Council could turn their attention once again to the nature of one of their larger investments.

Council may wish to look towards a full review of the CityWest blue print and how it impacts on the City of Prince Rupert and its "shareholders", better known as the taxpayers, a group that of late appear to be nothing more than a handy bank account for the City's financial short falls these days.

Unlike the never ending Sun Wave file, Council members won't have to chase a mysterious investor half way around the world for answers on operational and financial concerns.

Instead, they just have to invite the Board to make the walk one block west and ask some tough questions... for a change.

Should they need directions, a helpful map is provided below.

You can review the latest financial developments from CityWest (and reactions to them) through the local media offerings of the week, with both the Northern View and CFTK providing some background on Monday's announcement from at the Council meeting.

Northern View-- CityWest tells City of Prince Rupert expected $500,000 dividend won't be coming this year
CFTK-- Prince Rupert Facing Budget Crisis After CityWest Fails to Deliver Dividend

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