Accusations fly in Pelham
A special interest group that calls itself PelhamDEBT has added another twist in the political battle over the town’s east Fonthill development project.
Saying they represent “concerned Pelham residents,” a group of about 75 people attended the most recent regional council meeting, loudly demanding a forensic audit of some of Pelham’s development practices and cheering their spokesman Curt Harley during his presentation.
DEBT stands for Dave’s Excessive Borrowing and Taxation scheme.
Harley’s allegations about land deals tied to the development were almost identical to those of Rainer Hummel, a Niagara-on-the-Lake developer, the latest being at a September regional committee meeting.
PelhamDEBT has a campaignstyle website, which attacks the source of its ire, Pelham Mayor Dave Augustyn and town staff.
Among other things, it calls Augustyn a “cry-bully” and mocks Augustyn with a large photo of him wearing a captain’s hat. The caption reads: “Stay updated as the mayor sinks the ship in Pelham.”
Augustyn described the website as “misleading and erroneous,” when asked about it by The Standard.
Pelham Regional Coun. Brian Baty said there is anxiety in the community about the issue.
“I’ve heard from many people and retailers that have thousands of people going through their businesses,” Baty said. “It is widespread concern across all five communities. It is not one sector of demographics.”
Harley said his group brought its concerns to regional council because the mayor and town council are “not listening.”
Harley, in his presentation, told regional councillors any audit must be “fully independent” and funded privately.
In one piece of choreography, Harley’s supporters mimicked Hummel’s offer to pay $50,000 for the audit and waved cheques above their heads on cue to show their resolve.
Port Colborne Coun. David Barrick was impressed with the passion of Harley’s grass-roots supporters.
“People pay enough in property taxes across the Region as it is,” Barrick said. “I see 70 people here, and I’m sure many more residents that aren’t here. At one point they actually held up cheques. I don’t know if the cameras here caught it. It was a very powerful image of the residents of Pelham willing to put forth their own money and have a say in the process.”
Pelham council rejected Hummel’s offer to pay for the audit, saying it would be inappropriate to “accept a developer’s money to influence regional and town action.”
Harley said his group is going one step further. It is demanding control of the terms of reference and choice of an auditor with a self-appointed three-person “citizen oversight committee” headed by a resident, Bernie Law, who Harley said has an accounting background. The committee would work with regional staff and the Region’s procurement department to get the audit rolling.
After finishing his remarks, Harley led his supporters out of the chamber.
Had the group stuck around and listened a little longer, it would have heard Augustyn say Pelham is initiating an independent, third-party audit and has already hired a firm, KPMG Canada.
Augustyn told regional council that a forensic auditing specialist, Karen Grogan, who is a senior vicepresident at the company, will be lead investigator.
Augustyn added KPMG will also establish a separate email account so residents can forward questions or concerns directly to Grogan with no interaction from the town. Questions or concerns will be addressed in the report and noted without any names.
KPMG Canada will publicly report its findings directly to town council at a meeting before the end of November.
Augustyn said he has asked Harley to meet with him to discuss the issues “and try to clarify these things.”
Although Harley has yet to meet with him, Augustyn said the invitation remains open.
In an interview, Hummel said he didn’t know much about PelhamDEBT or Harley, and was too busy to watch the council meeting. Hummel was straightforward and detailed in articulating his concerns, questioning the $3.6 million the town paid for 3.5 acres of property.
“Someone paid $1.8 million for 8.5 acres,” said Hummel, and provided some of his research to support his statements. “They financed $450,000 through the Meridian( Credit Union). They financed $1.35 million with a vendor take-back mortgage. In other words, they didn’t have one dime of their own in this property.
“Then they sold 3.5 acres of it, less than half, five or six days later to the town and its taxpayers for $3.6 million,” he said.
“You can’t explain it away by waving a piece of paper in the air and saying you have an independent appraisal. No property goes up in value in four or five days by 600 per cent. I don’t care how you want to skin the cat — there is no damn way a deal like that doesn’t smell funny. Does that sound OK to you?”
Pelham planning director Barb Wiens, however, said the deal wasn’t the quick flip Hummel described. And his description of the transaction only refers to a little more than half of the 13,226 square metres (3.26 acres) of land that was ultimately sold to the town.
Wiens provided a copy of a property title search conducted in May 2016, as well as the results of a second search conducted last week that wasn’t included in the research Hummel provided.
Referring to information included in the more recent search, Wiens said “a big chunk of the property” in question — 6,230.5 square metres (1.54 acres) — was purchased by developer Fonthill Gardens Inc. on March 31, 2005 from previous owner Gardens Four Ltd., as part of larger land sale worth $3.6 million.
The remaining 6,995.5 square metres (1.72 acres) that was sold to the Town as part of the transaction, was part of a parcel of property acquired by Fonthill Gardens on May 29, 2015, from Denise Mamas at a cost of $1.789 million.
“It was just a separate piece of property that they acquired about 10 years later,” Wiens said.
The title search of the 2015 purchase also showed the developer’s financing for the transaction that was consistent with Hummel’s description of it — including the takeback mortgage and the $450,000 loan from Meridian Credit Union.
Referring to Hummel’s statement about the town’s purchase of the property occurring “five or six days” after the developer bought the land, Wiens said: “That’s not correct.”
She said the town made the agreement to purchase the land on Sept. 8, 2015 — more than a decade after the developer acquired the first part of the property and about four months after the remaining portion of land was purchased.
As part of that agreement, she said the two parties “laid out how we would determine the value of the land.”
“There was an appraisal done,” Wiens added, “and then the appraisal was peer reviewed, then we negotiated a two per cent reduction in the price from the appraisal.”
Augustyn said that agreement was consistent with typical practices for the exchange of property.
“That’s how it’s done,” Augustyn said.
The two properties were ultimately transferred to the town on Sept. 12, 2016, at a cost of about $3.1 million.
Although Pelham council voted Oct. 2 to hire KPMG to conduct the audit of the land deal, Hummel as well as the PelhamDEBT group won’t be satisfied with an audit conducted on the town’s dime.
Hummel wants an investigation into two specific areas: a parkland over-dedication transaction and a development charge credit agreement.
All this is taking place amid a massive residential and commercial expansion in Pelham, a bedroom community of 17,000 people.
The east Fonthill development is rising in fields along the Regional Road 20 corridor. The centrepiece is a $36-million community centre, which will include two ice pads. It replaces Pelham’s old arena, which is crumbling.
Harley and some regional councillors have said Pelham’s finances could impact the Region’s credit rating and increase borrowing costs for everyone if the town’s plans fail.
Barrick laid out those concerns in a motion at regional council earlier this year. However, the decision by the Region’s audit committee that flowed from Barrick’s motion raised eyebrows across Niagara. Barrick and his supporters on Regional council have taken a deep dive into Pelham’s finances.
The Region has no jurisdiction in the matter. That clearly lies with the town council, which controls its own finances and sets its own budget in accordance with the Ontario Municipal Act.
Over the years, what amounts to a gentleman’s agreement is in place regarding the issuance of municipal debt. The Region goes to the market on behalf of all 12 municipalities when they need to borrow money for major projects. The municipalities obtain a better interest rate when their debt is bundled together.
However, the agreement was never intended to give the Region financial oversight. The Region has taken that precedent-setting leap with Barrick leading the charge.
Harley, in his presentation, said taxpayers across Niagara could be at risk if Pelham implodes financially, a line of reasoning they took from Barrick.
Pelham staff countered by referencing a Standard & Poor’s report for 2017. It shows the Region could borrow an additional $282 million on behalf of its municipalities before risking a credit rating downgrade.
Both Lincoln and Dunnville, the latter part of Haldimand County, have built similar recreation centres recently and West Lincoln is in the process of building one.
The province has strict regulations on debt ratios and how much a municipality can incur when undertaking a project. Those debt provisions were instituted some 90 years ago after a flurry of defaults during the Great Depression. In fact, there has only been one municipal default since the end of the Second World War, and that occurred in Quebec during the 1950s.
Augustyn said the town has answered Hummel’s and Harley’s questions.
The mayor and his staff put together a 350-page document detailing the financial dealings and how the centre is being funded — with corroborating appendices. The town also held a special meeting where it brought in experts to address concerns of ratepayers.
Hummel said the town’s document skirts the issues.
Augustyn has offered to meet with Hummel and was rebuffed. He again extended the same invitation to PelhamDEBT.
Augustyn believes the allegations of impropriety are politically motivated and payback for Pelham’s strong stand in opposing how the embattled Niagara Peninsula Conservation Authority conducts its business. It’s a political case of tit for tat. Pelham has demanded an audit of NPCA. NPCA’s supporters at the Region have in turn demanded an audit of Pelham.
Barrick is a senior administrator at the authority. The head of the Region’s audit committee, Grimsby regional Coun. Tony Quirk, is a member of the agency’s board of directors.
Among the concerns about the NPCA that the town, and most other municipal bodies in Niagara, want addressed are complaints at the board and management level about hiring practices and appointment of board members who were determined to change the role and mandate of the NPCA so that it would be more development-friendly.
Niagara Falls regional Coun. Bart Maves and Hummel have been transparent about their long-standing friendship.
Hummel was the Niagara Falls Progressive Conservative riding association president where Maves has made repeated runs at regaining his seat in the provincial legislature.
Hummel went to Maves for advice before he aired his concerns about Pelham in public. Maves told him not to do it. The cost to his business interests and personal reputation outweighed the benefits.
At a committee meeting last month, Maves apologized for that advice. In hindsight, he told Hummel coming forward was the right thing to do. Maves went on to register his disgust at insinuations that he is a puppet master using Hummel to score political points.
Hummel was quick to dismiss the notion that he has any ulterior political motive.
“I don’t understand where that is coming from,” he said. “I haven’t done anything or said anything that would suggest that. The mayor was the first person to say it publicly, and I remember thinking, ‘What the hell are you talking about?’
“Yes, I was the president of the Niagara Falls PC riding association. So what? I was also the president of the chamber of commerce in Niagaraon-the-Lake for four years. I sat on the board of directors of two public companies and three charities. I don’t understand why people want to politicize this …
“I have money invested in Pelham. I am in a lot of different places. Wherever I am, I am interested in what’s going on. I have land in Ridgeway and Fort Erie, and I am also concerned about what is going on there,” said Hummel.
“Fonthill is no different. We have owned land out there for a long time. I try to stay on top of it. When I see things go sideways, I react to it. My only motive is for my own company. I have a responsibility to my shareholders.
— with files from Allan Benner bsawchuk@postmedia.com twitter.com/Bill_Standard