Recommending an Audit, but Refusing the Money

Niagara Regional politics got even stranger last week when a Niagara developer offered a lot of money – $50,000 – to the Niagara Region Audit Committee. His proposal was to get the Committee to recommend that Regional Council ask Pelham Council to audit two Town matters – a parkland over-dedication transaction and development charge credit agreement.

Developer Rainer Hummel holds an envelope during Regional
Audit  Committee meeting that he said contained a cheque
for $50,000 to pay for an audit of the
Town of Pelham finances. Credit: POSTMEDIA

You will recall that some Regional Councillors started questioning Town issues on March 30, 2017 when Regional Councillors Barrick (Port Colborne) and Gale (Niagara Falls) put forward a motion that included 13 accusations about Pelham’s debt, finances, and property taxes. Why at the Region? They said the Region could talk about Pelham because the Town’s debt might impact the Region’s Standard & Poor’s AA Credit Rating. This was later disproved since the 2017 S&P report shows that the Region could borrow an additional $282 million before risking a credit rating downgrade.

Town Staff responded with a 335-page comprehensive report that refuted each of the 13 claims in the motion. Yet, instead of letting me respond to the March 30 motion as Pelham’s rep, a majority of Regional Council referred the matter to a June meeting of the Regional Audit Committee.

On April 3, Town Council reviewed and endorsed the Town’s response to the Regional motion. Worried that Pelham residents might have questions, Council directed Staff to organize an “Evening with the Experts.” About 100 people attended the panel discussion on April 24, with 17 people asking questions of Town Staff and professional advisors.

Then Town Staff attended and answered all questions at the June 12 Regional Audit Committee meeting. Despite my insistence that the Region has no jurisdiction in Town matters, Committee Chair Quirk (Grimsby) allowed specific questions about Pelham including parkland over-dedication, property purchases, water and tax rates, development charges and credits, library budgets, and cemetery fees. After these Town responses, the Audit Committee approved a motion that removed all references to Pelham.

When that revised motion went to the June 29 Regional Council meeting, Rainer Hummel, a Niagara developer, made numerous accusations about Pelham regarding a parkland over-dedication and a development charge credit agreement with Fonthill Gardens. Despite my request, the Regional Chair refused to recognize that the presentation was outside the Region’s jurisdiction. Following the presentation, a majority of Regional Council referred the matter to the September 18 Regional Audit Committee.

After Sept. 18, 2017 Audit Committee, I chatted with
Rainer Hummel for the first time. Credit: VOICE PHOTO

During the September 5 Town Council meeting, Staff and Callum Shedden, the Town’s lawyer, reviewed and refuted each of the claims made by Mr. Hummel. Mr. Shedden also confirmed that the Region has no jurisdiction in these matters under the Ontario Municipal Act. The Town published the accusation’s disproof and posted information about parkland over-dedication at www.pelham.ca/ParklandFAQ.

Town Council sent a strongly worded motion and Mr. Shedden to outline the Region’s lack of jurisdiction to the September 18 Audit Committee meeting. Instead of heeding the legal advice, the majority of the Audit Committee voted to allow Mr. Hummel to speak again. During his presentation, Mr. Hummel admitted to never raising his concerns with the Town or myself directly. Instead, he said he had a cheque for $50,000 for the Region to pay for the Town to undertake an audit of the parkland over-dedication and development charge credit agreement.

The committee “endorsed” the funds and recommended that Regional Council ask the Town to undertake an independent audit, but with the involvement of Mr. Hummel and Regional Staff.

I have thought a lot about and spoke to many people about this matter since last week.

For example, neither Town Staff nor Fonthill Gardens fear an audit, because it will then clearly show that all parties handled the parkland over-dedication and credits appropriately and legally. Some folks asked me why the Region’s Audit Committee was baited by the cash and agreed to the involvement of a developer in what should be an independent process. Others still cannot understand why some Regional Councillors interfere in Pelham business.

I will recommend to Pelham Council, therefore, that we initiate an independent, third-party audit of all transactions and documents related to the 3.3-acre Parkland Over-Dedication to the Town by Fonthill Gardens and a 2015 Development Charge Credit agreement between the Town of Pelham and Fonthill Gardens. While I am certain that we followed all laws and appropriate policies with these transactions, I hope than an independent audit will help satisfy those with questions.

Yet, I will not recommend that Pelham Council accept the lure of the money. I believe it is ethically inappropriate to accept the $50,000 because it sets an unacceptable precedent of granting wealth great influence and privilege in municipal decision-making. Further, it is beneath the high-standard that the public expects from Town and Regional Councillors and Staff.

Watch for Town Council to discuss these types of motions at our next meeting.

You may contact Mayor Dave at mayordave@pelham.ca or read past columns at www.pelhammayordave.blogspot.ca.

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Update: Monday, October 2, 2017

Pelham Council approved proceeding with an independent, third-party audit. Council also refused the "cash to influence" offer.

Here are the approved motions:


Initiate an Independent, Third-Party Audit of Parkland Over-Dedication and 2015 Excess Parkland Dedication Agreement

WHEREAS the Council and Staff of the Town of Pelham pride themselves in being open and transparent; and

WHEREAS the Town has provided complete details and answered all questions generated by some members of Regional Council and some members of the community by presenting a 335-page comprehensive response document and addendum to a March 2017 motion at Regional Council, answering all citizen questions during an “Evening with the Experts” panel, and disproving all claims and accusations made by a Niagara developer at Regional Council; and

WHEREAS despite these answers and complete documentation, some members of the local community continue to ask questions about the 3.3-acre Parkland Over-Dedication to the Town by Fonthill Gardens and a 2015 Excess Parkland Dedication Agreement between the Town and Fonthill Gardens; and

WHEREAS Deloitte Canada has provided the Town with independent, third-party audits of the Town’s financial statements for the last six years with “unmodified Independent Auditor’s reports” that are “free from material misstatements”; and

WHEREAS KPMG Canada would be an acceptable supplier of services to the Town of Pelham having ranked second in the 2016 tender by Pelham for independent, third-party auditing services;

THEREFORE, BE IT RESOLVED THAT Pelham Town Council directs Staff to RETAIN forensic auditing experts with KPMG Canada to undertake an independent, third-party audit of all transactions and documents related to the 3.3 acre Parkland Over-Dedication to the Town by Fonthill Gardens and a 2015 Excess Parkland Dedication Agreement between the Town of Pelham and Fonthill Gardens; and

THAT KPMG Canada PRESENTS a public report of their findings, with costs to undertake the audit, directly to Council at a meeting before the end of November 2017; and

THAT this resolution be CIRCULATED to Niagara Regional Council for their 5 October 2017 meeting, to all Niagara municipal Councils, to all Niagara MPPs, to the Minister of Municipal Affairs, to local news media and to KPMG Canada, and posted on the Town’s website.


Refusal of Cash to Influence Offer

WHEREAS the Council and Staff of the Town of Pelham pride themselves in being open and transparent; and

WHEREAS the Town has provided complete details and answered all questions generated by some members of Regional Council and some members of the community by presenting a 335-page comprehensive response document and addendum to a March 2017 motion at Regional Council, answering all citizen questions during an “Evening with the Experts” panel, and disproving all claims and accusations made by a Niagara developer at Regional Council; and

WHEREAS despite these answers and complete documentation, some members of Niagara Regional Council and a Niagara developer continue to accuse Pelham Council and Staff of impropriety regarding a 3.3-acre Parkland Over-Dedication to the Town and a 2015 Excess Parkland Dedication Agreement with the Town; and

WHEREAS Pelham Council unanimously approved a motion to send the Town lawyer to the September 18, 2017 Regional Audit Committee to clarify that the Municipal Act does not grant Niagara Region jurisdiction in these Town matters; and

WHEREAS during that meeting some members of the Regional Audit Committee ignored the fact that the Region does not have jurisdiction, yet persisted in asking detailed questions about Pelham transactions and made accusations of impropriety; and

WHEREAS the Regional Audit Committee accepted and endorsed a cheque from a Niagara developer for $50,000, and recommended to Regional Council that it request Pelham Council to consider using those developer funds to undertake an audit of Town transactions; and

WHEREAS the Audit Committee motion compromised the independence of such an audit by specifying the involvement of the developer, the Regional Audit Committee members, and Regional staff in the audit; and

WHEREAS the Niagara Regional Council Code of Conduct demands that members shall observe the highest standard of ethical conduct and are expected to “Act honestly, independently, impartially, with discretion…” and to “Conduct themselves in a way that maintains and promotes the public’s trust in the Regional Municipality of Niagara;” and

WHEREAS accepting these funds would grant wealth great influence and privilege in municipal decision-making and goes against the Values of the Town of Pelham; and

WHEREAS, to us, accepting money from a developer is behaviour which is beneath the high-standard that the public expects from members of the Regional Audit Committee, and Regional Council generally;

THEREFORE, BE IT RESOLVED THAT Pelham Town Council unequivocally REJECTS the inappropriate request by the Region’s Audit Committee to influence Town actions; and

THAT Pelham Town Council REAFFIRMS its jurisdiction over Town of Pelham matters and REQUESTS Regional Council to reaffirm the “Spheres of Jurisdiction” between regional and local municipal corporations as legislated by the Ontario Municipal Act; and

THAT this resolution be CIRCULATED to Niagara Regional Council for their 5 October 2017 meeting; to Mr. Rainer Hummel, the Niagara developer; to all Niagara municipal Councils; to all Niagara MPPs; to the Minister of Municipal Affairs; and to local news media; and posted on the Town’s website.



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Update: Friday, October 6, 2017

Pelham Retains KPMG Canada for Third Party Audit

On October 2, 2017, at the regularly-scheduled Town of Pelham Council meeting, Town Council retained KPMG Canada to conduct a third party audit of all transactions and documents related to the 3.3 acre parkland over-dedication to the Town by Fonthill Gardens and a 2015 excess parkland dedication agreement between the Town and Fonthill Gardens.

The Town is encouraging all those with questions to submit them directly to the forensic auditor, Karen Gorgan, senior vice-president of KPMG Forensic Inc.

Questions and concerns will be acknowledged with a receipt of submission, but will not be responded to directly. Instead, the questions submitted will be addressed and noted in the report without names.

“Town of Pelham Council recognized that there are many questions from the community regarding parkland over-dedication,” said Mayor Dave Augustyn. “To make the audit completely independent, Pelham Town Council has retained KPMG Canada to undertake an independent, third-party audit of all transactions and documents related to the parkland over-dedication and the development charge credit agreement.”

Any comments, questions, and concerns can be sent to townofpelhaminfo@kpmg.ca up until October 17, 2017.

KPMG Canada has been asked to report their findings, publicly and directly to Council at a meeting prior to the end of November 2017.

Welcoming Wellspring Home, to Pelham!

On behalf of Pelham Town Council, it was my honour and privilege to participate in the special groundbreaking for a new home for Wellspring Niagara last week.

Wellspring Niagara groundbreaking, Sept. 2017

Wellspring Niagara’s exceptional services are well known across the Peninsula. For more than 16 years their dedicated volunteers and staff have provided free social, emotional, psychological and informational support to people coping with cancer. Wellspring receives no government funding and relies entirely on donations so that every dollar raised in Niagara, stays in Niagara.

For individuals and families impacted by cancer, Wellspring stands as a beacon of light and a rainbow of hope – as one speaker said on Tuesday. The Wellspring board, staff, and volunteers embody a spirit of generosity and sacrifice at a critical time in people’s lives.

They have provided this amazing support from a very small space – a mere 2,000 square feet on Schmon Parkway in Thorold – which was meant to be temporary

In the fall of 2013, Council and I learned that Wellspring needed to move but could not find a suitable location for a new facility. Town Council discussed how incorporating Wellspring into Pelham matched our vision of being a vibrant, creative, and caring community. We recognized that offering a Pelham location provided the best way to show our caring nature. Therefore, we immediately and unanimously embraced Wellspring.

In addition to the use of the land, the Board recognized East Fonthill as a central location in the Niagara Peninsula and the synergy of other developments nearby – a potential Community Centre, medical centre, and retail – and natural features.

By the spring of 2014, we signed a memorandum of understanding to give use of up to two acres a land in East Fonthill for as long as Wellspring Niagara operates their Niagara Cancer Support Centre. We also named the street “Wellspring Way” to highlight the location and our commitment.

This past May we signed a long-term lease, thereby donating the perpetual use this land – and approved their exceptional site plan for their 11,000 square foot facility which will offer a home-like feel and make full use of the property.

It’s so important for everyone in the Peninsula that Wellspring has a new home to continue to provide welcoming and safe supports and encouragement for individuals and families affected by the many challenges of cancer.

Pelham Council and Staff are delighted and honoured to partner with Wellspring and we offer them our best wishes and congratulations on the groundbreaking and fundraising success to date.

May Wellspring’s spirit of generosity and sacrifice deepen and may their “beacon of light” shine even brighter in their new home.

“Welcome to Pelham. Welcome home!”

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TVCogeco Niagara video of Wellspring Niagara groundbreaking:

You may contact Mayor Dave at mayordave@pelham.ca or read past columns at www.pelhammayordave.blogspot.ca.

Pelham’s Parkland Over-Dedication

Despite assurances that Town Council, staff, and professional advisors followed all appropriate laws and policies when dealing with a parkland over-dedication in East Fonthill, persistent questions still exist in the community. My column this week, therefore, explains how and why this type of special transaction occurs.

The award-winning East Fonthill Secondary Plan calls for a community park near the intersection of Wellsping Way and Summersides Boulevard and along-side a watercourse. Since it didn’t own all of this land, the Town had to ultimately acquire some property.

Parkland in East Fonthill Plan

To acquire the parkland, the Town followed the Planning Act and the Town’s Parkland Dedication Bylaw and used funds exclusively from Pelham’s Parkland Dedication Reserve. (The Town did not use property tax funds to acquire this park.)

The Planning Act provides options for how a municipal council can acquire parkland and/or “cash-in-lieu” of actual land in new developments.

When a developer proposes a residential subdivision or builds a house, the Planning Act allows a Town to take 5% of the land from the new subdivision for public parkland, or to take a cash percentage of the land value (instead of actual property).

In the case of a cash-in-lieu allocation in Pelham, the Town requires a payment of 5% of the value of a serviced building lot at the “day before the of issuance of the building permit.” To determine this value, a developer or builder provides the Town with an accredited real estate appraisal for the land or for the subdivision.

As time goes on and other homes or businesses are built nearby, the property values increase and, therefore, the parkland payments increase.

Towns must deposit these cash-in-lieu-of-parkland funds into a segregated fund called the Parkland Dedication Reserve.

Sometimes, an overall community plan calls for a park that is larger than an individual property owner is legally obligated to provide – larger than 5% of the land the developer owns or plans to develop. In that case, the owner must give a “parkland over-dedication.”

A parkland over-dedication must be valued in the same way as a cash-in-lieu-of-parkland payment. In Pelham, therefore, an accredited real estate appraiser must value the over-dedication at the “day before the of issuance of the building permit.” Then, the Town uses funds from the Parkland Dedication Reserve to pay for the parkland. (Again, no property taxes are used for this purchase.)

Just as the value of building lots increase over time and as development occurs, the valuation for excess parkland also increases as nearby development occurs; it makes sense and costs less, therefore, to value and purchase parkland early and before the construction of nearby homes or businesses.

In the case of the 3.3 acres of East Fonthill parkland, the Town peer reviewed a 2015 accredited real estate appraisal and negotiated a parkland over-dedication value of $3.6 million. Since the local real estate market increased by as much as 20% since the time of the appraisal, the Town saved parkland funds by negotiating this transaction two years ago and before recent nearby construction.

The Town paid for this land from the Parkland Dedication Reserve. As new houses and businesses are constructed in the East Fonthill area and property values increase, builders and developers will have to contribute 5% of those increasing values to pay for this park and other parklands.

Negotiating the parkland over-dedication early and before rising property values, makes fiscal sense. And, getting re-payed for that parkland by builders as property values increase will provide value-for-money for the Town over the long run.

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2017 September 15 Update:

The Town published some answers for frequently asked questions regarding parkland over-dedication and the development charge credits. Here's the text:

Q: Why did the Town purchase parkland in East Fonthill?
A: The award-winning East Fonthill Secondary Plan calls for a community park. Since it didn’t own this land, the Town purchased the parkland.

Q: Who determines the amount of land needed for parkland?
A: When a developer proposes a residential subdivision or builds a house, the Planning Act allows a Town to take 5% of land for the new subdivision for a park, or to take a percentage of cash instead of a property. In the case of a cash-in-lieu allocation in Pelham, the amount of payment is valued at 5% of the value of a serviced building lot at the ‘day before building permit’. For commercial or industrial property, the parkland is 2%. See section 51.1 in the Planning Act to read more: https://www.ontario.ca/laws/statute/90p13

Q: Who determined the value of the land?
A: The land was appraised and peer reviewed by a professional accredited appraisers to establish the value of the land.

Q: Wasn’t the appraisal value much higher than other land sold in the area?
A: The land was purchased at a price that reflected the value of the land at the ‘day before building permit’ stage. Land without roads, sidewalks, or additional development, for example, would not be valued the same as land that included all of those things, or at the ‘building-permit ready’ stage. When the Town purchases parkland land, it is done so using this formula, a system that is fair to both developers and the Town.

Q: What is this land going to cost me, the taxpayer?
A: Nothing. The land was purchased with funds in the Town’s Parkland Dedication Reserve. As new houses and business are constructed in the East Fonthill area, the property values will increase and builders and developers will have to contribute 5% of those increase values to pay for this and other parklands, replenishing the reserve fund. Towns must deposit these cash-in-lieu funds into that reserve fund.

Q: What is Parkland Over-Dedication?
A: Sometimes, an overall community plan calls for a park that is larger than an individual developer is legally obligated to provide – larger than 5% of the land the developer owns or plans to develop. In that case, the developer must give a parkland over-dedication.

Q: Was purchasing the land in 2015 a good idea or not?
A: Negotiating the parkland over-dedication early and before rising property values makes fiscal sense. Getting repaid for the parkland by builders as property values increase will provide value-for-money for the Town in the long run.

RE: OP-ED: Stop the dodging, I'll pay for the audit – The Voice of Pelham, September 13, 2017
Q: Did the Town do a secret deal with a developer, wherein the Town agreed to buy land from the developer, land the developer did not even yet own, in exchange for some $3 million dollars’ worth of  “Development Charge credits,” and was this credits scheme even legal?
A: No, the Town did not do a secret deal with a developer. All agreements between the Town and any individuals or corporations are publicly approved. Specifically, on September 8, 2015, Town Council considered and approved the report “Over Parkland Dedication (East Fonthill) Agreement (Issue #20150901002)” and approved by by law 3650 (2015).

Q: Can parkland legally be purchased with Development Charges?
A: The Town did not purchase parkland using development charges. Parkland is purchased through the Parkland Dedication Reserve.

Q: Why did Town Council agree to pay $928,000 dollars per acre for this land when the going rate was approximately $150,000 to $200,000 per acre?
A: In the case of the 3.3 acres of East Fonthill parkland, the Town peer reviewed a 2015 accredited real estate appraisal and negotiated a parkland over-dedication value of $3.6 million. Since the local real estate market has increased by as much as 20% since the time of the appraisal, the Town saved parkland funds by negotiating this transaction two years ago and before recent, nearby construction.

For a printable version of these questions, please go to www.pelham.ca/ParklandFAQ.


You may contact Mayor Dave at mayordave@pelham.ca or read past columns at www.pelhammayordave.blogspot.ca.