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Mayor on $18 million Blind River debacle: 'We're going to be just fine'

Last week at Blind River Town Hall, councillors agreed to spend $4,000 to hire Dr. Von Houligan’s Carnival of Calamities to perform at the 2015 Community Days, July 9-12.

 

Last week at Blind River Town Hall, councillors agreed to spend $4,000 to hire Dr. Von Houligan’s Carnival of Calamities to perform at the 2015 Community Days, July 9-12.
 
The Calgary-based touring group includes a contortionist, fire performer, ringmaster, escapoligist and a ventriloquist.
 
Nice, but some might argue Blind River doesn't need to import Alberta calamities.
 
Some might argue that Blind RIver has rather enough calamity already.
 
Earlier at last week's Blind River Town Council meeting, Mayor Sue Jensen was bravely trying to put the best face possible on news that her community had narrowly avoided defaulting on a $49.5 million loan, because of a calamitous $18 million municipal investment that may never be recovered.
 
Just three days prior to last week's deadline, Blind River had managed to persuade Canada Mortgage and Housing Corp., (CMHC) to restructure the 15-year loan.
 
$16 million of the $39.5 million still owing could now be paid off in annual instalments of $1.1 million.
 
Over the next 23 years.
 
That will take care of the loan's interest.
 
Then, on April 1, 2037, the community is expected to somehow pony up an interest-free balloon payment of $23.5 million to cover the loan's outstanding principal.
 
This, Mayor Sue Jensen assures, is good news.
 
Annual payments on the longer-term loan are just $1.1 million, compared to $4.4 million previously, she points out.
 
"We're going to be just fine," Mayor Jensen told SooToday on Saturday night. "This is going to settle things right down."
 
How on earth did a community of 3,549 souls end up in such a carnival of fiscal calamity, holding bad debt amounting to more than $5,000 for every man, woman and child within its borders?
 
It's a tangled tale that began in 2010, when Town of Blind River agreed to borrow $49.5 million dollars from CMHC at 4.03 percent over 15 years.
 
The job-creation cash was transferred to North Shore Power Group (NSPG), a green-energy developer created and wholly owned by the town.
 
The original idea, as explained on NSPG's website, was to build a biomass energy project.
 
Not a good idea.
 
"This project was approved by Ontario Power Authority," North Shore says, "but we were unable to secure a guaranteed supply of wood. We had to refuse the project. Since both the province and the federal government were promoting solar projects, we applied for an eight-mW (10-mW DC) solar farm project instead."
 
The solar farm idea also quickly melted, like an overreaching Icarus.
 
It turned out there were issues connecting the proposed project to the provincial grid.
 
So North Shore Power Group invested half of the CMHC funds - $25 million - in smaller projects, including 71 solar installations under Ontario's microFIT program.
 
As for the other $25 million, there was a problem.
 
Terms of the CMHC loan prevented it from being paid off before 2025.
 
So Blind River took that $25 million and went shopping.
 
"Our only option was to look for somewhere to invest this money in order that we would be in a favorable position to make our first CMHC payment," NSPG says.
 
It decided to camp the money in Plasco Group, an Ottawa-based start-up developing technology to convert municipal solid waste into synthesis gas that's used to generate electricity.
 
It seemed a great idea.
 
SInce 2008, Plasco had run a large-scale energy-from-waste demonstration facility at the City of Ottawa's Nepean landfill.
 
It had a sweet 20-year deal with the city under which Plasco would process 109,500 tonnes of Ottawa's municipal waste a year, with the city paying $83 a tonne.
 
"Plasco agreed to pay us seven percent interest," NSPG says. "Our interest payment to the federal government is 4.03 percent.".

Sounded good, but it was yet another bad idea.

Plasco was unable to raise enough money to build its full-scale commercial waste conversion facility.

After granting a number of extensions, the City of Ottawa was in a position to terminate the 20-year deal.

On February 10 of this year, Plasco applied for protection under the Companies' Creditors Arrangement Act (CCAA) and Ottawa Mayor Jim Watson announced that his city was done with Plasco.

Ernst & Young Inc., appointed as monitor in Plasco's CCAA proceedings, lists North Shore Power Group as a secured creditor, owed $17.9 million plus $1.4 million in accrued interest.

It will be up to the courts to decide in the months ahead how much NSPG will get back, if anything.

It's not as if no one was asking pointed questions about Blind River's finances.

Andre Berthelot, who has a law office in Elliot Lake and who ran unsuccessfully for mayor of Blind RIver in last year's muncipal election, was concerned enough about the NSPG investment that he outlined his concerns in a paper titled: "A Bit of A Pickle - How Blind River Got Backed into a Corner."

Citizen Nicolle Utter says she tried to ask questions about NSPG at a candidates meeting on October 8, 2014, but was prevented from doing so.

"Anyone with valid questions exposing the current council [was] hushed," Utter said last month in a social media posting.
 
"I feel the situation is far more serious than we know. If anyone has knowledge of the 1930s to 1950s situation of Blind River being in receivership, you will understand how unpleasant those years were. It could happen again thanks to some who did not do their homework when this project was proposed. The biggest mistake was in borrowing money the town could not pay back. It will affect us all," Utter wrote.
 
Berthelot lost the election by 63 votes to incumbent Sue Jensen.
 
Jensen sits on the NSPG board, and also lends her expertise to the recently embattled board of Algoma Public Health.
 
So where does all this leave the Town of Blind River and North Shore Power Group?

Are they out of jeopardy?

Will they get their money back?

NSPG owns substantially all the assets of Plasco's demonstration facility in Ottawa, for which construction costs were originally estimated at $27 million.

The company says it holds additional security over Plasco’s North American patents and trademarks and an "unlimited guarantee" from Plasco Energy Group, the parent company.

North Shore Power Group has retained the law firm Blake, Cassels and Graydon to defend its interests in the CCAA proceedings.

And has Blind River learned anything from all this?

"I'm not sure what you mean by that question," Mayor Jensen tells SooToday.

But then, after a pause, she adds: "We're going to definitely be more diligent."

Mayor Jensen says the $1.1 million annual interest payments that her town must make to CMHC over the next 23 years can be handled from NSPG's projected cash flows.

As for the additional $23.5 million principal payment due on April Fool's Day, 2037, Jensen anticipates that will be reduced by additional payments from NSPG plus any monies recovered from the Plasco proceedings.

And if there's not enough cash to pay for Blind River's unfortunate fiscal decisions?

In that case, perhaps a contortionist, fire performer, ringmaster, escapoligist and a ventriloquist might turn out to be very useful investments after all?

 


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David Helwig

About the Author: David Helwig

David Helwig's journalism career spans seven decades beginning in the 1960s. His work has been recognized with national and international awards.
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