What You Don’t Know Could Totally Hurt You

I am rarely rendered speechless, but I am gobsmacked by the answers I just received from John Phalen, the economic development manager for the Cape Breton Regional Municipality (CBRM).

John Phalen (CBC photo)

John Phalen (CBC photo)

Phalen, you’ll recall, organized last week’s secret meeting between port promoter Albert Barbusci, CBRM councilors (nine of whom attended), Mayor Cecil Clarke and senior CBRM staff. I asked the CBRM for a list of councilors and staff in attendance and was told by spokesperson Jillian Moore:

Apologies, but the meeting was hosted by Albert Barbusci. CBRM did not organize the attendance and therefore do not have a list of attendees.

This is pure baloney, of course — Rick Grant reported right here in the Spectator that Phalen contacted the councilors to inform them of the meeting.

Apparently, it’s all part of the CBRM’s “confidentiality” agreement with Barbusci, which Mayor Clarke (a career politician with no private sector experience) discussed in the Chronicle Herald on Tuesday. Personally, I think most private sector companies would be green with envy at the level of secrecy enforced by the CBRM where, apparently, telling citizens which of their elected representatives met with a developer is against the “rules of industry.”

Barbusci was here to “update” council on his progress in developing a deep-water container port in Sydney harbor, an update the powers that be decided was best delivered in a hotel down the street from the Civic Centre, rather than in council chambers.

 

New powers

Barbusci’s visit followed hard on the heels of Municipal Affairs Minister (and Sydney-Whitney Pier MLA) Derek Mombourquette’s announcement that he had introduced legislation to amend the Municipal Government Act (MGA) to facilitate the CBRM’s port deal with Barbusci’s company, Sydney Harbour Investment Partners (SHIP). The bill would allow the CBRM to sell or lease land for below market value, enter into a 99-year lease and offer tax incentives — all powers the mayor has said we need to enter into the Option and Development Agreement with SHIP that was approved by CBRM council on 20 November 2017.

Details of that agreement have not been made public but here’s the motion passed at that November meeting:

That the Cape Breton Regional Municipality enter into an Option and Development Agreement with Sydney Harbour Investment Partners Inc. and that the Mayor and Clerk be directed and authorized to execute the Option and Development Agreement presented between the Cape Breton Regional Municipality and Sydney Harbour Investment Partners Inc., acting in its capacity as general partner for Sydney Harbour Investment Partners LP, that was presented to Council on November 20, 2017, and that the Mayor and Clerk be authorized to execute the Port Facility Lease and Agreement of Purchase and Sale contained in the Option and Development Agreement in accordance with the terms and conditions set out in the said Option and Development Agreement. That in the event a sale of the Port Site is required as a result of the inability of the Municipality to obtain consent to a 99 year lease agreement; that the lands be conveyed to SHIP by way of an Agreement of Purchase and Sale, which document shall contain all rights, conditions, benefits and protections in favour of the CBRM as exist in the Lease Agreement attached to and forming part of the Option and Development Agreement.

The only glimpse of the agreement we were given was in a letter from an “independent” auditor chosen to give council an opinion on the deal. (I put “independent” in quotation marks because Richard Deslauriers, a Montreal-based PricewaterhouseCoopers partner, was chosen by CBRM staff and “outside counsel” Jim Gogan, the very people who had negotiated the agreement.) Deslauriers wrote that the agreement included:

The option to lease lands comprising an area of approximately 431 acres located in Edwardsville for the purpose of developing a wharf and a container terminal. This is referred to as the PORT SITE.

The option to purchase the freehold title to lands comprising an area of approximately 1,000 acres for the purpose of developing a multi-tenant logistics site. This is the LOGISTICS SITE.

We also know, because of a second motion passed at that same 20 November 2017 meeting, that:

When the option agreement is exercised with Sydney Harbour Investment Partners Inc. in relation to the Port Site, the payment of $10,000,000 will be held in reserve and will be used in lieu of borrowing for capital purposes until the reserve is depleted.

When I first read that motion, I assumed it applied strictly to the Port Site, which Deslauriers defined as the greenfield site, but CAO Marie Walsh told me it applied to the “overall deal.” So apparently, that $10 million covers both the sale of 1,000 acres of land for the logistics park and the lease (or sale) of the greenfield site.

This is the deal Mombourquette’s amendments pave the way for.

 

No comment

I feel like I’m trying to punch my way out of a paper bag on this one — it could be the most straightforward deal ever signed in the history of port development but the secrecy surrounding it and the full-court press that was put on council to approve it quickly makes everything seem suspicious. (Especially as we’ve gone from the Mayor’s starry-eyed prediction of big port news as “an early Christmas present” to Barbusci’s declaration that fall 2018 is a more “realistic” target.)

I tried to get some more details about the deal from CAO Walsh who told me she was on vacation but would forward my questions to Phalen to answer.

Here, then, is what I asked Phalen and what he said:

1. If Minister Mombourquette’s bill passes and the CBRM is given the powers outlined in it, what happens next?

1) We will be able to sell land for below market value and offer tax incentives.

And enter into 99-year leases, presumably. But my question was actually, what is the next step in the port development process? Is there any further role for council? Or as I put it:

Will council have to approve the sale or lease of land at below-market value? Does that mean the CBRM may receive less than the $10 million provided for in the Option and Development Agreement or is that $10 million considered already to represent a below-market-value price?

The rest of your question is part of the agreement and not public.

I tried rephrasing this question, pointing out that the $10 million price tag is pretty much the only information about the deal that is public and asking if Phalen could simply confirm that we will receive $10 million for the lease/sale?

He responded:

Confirmed.

I also pushed for an answer as to whether there is any further role for council in this deal, asking a follow-up question:

Is it correct then, to state, that once the CBRM has the power to sign a 99-year-lease and sell land below market value, this agreement may be exercised by the Mayor and the Clerk, provided SHIP has met the conditions laid out in that agreement, or will Council have a further role to play?

To which Phalen replied:

They have to meet conditions in the agreement…….its [sic] an option agreement.

So does this mean there is no further role for council? Why can’t Phalen just say, “There is no further role for council” or “Council will then do X?” And who will decide whether SHIP has met conditions in the agreement? I’m asking these questions aloud now, I didn’t bother sending them to Phalen because it was getting ridiculous. Without knowing what’s in the agreement, trying to ask reasonable questions is like playing battleship.

(And might I just add, if Phalen’s goal with that extended ellipsis was to distract me from my purpose, it almost worked. I found myself trying to decide whether his period key had gotten stuck or if he was actively trying to create suspense before the big reveal: “its an option agreement!” I guess I’ll never know.)

2. Albert Barbusci says he wants to lease 200 hectares and buy 400 hectares — does this mean he would lease the greenfield site and buy the land designated for the logistics park, as provided for in the Option and Development Agreement?

3. What is required to trigger the Option [and Development] agreement?

4. Is there any timeframe on the development of a container port once the Option and Development Agreement is triggered?

2) and 3) and 4) These details are part of the agreement and not public.

5. Is there anything to stop SHIP from using the 1,000 acres it intends to buy for a purpose other than a Logistics Park?

5) we would expect the development of the Logistics park would spur economic development and jobs in all sectors.

That’s a lot of confidentiality, but Phalen is something of a municipal man of mystery: there was no official announcement of his appointment as economic development manager, he just appeared in the Post one day under that title. There is no economic development department listed on the CBRM web site, nor is there any mention of or contact information for Phalen himself. Moreover, his LinkedIn profile still lists his old job — CBRM Public Works Manager.

Phalen says CBRM council has seen the Option and Development Agreement “in in camera sessions,” so presumably our councilors know (and are satisfied with) the answers to these questions (although District 6 Councilor Ray Paruch was not and voted against approving the agreement).

But is it really enough that council alone should be privy to this information? These seem to me like some pretty basic questions — what does SHIP have to do to trigger this agreement? How long do they have, once the agreement is triggered, to actually develop a container port? Is there a possibility we’re simply allowing a Montreal real estate developer (Canderel, Barbusci’s partner in SHIP) to sit on 1,500 acres of port and port-adjacent land until opportunity knocks? Does it even matter what type of opportunity knocks? I have to say, Phalen’s answer to question 5 makes it sound like it doesn’t.

Again, I come back to a thought I had last week: before our municipality is given the power to enter into an agreement like this, I think we should have some stricter ground rules in place, and insisting on public answers to these pretty basic questions seems like a good place to start.

 

 

 

 

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