Editor’s Note: John Whalley, the former Economic Development Manager of the Cape Breton Regional Municipality (CBRM) is suing the CBRM for constructive dismissal. The case finally came to trial from 20-24 August 2018 and the Spectator was there. We’re presenting our coverage in a series of articles because the trial touched on so many issues of interest to CBRM residents. This is Part V. (Read Part I, Part II Part III and Part IV)
As we resume our (slow journalism-style, one-week-after-the-fact) coverage of the Whalley trial, John Whalley himself is on the stand, testifying about events that led to his decision to resign his position as the CBRM’s economic development manager in May 2015.
A key development was the arrival in October 2014 of Michael Merritt, the municipality’s new CAO. Merritt was barely in office two months before he was presiding over the first of two port-related property deals which Whalley characterized as “quite significant” and that the Spectator has always thought of as “deeply dodgy.”
‘Working waterfront’
The first was the sale of Archibald’s Wharf, a waterside recreation area in North Sydney named, on the advice of the North Sydney Historical Society, after the Archibald family, the “founders of the town of North Sydney,” whose business was once located on the site. (Note: Council actually agreed to the name “Archibald Wharf” but the people have spoken and “Archibald’s Wharf” seems to be the common usage, so I’m going to stick with that.)
Archibald’s Wharf was the victim of the CBRM’s contradictory approach to planning: the 178-page Municipal Planning Strategy adopted by the municipality in 2004 set out, on the one hand, to preserve waterfront access for citizens by limiting the circumstances under which CBRM could sell waterfront recreational property. (A goal Senior Planner Malcolm Gillis described as “noble” in an Issue Paper dated 18 December 2014, which is always another way of saying “doomed.”)
On the other hand, as Gillis went on to explain, the CBRM considers Archibald’s Wharf to be “part of the working waterfront of the Northwest Arm of Sydney Harbour,” and as such, open to development.
That’s why, in the 2002 Downtown North Sydney Revitalization Plan produced by — who else? — Ekistics Planning & Design, North Sydney is a town whose industrial days are behind it and whose future lies in tourism:
Today, the town had also rebuilt itself into a tourism and adventure destination; North Sydney exudes small town charm with walking trails, coastal scenery, home style restaurants and family run shops. Where once bustling port activities occurred there is a waterfront board walk and public open spaces. The Marine Atlantic Ferry and several auto parts plants are the only remains of the town’s industrial heritage.
While in Gillis’ 2014 Issue Paper, North Sydney is a town whose best bet for the future is a return to its industrial roots:
North Sydney’s reason to be is a port…CME’s introduction to the waterfront brings back the ship construction, repair, and servicing components of the shipping industry, which at one time was one of the primary elements of the shipping industry.
Never mind that in the intervening years, millions of public dollars were spent to turn Archibald’s Wharf into a recreation and tourist area. One that might finally have been about to come into its own thanks to a new Marine Atlantic terminal that actually gave travelers access to North Sydney’s downtown.
All of that was rendered irrelevant when Dartmouth-based Canadian Maritime Engineering (CME) came to town.
CME
In his Issue Paper, Gillis described CME as a ship building/repairing outfit, although as the Spectator has documented, the federal government has identified it as a potential shipbreaking facility. CME took over an existing shipyard on the North Sydney waterfront in December 2013 and began its own operations in January 2014 (I told you it was an eventful year).
It’s hard to say when CME began negotiating the Archibald’s Wharf purchase but Whalley testified that the negotiator for the CBRM was Mike Moore who had been hired (through Business Cape Breton) in 2013. It could well be that the possibility of expansion was used to attract CME to North Sydney in the first place.
In July 2014, five months before the public heard anything about the plan for Archibald’s Wharf, the late District 2 Councilor Charlie Keigan told the Cape Breton Post there was the potential for “a great partnership” between CME and the CBRM and District 1 Councilor Clarence Prince said municipal staff were “working with the shipyard,” which had already been granted access to the neighboring Ballast Grounds by council.
Of course, any council discussions of the matter were carried out during in camera sessions that were not announced publicly, in contravention of the Municipal Government Act (MGA). Between January when CME took over the Northside shipyard and July 10, when Councilors Keigan and Prince made their comments to the Post, council had met in camera 14 times.
That said, news of the deal did eventually leak — the Cape Breton Post went to CBRM Mayor Cecil Clarke on 18 November 2014 for confirmation that there was an “expansion plan” that would involve the sale of “the bulk of Archibald Wharf” to CME and Clarke replied:
There are ongoing discussions but no final outcomes as of yet.
The public wasn’t officially let in on the secret until 2 December 2014, when Clarke called a “Special Meeting” of council with a two-item agenda: the fiscal situation and a “port update” by then-economic develpment officer John Whalley on Archibald’s Wharf. The “update” about Archibald’s Wharf was that the CBRM had received an offer on it from CME.
The offer of intent, contained in a 17 November 2014 letter from CME president Tony Kennedy to Malcolm Gillis, was for $200,000 and hinged upon the CBRM being able to close the deal — that is, push it through council — in 30 days:
CME_lettersAt that 2 December 2014 meeting, council agreed to the sale (the mayor and nine councilors voted yes, District 7 Councilor Ivan Doncaster abstained, District 6 Councilor Ray Paruch was not present). CME would pay $200,000 for the property plus make a $50,000 contribution to local recreation ($25,000 of which would be used for “port development”).
The sale, however, required an amendment to that CBRM Municipal Planning Strategy I mentioned earlier and that required a public consultation process “culminating in a Public Hearing of Council,” so a “committee comprised of the Mayor and senior administration [read: CAO Michael Merritt] was tasked with the responsibility of organizing and scheduling a Public Participation Program.”
That committee did such an excellent job that when it was time to vote on the amendment (at yet another Special Meeting of council on December 19), District 5 Councilor Eldon MacDonald and District 3 Councilor Mae Rowe voted against it, MacDonald saying he felt the process had been “severely flawed” and that he “did not have sufficient time to review the documentation provided;” Rowe arguing that while they may have followed the letter of the law in terms of process, she felt they hadn’t followed its spirit. Nevertheless, the amendment passed by a vote of 12 to 2.
Fifteen months later, Nova Scotia’s Ombudsman would validate the dissenting councilors’ concerns, ruling that the CBRM had rushed the sale of Archibald’s Wharf and had failed to adequately consult the public.
Fun with Appraisals
That’s what I knew about the Archibald’s Wharf sale before the Whalley trial (in fact, I just cribbed almost all of that from my own earlier article).
As noted above, though, the information that the negotiations were being led for the CBRM by an outside consultant — Mike Moore — rather than by the CBRM’s economic development manager was something I learned during the trial. Whalley further testified that Moore was reporting not to council but to the Mayor’s Office, which by then (2014) consisted of Clarke, his executive assistant Mark Bettens and his communications person Christina Lamey, two Progressive Conservative Party loyalists hired by Clarke (without any hiring competition) when he took office.
Canadian Maritime Engineering Ltd., North Sydney
Let’s think about that for a moment: Moore is hired not by the CBRM but by Business Cape Breton, a “quasi-public” body without any accountability to the public and rather than reporting to council, he reports to the mayor (who is, it cannot be said often enough, just one of 13 councilors in terms of power) and his “political” staff. But what Moore is doing is selling a piece of publicly owned waterfront property. What isn’t wrong with this picture?
Even the mayor seemed to realize this arrangement wouldn’t look great to the citizens, because when it came time to go public with Moore’s deal, John Whalley, the economic development manager, was tasked with writing and presenting the Issue Paper to council even though, by his own account, Whalley had had “absolutely no involvement” in the Archibald’s Wharf negotiations. Whalley presented the paper during that 2 December 2014 Special Council meeting:
Whalley_CME_IP_2014.12.01
Council, as noted above, approved the sale.
But Whalley testified that the municipality had entered into its agreement with CME without first getting the Archibald’s Wharf property appraised, a contravention of the Municipal Government Act (MGA). Whalley said that Marie Walsh — who had been made Chief Financial Officer (CFO) following Merritt’s appointment as CAO — told Moore to get a market appraisal of the property because they could not go to council without one. (Walsh, in her testimony, said she felt the Archibald’s Wharf sale met the terms of the Municipal Government Act. Asked if it was originally intended to go to council without an appraisal, she responded, “I don’t recall that.)
Whalley said the appraisal was ultimately obtained but there was a “substantial differential” between the market value of the property and the price the CBRM had agreed to charge CME. Whalley said that, according to the MGA, the municipality was not permitted to sell the land to an entity (other than a non-profit) for less than market value.
Again, although the deal was being led by Moore, it fell to Whalley to provide council an explanation for the price differential, which he did in an email dated 16 December 2014:
Whalley_email_appraisal
Compressed timeframe
As mentioned earlier, before the sale could be completed, council had to amend the Municipal Planning Strategy and to do that required public consultation. That happened during a Special Council meeting on 19 December 2014. (First up: “Ms Earlene MacMullin,” now District 2 Councilor Earlene MacMullin, who spoke against the amendment to the Municipal Planning Act, arguing the municipality had not followed the rules for public consultation.) In all, 27 people spoke during the meeting — seven in favor of the sale, 22 against.
In response to concerns raised by the public, Regional Solicitor Demetri Kachafanas was asked by the CAO to give his opinion on the “legality” of the meeting in terms of compliance with the MGA’s rules for public consultation. Kachafanas opined that it was all right and tight. He even went so far as to claim that the 30-day deadline imposed by CME made this a “unique situation where an economic interest had to be met. Thus [they] compressed the timeframes.”
(For the record: this assertion would come back to bite Kachafanas, but as the bite came from the Ombudsman and the Ombudsman is pretty much toothless, there’s no guarantee he even felt it. Nevertheless, it is worth noting the relevant passages from the ruling:
It appears the thirty (30) day deadline of the intent to purchase drove the pace of events in December 2014. The compressed timeframe added to the community’s assertion that the process lacked meaningful public consultation and fairness. Ultimately, the final sale of this property did not occur until more than six (6) months later.
Although the sale of the Archibald’s Wharf property was not a matter for provincial intervention, there appears to have been a lack of accountability in the adherence to the MGA by CBRM Council in this instance. Specifically, the time requirements for public notice stated in the MGA were not followed.
Which means the regional solicitor gave the municipality bad advice.)
But back to the meeting: Whalley was called upon next to give his explanation regarding the difference between the market value of the property and the sale price.
It was then moved by Councilor Mae Rowe and seconded by Councilor Eldon MacDonald that the motion to amend the Municipal Planning Act be postponed to give council time to review “all information regarding the matter.”
This amendment to the motion was defeated (10 to 2) and the main motion — amending the MPA to allow for the sale of Archibald’s Wharf — was passed by a vote of 10 to 2. Rowe and Eldon MacDonald were the nays, District 6 Councilor Ray Paruch was not present at the meeting.
Final contract
Negotiations over the final terms of the sale obviously went on for a few months because council was not asked to approve a contract until 15 May 2015, during another Special Council Meeting. (Between the 19 December 2014 meeting and this meeting, council held four in camera meetings at which it may well have discussed the Archibald’s Wharf sale; we have no way of knowing. In fact, if you look at the list of CBRM meetings on the municipality’s website, you won’t find any mention of the in camera sessions held on 26 January, 3 February, 23 February and 15 May 2015 because it was before the municipality began following the MGA and at least telling the public such meetings were occurring.)
When the deal finally came before council, the price CME was to pay had increased to $500,000:
Archibalds_Wharf_contract
So, did the CME deal live up to its billing? Did the company invest $5 million in its North Sydney operations within a year of 1 May 2015? Well, according to what Tony Kennedy told the Cape Breton Post on 19 May 2015, no, it didn’t:
Engineering work on Canadian Maritime Engineering Ltd.’s new fabrication shop has been completed and construction on the North Sydney property could begin soon, the company’s president says.
To date, several millions of dollars have been spent at the North Sydney facility, Kennedy said, mostly in equipment that will go into its fabrication building. He said they are in the process of acquiring a travel lift.
“We will be well over the $5 million with the building addition,” he said.
But the chances the CBRM was going to buy back the property for $500,000 (the remedy spelled out in the contract should CME fail to live up to its terms) were probably always slim to none.
And what about job creation? Before the sale was even discussed in council, District 1 Councilor Clarence Prince told the Post:
“I guess the thing for me, would be their (CME) promise of jobs in the CBRM, particularly on the Northside,” said Dist. 1 Coun. Clarence Prince. “They’re talking anywhere I understand from a low of 50 to a high of 100 — you’re talking $55,000-60,000 per person, and if that were true, it’s time that we started saying yes to economic development.”
Was it true? My sources on the Northside aren’t buying it. But how to verify? CME is a private company with no obligation to disclose information about staffing and salaries to the public. That’s the beauty of a deal like this from CME’s point of view.
Port of Sydney Update
That was a rather extended trip into the “weeds” as the CBRM’s solicitor Tony Mozvik might say, but I think the occasional trip into the weeds can be enlightening.
Now we’re going back to the trial and Whalley’s testimony and we can segue into it quite elegantly, because I noted above that on 26 January 2015, CBRM council met in camera.
Whalley testified that on 19 January 2015, he received a request from Merritt to prepare a Port of Sydney update for that 26 January meeting. (It must have been intended for the in camera session — Whalley presented an Issue Paper during the public meeting that day but it concerned a request for funding for the Two Rivers Wildlife Park. Feel free to take a moment to think about otters and bobcats and coyotes and black bears. I fully intend to…)
Whalley asked Merritt if the update was to include information on “current commercial initiatives” about which, he said, he knew nothing.
Whalley here is talking about the McKeil deal.
But that is obviously a subject for another article so for now, we’ll stand adjourned.
[signoff]
