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A primer on the scandal that ends Sam Katz's political career


That's some audit you've got there, Mr. Whiteside.

It hasn't been released to the public yet and already the city's Fire Chief has been fired and Winnipeg's most powerful administrator has resigned, the mayor's re-election chances have evaporated, and reporters are circling like buzzards over a dying donkey in anticipation of what's between the pages.

On Monday, City auditor Brian Whiteside will give a committee of city council the first look at his audit (conducted by an out-of-Winnipeg firm on his behalf) of the convoluted, controversial and extremely fishy deals behind the construction of four new firehalls for Winnipeg.

Former Fire Chief Reid Douglas and former Chief Administrative Officer Phil Sheegl got their own peeks at what the audit said about their roles in the scandal, and both are now gone.

Coincidence,shouts Sheegl's close friend, Mayor Sam Katz. Neither man's departure had anything to do with the audit, insists Katz to derisive hoots from public and press alike.

But what else can he say? Katz still leads the cover-up of the scandal, which involves his business partner Sandy Shindleman's construction company, Shindico, as well as his longtime friend and confidant Sheegl.  Although, to save his own hide, Katz now claims he barely knows either man and rarely sees either socially. Cue the derisive hooting.

Its been a year since the firehall audit was ordered.  Memories have faded over what its all about. Here, then, is a primer we wrote on the scandal just under a year ago with all the details you need to know. Print and save to read along with the audit on Monday.
 
 

Tuesday, November 06, 2012

The Winnipeg Firehalls Scandal by the numbers

The last time we looked at the Winnipeg Firehalls Scandal we demonstrated how the project degenerated progressively so that it went from a one million dollar surplus on the first new fire station, to a pair of big deficits on the next two, to a fourth and final station being built by a process that's completely out of control with no tender, no contract, no fixed budget, no timeline and no oversight.

Now for the bad news.

To justify city council approval to cover a cost overrun of at least $2.2 million on the firehall currently being built in St. James, the last of the quartet okayed by council in 2009, the fire department submitted a "report".  In it was a financial accounting of the project so far--- what was spent on which firehall and how it compared to the original budget.

We spent a week pouring over the numbers.   Here, for the first time ever, is a detailed report of how the new firehalls were built. If you thought you knew how city administrators spent your money, you're in for a big surprise.

The overall budget for the four new fire stations was $15.3 million.  The city would borrow roughly $9.7 million from a federal stimulus/infrastructure program to add to approximately $5.3 million that had been (or would be) squirreled away from the 2006, 2008 and 2010 city budgets.

The money would be used to build four new replacement firehalls---Station 27 (Sage Creek), Station 18 (Charleswood), Station 12 (River Heights) and Station 11 (St. James.)

Money was allocated to each new firehall project to cover construction, land, and "other" (presumably soft costs like lawyers, architects, etc.).  The budget allocation for Sage Creek was $5 million;  Charleswood, $3 million; River Heights, $3.17 millon; and St. James, $4.17 million.

The land where the old fire stations stood in River Heights and St. James was to be declared surplus and sold.  They budgeted $340,500 in revenue from those parcels of land to be applied to the overall budget ($170,000 for the new firehalls in River Heights and St. James respectively).

Note: it was belatedly revealed in August that Fire Chief Reid Douglas made a secret and verbal deal for a land swap with Shindico, the developer building all the new firehalls.  The swap was to include the St. James and River Heights parcels plus land on Mulvey Avenue, in exchange for the land owned by Shindico on which the new River Heights station was built.  The city later put a caveat on the River Heights station that required the city to pay $960,000 for the Shindico land in case there was no swap. That means the city values the Mulvey land to be swapped at $620,000.
Construction of the Sage Creek firehall started in mid-July, 2011 and the station was opened in January, 2012. Time: six months.

They spent a shade more than $3 million on construction, meaning that after approved adjustments to the budget they saved $652,000. They also saved $358,000 on other expenses.  All told they saved $1 milliion on the Sage Creek station.

Note:  This is important.  Reid Douglas said he treated the firehalls project as four smaller and separate projects because each had its own unique elements.  This let him avoid telling city council who the builder was because he only needed to inform council what he was doing if the budget of a project exceeds $10 million.

       But...

       The Sage Creek station had a surplus of one million dollars. This money had to go back to general revenues.  It was not money that Douglas could use as a slush fund. And, seeing as how he was treating each firehall as a separate project, it could not be used on any of the other firehalls without city council approval.  That wasn't how he saw it, though.

The Charleswood and River Heights stations were built concurrently. They started in September, 2011 and finished at the end of March, 2012 (the deadline to qualify for stimulus money). Time: six months.

The bid for the Charleswood station came in more than half a million above the expected price. Plus they got hit by higher expenses (at least half to cover working over the winter).  The bottom line was a budget shortfall of $661,000.

 The construction of the River Heights station also cost more than expected ($245,000). That, plus the added costs of working over the winter, and the loss of $170,000 which was to come from the sale of surplus firehall land resulted in a budget shortfall of $614,000.

Together, the two firehalls cost  $1.2 million more than budgeted. Now, remember, all four new fire stations were separate projects. That means that the fire department should have gone to city council and asked separately for $661,000 to cover the shortfall on the Charleswood station and $614,000 to cover the shortfall on the River Heights station.  Instead, Reid Douglas applied the million dollar surplus on the Sage Creek station to the cost overruns on the other two suburban stations and in his report to the city's protection committee claimed a shortfall of only $264,000 on all three.

So when he needed to, to cover up that Shindico was the sole contractor, he claimed the budget for each project was under $10 million and he didn't have to notify city council. But when it was convenient, he treated the projects as one so he could move money from whichever was in surplus to the others that were showing overruns.
If this happened on an Indian Reserve, the Taxpayers Federation would be up in arms and screaming for somebody to resign.  But apparently, this is business as usual within the City of Winnipeg.  Remember that the city's top administrators, including Chief Financial Officer Mike Ruta, Chief Operating Officer Deepak Joshi, and Chief Administrative Officer Phil Sheegl have all declared publicly that Reid Douglas followed all the proper procedures and did everything by the book---their book.
This brings us to the fourth and last firehall project---the ultimate boondoggle, also approved by the city's top administrators.

Bear with us. We'll try to make sense out of this, although nobody is giving a straight story about anything to do with this project. And when they claim they are, they just raise more questions.

The contractor on the St. James station is Shindico. Only there is no contract. It seems that Reid Douglas just gave the project to Shindico without putting it out to tender or seeking other bids.  Add that to how hard he worked to keep Shindico's name away from city council and you've got a really, really big question that starts with the word favoritism and leads to cover-up.  Not to mention that Winnipeg's top administrators see nothing wrong with an untendered contract worth millions going to a company owned by a close friend of the mayor, especially the administrator who is also a close friend of the mayor.  Nope, nothing to see here.

Shindico got a permit from the city in March, 2012 to start pouring the foundation for Station 11.   Then, get this, four months later, in July, Fire Chief Reid Douglas "and Winnipeg Fire Paramedic Service project manager Christine Friesen" appeared before Assiniboia community committee asking for approval to move the proposed fire station closer to Portage Avenue.
 
[ ED. NOTE : Christine Friesen is actually Krisine Friesen.  We found her actual designation on this official city document:
 

City of Winnipeg : NEW No. 27 STATION PROJECT
Deputy Fire Chief : Mr. Reid Douglas Tel : 204-986-3555
Project Design Coordinator : Ms Kristine Friesen Tel : 204 391-2722 ]

FOUR MONTHS LATER? The other firehalls were built in six months.  What was going on here?  Douglas, and apparently "project manager" Christine Friesen, had been dicking around for four months after getting a permit to start pouring the foundation?  Do you think they could have negotiated a contract in those four months?

A contact with a time deadline? And a price? And, maybe, an idea of what they were building?  Because, as it turns out, nobody can give a simple answer as to what they're building.   A fire station with a museum? Without a museum? With a hazmat unit from St. Boniface?  No, not from St. Boniface.  A hazmat unit from the Maples? Uh, maybe. Or maybe just a training facility.   Isn't this the sort of thing you sort out BEFORE you start construction?

Just as you might want to know how big a building you're building.  Reid Douglas says now that it was always going to be 14,000 square feet.  Except that the Winnipeg Free Press says documentation shows it started as a 10,000 sq.ft. project. And every print story we can find says it was going to be 12,000 sq. ft. and not one says 14,000 sq. ft.

So we have a project for a fire station and nobody knows for sure how big it's going to be, what's going to be in it, or when its supposed to be finished.

Douglas told the Assiniboia community committee that moving the fire station closer to Portage Avenue would " increase visibility of the station, improve traffic sight lines and reduce the overall footprint of the station by about 600 square feet."  Apparently during the two-hour meeting, there was no discussion that the station had grown to 14,000 square feet.

We do now know that one month later, on Aug. 9, 2012, Shindico informed Douglas that the estimated cost of the new Fire Station 11 had ballooned and could be as much as $2.3 million more than initially budgeted.  Douglas says he told Ruta, who told him to go to city hall to get the extra money.  Apparently Ruta wasn't the least big curious about why the cost was now 56 percent higher than predicted a year earlier. Or how the other projects were doing. On budget? Not on budget?  Isn't the financial officer in charge of how your money is spent? In this case he apparently couldn't care less about an overrun of greater than $2 million.

Something else of interest happened in August, 2012.  Shindico put the former St. James fire station land up for lease.  Shindico did not own the land.  It was part of the secret land swap Douglas had negotiated,though.  Coincidence?  Yeah, that's it. Coincidence.

But that coincidence was spotted by CBC which reported Shindico's odd listing. And though Shindico pulled it immediately, it opened the door on the Scandal that's sweeping the city.

While reporters were scrambling to report the Shindico old firehall land-lease story, the company was apparently hard at work on the new St.James station.  Because, according to the report submitted to the city,  by Sept. 9, 2012 the fire department had spent $858,000 on its new firehall.  That's out of a budget of $4.1 million.
It looks like they poured the foundation at last.

But here's where the story get even more queer.  Shindico was saying the project would now cost $6.5 million or $2.2 million more than the initial budget.  Douglas dutifully went to Protection Committee seeking that extra money.  He intimated, and Mayor Sam Katz echoed, the suggestion that Shindico was finishing the work at its own expense while waiting to be repaid by the city.

Katz said he has no issue with construction taking place without a contract.

"I think the private sector is certainly putting their faith in city hall," the mayor said. "My understanding is they had a contract award for the foundation and now they're acting in good faith."

Except that there should be $3.1 million in the kitty waiting to be spent.  Why would anybody say Shindico is working for free with the expectation of being repaid later? They are being paid by city taxpayers and won't need that additonal $2.2 million for a while yet.  Unless, ha ha, that $3 million has been spent somewhere and nobody is telling. Ha ha.

Katz wants the $2.2 million fast-tracked to Shindico.  He says that would keep the budget from ballooning even further with winter costs.  How's that?  It took six months to build each of the other fire station.  That means construction on the St. James station will carry on all winter in any event.

And costs will increase accordingly.

Contract?  We don't need no steenking contract?

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