Future Fund Board of Governors Meeting
February 11, 2005 Report

Councillor member attendance :

• Ferguson (Co-Chair) - absent for about ½ hr during meeting.
• DiIanni - absent
• Collins - absent
• Kelly - absent

Also attending:

• Councillor McHattie (There to make a funding request for a Tree Planting program similar to one in Toronto )
• Staff: Joe Rinaldo, Joe Spiler, and one other finance staff (possible Tom Hewitson or Tony Tollis).
• Press: Eric McGuinness - Hamilton Spectator

The meeting had quorum (9 or more). Mary Gallagher (City Clerk) took minutes, but FF Board minutes are not available on the City's website.

There are 13 citizen members of the former 'Community Trustee Panel', now called the Future Fund Board of Governors:

Tom Weisz (Co-Chair), Tom Atterton, Shawn Chamberlin, Christa Chambers, Elham Farah, Brian Henley, Greg Hoath, Pat MacDonald, Bill Manson, Mark Milligan, Judy Partridge, Paul Shewfelt, Larry White.

For background on the Future Fund a full transcript of the FF portion of the January 19 th Strategic Planning and Budgets Committee meeting (including a link to the FF Board's report regarding 'recommendations' for a more effective working relationship between Council and the Board, and a verbal update from Mayor DiIanni about the Board's history, mandate and operation) can be found at: http://environmenthamilton.org/CATCH/strategic/strat_050119.htm.

The following is a partial transcript of the Feb. 11/05 Future Fund Board meeting (links to more resources at the bottom). Comments may have been made in between those transcribed.

Shewfelt : "I wasn't sure that any of the monies that we've been asked to 'manage', if I can put it that way, within our goals and purposes, were used to reduce taxes". ..

Weisz : ".There was $137 million that the City of Hamilton received as a result of what happened to Hamilton Hydro. This group was put together to make recommendations as to how that $137 million should be used for Hamilton 's future. What we came up with was a plan to make sure it was kept for Hamilton 's future in perpetuity. We split the $137 million into $100 million permanently perpetual fund and $37 million was allocated to a number of projects. There's some communication gaps in terms of what happened to the $37 million, in terms of how it was spent or whether things were added to it or not, but basically what was approved is basically what's taken place. And the good news is that after the allocations and the interest that was earned, in fact we're on track to have a little bit left over from the $37 million, which looks like it's going to be $3 million or more.

With respect to the $100 million the plan was that that would be permanently set aside in perpetuity with a plan that every number of years, and five years I think was the time frame that was selected, that within five years the $100 million would grow to perhaps something like $135 or $137 million. We would then be able to reallocate $35 or $37 million to worthwhile projects which fit the mandate, fit the vision of what we had in mind for the city, as things change and things come up.

The problem is that if the $100 million is used for other purposes, or interest on the $100 million isn't left to accumulate, we won't be building up to that amount and we won't be fulfilling our mandate and we certainly won't be helping with the vision of the city the way that it was envisioned in the first place. This has going on for a long time. There's some communication issues. I'm not sure that we did exactly what we were supposed to do in demanding information. I'm not sure we got back information in the same way we were supposed to get it back. Having said that, we are where we are. I think we've made a lot of progress in the last three, or four or five months, sort of complaining that we weren't give information that one would expect. On the other hand, I'm not sure we were demanding the information that we needed. But we've gone past that. We've got lots of information. We know exactly where we are. We understand the city has its own difficulties.

But as a group, .the main part of the meeting really is, as Paul has pointed out, what do we do with the $3 million that's extra; what do we do with the fact that the $100 million instead of being a $100 million growing with interest, as a result of adjustments and money being taken away, is now $88 million because of the $15 million which was borrowed without our specific permission anyway. And then we have some forecasts here, which we asked for at our last meeting, saying if we allow somebody to borrow some of our money, not necessarily all of our money, what happens to the money that's available to fulfill the mandate, the vision that was sort of created in the first place and approved by City Council. So that's where we are, and I ask Joe to sort of take us through the projection.

But before we do that. We were upset last year that $15 million was borrowed - and we're working on the terms of that of when principal and interest starts. There was talk of borrowing some more. Now all of a sudden the projection shows borrowing all of it. So that's something that"

Rinaldo : "Mr. Chairman I came here in November and clearly set out what the proposal that was before council. I sent the memo to you before it went to council so you'd . the budget for 2005 clearly has two options in there. We have not recommended either one of the options. The proposal is if Council wants to go ahead with the capital program, it can take one option, and if it goes ahead . you've asked us to come up with some additional options for you, so we've done exactly what the Board of Governors asked us to do. .Now it's up to you. You can make whatever recommendation you want to council."

Weisz : "No. I understand that. I just wanted everyone around the table to understand that we went from that objective, being concerned about $60 million and the projections now talk about $100 million being borrowed . at the last meeting we asked you to come up with a couple of alternatives with the numbers that you brought forward at that time. I'm only making the point that . now borrowing $100 million."

In the report Rinaldo presents to the Board the first three of four options have different times of starting principal and interest payments. Amount borrowed is the same. No mention of any spending by the Board.

Rinaldo raises spectre of cutting the road program and notes how terrible a state the streets are already in. "They're putting more pressure on us. And again it's the issue of we having to deal with two very large projects going all at once and they're consuming all of our capital programming. This is the largest capital program we've ever had, even combining all the municipalities together, this is the largest capital program ever that this city has had over the last four or five years. Unfortunately a lot of its catch up, and a lot of it's environmental. We have lots of responsibility. And a lot of it is a matter of the road program, our road program . the road program itself really requires another $5 million a year to be on a self-sustaining basis . lot of things that have not been addressed for the last two or three or five years and of course we're trying to address them all."

Weisz : "Last meeting we had some information on provincial and federal money.?

Rinaldo : Yes, unfortunately my friend Joe [Spiler] here made the assumption that we were going to get the federal gas tax, we were able to keep the capital road program at the $40 million level for five years. The only thing that he didn't make an assumption .is what we're going to get in 2005 .federal announcement on Feb 23 on what federal gas tax monies will be coming to municipalities . may not know the formula within Ontario for municipalities for awhile yet . we think it's going to around $5-6 million .$12 million next year. In addition to that, you may have heard that we got provincial tax dollars. Those are strictly dedicated to transit, to transit enhancement. So in fact that does not help us in terms of addressing any other issue - road programs, our parks and facilities and all that. That's the only additional sources of funding that we have been able to do. . St Catharines and Hamilton Hydro amalgamated . similar to 2001 . when we do that amalgamation we are going to re-capitalize . additional $7 million in dividends at that point and we need that to help us finance the capital program.." Also notes additional development charges "to try to recover more of our costs from new growth through development as opposed to the tax levy. To be honest with you, if council says can we borrow more money, I'm going to recommend against it. because I think we're getting to a point where we could get ourselves in trouble in the long run."

Weisz ".certainly one of the issues that's going to come up is if we were lending the money to the federal government. we'd be sure to get the interest paid and the principle paid, but since we're borrowing from ourselves we have to be concerned. .the assurance that that money will sort of circulate and come back, and we're not. We understand that the city council can do whatever they want, but they've approved our original mandate and we're here to try and deliberate and figure out some way of not changing our mandate too much - having funds available for the future perpetuity of the city of Hamilton - the form of security of commitment, whatever, is a big issue. But we're just a bunch of volunteers who've given a responsibility to sort of shepherd over $137 million. And we came up with a formula and a mechanism and it was approved - haven't been deviating from it totally in theory, but we're sort of at the edge of the precipice here." Rinaldo says repayment schedule is built into city financing plan "for the next five to ten years . we can formalize it into a bylaw, what the repayment is, but I've got to be honest with you, ultimately the decision on whether or not it gets amended is up to council . we all know that they make that decision."

Rinaldo : He describes it as a "cash flow" issue - money is owed so it's still technically there.

Ferguson : He says council much more aware now. "We realize now that we weren't as communicative as we should have been. ".Yesterday during the budget discussion, the Future Fund trustee panel time and time again was referred to, so your credibility has come up a long way with the council and the staff, which is a good thing. I still think you're the watchdog; you're the firewall between the $137 and the . in order to maintain the $100 million in perpetuity we have to take promissory notes. And those promissory notes . the question is do you trust the city to repay? And that can be demonstrated by the fact that 1.4 or 1.6 (Rinaldo says 1.7) .(reference is to the reduction of interest claw back). You're doing the job we want you to do. It might not be what we had in mind, but certainly it's a lot higher in esteem than it was three or four months ago."

Shewfelt : He says he respects the council and staff and his comments don't reflect on them . "However, looking back at our role with the $137 million, and what I consider our duties and responsibilities . we're looking ahead close to a quarter of a century. a large sum of money . I believe our responsibility here is to be abundantly clear with those to whom we are reporting about our position."

Weisz mentions that Bill Manson has sent letter to committee because he can't attend this meeting. Asks if someone has a copy. Extended break in conversation . Weisz says Judy [Partridge] is going to read the letter that Bill wrote a month ago. Just trying to "start things off the right way, or the wrong way".

Manson [letter]: ' .I firmly believe that the original recommendations of the Mayor's trust panel laid the groundwork for an ongoing and lasting legacy for the citizens of Hamilton . The direction that council has since taken for use of the funds seriously compromises the original concept and challenges the spirit and position and principles recommended by the panel. To do so is council's prerogative and I respect that reality. Now at long last [a means of communication with council] are in place. Given that Council will likely use the Hamilton Future Fund as a bank in order to finance loans to effect capital projects, I would suggest that, and this is in bold, there may be no necessity for the current board of governors because city council is ultimately the de facto board of governors, end bold, when all is said and done. In retrospect it was probably a mistake to establish a board of governors outside the council itself. Certainly we did not know the direction council would be taking, and indeed there were some loose ends that needed cleaning up, such as establishing a reporting mechanism. However, the trust panel could have undertaken that without being put in a position of being a governing board with no real mandate to govern. We now find ourselves in a Catch 22 situation. I would suggest, (Partridge says, while reading: "and again in bold"), that we and our mandate will be redundant if we agree to council's intended use/ uses for the Hamilton Future Fund. At the same time we will render ourselves dysfunctional if in the spirit of the mission principle we do not support council's intended use for the funds, end of bold. Personally I still strongly believe in the original mission principles and funding models. Therefore should any proposal to use the Hamilton Future Fund to finance the city through loans or otherwise be put to a vote by the Board of Governors, in bold, I wish to go officially on record as being opposed in principle, end bold. I am not convinced that future city councils will not renege on repaying a loan and/or the interest. If indeed repayment does occur over the next decade or so, and the capital of the Hamilton Future Fund is restored to a level which would allow for the development of new lasting legacy projects, then perhaps a second . panel could be set up to recommend projects for future generations of Hamiltonians. Meanwhile, what is to become of us? We need to sit down with council and discuss the whole situation. I wish you the best in your January and February deliberations as a board of governors, and trust that the board will continue to function within the vision, mission, spirit and principles and character of the panel's original report and recommendations.' (End of letter).

Partridge : ".very important role to play . I don't agree that the money should be let go" but says committee should strengthen procedures "and have a plan for communication" Develop criteria and process for applications to the fund..

Ferguson : "If this committee hadn't been in place in '02 we wouldn't still have $137 million still in place. We might have had $37 million. I can't stress that enough. You are our firewall" Notes biotech funding and says MRF will be a legacy. "We have that legacy and we also have the principal so we have the best of both worlds"..

Weisz : ."not sure what Bill (Manson) would say after he has heard everybody else. Certainly seems to be a consensus that we work well. We do things. We do make a difference. We can make more of a difference possibly.".

Weisz : "The motion being put forward is the city would like to borrow $100 million from the fund. The interest rate to be based on ." Also get bylaw and Board will be asked to comment on any proposal for change in bylaw. "Carried unanimously with those present".  

This is the link to the City report that came out of this meeting which was presented to Council at the Feb 16 th budget deliberation meeting, outlining the exact details of the loan:
http://www.city.hamilton.on.ca/clerk/agendas-minutes-reports/
committee-of-the-whole/2005/Budgets/Feb16/Future%20fund%20Report.pdf

A CATCH article about this issue was also written and can be found at: http://environmenthamilton.org/CATCH/articles/art_0502/art_050213future.htm