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Mississauga Mayor Hazel McCallion is headed for a showdown with her council over a deal she signed eight years ago that gives veto power to the minority shareholder in the city's hydro utility, Enersource.
Councillors have voted to scrap the deal by spending millions of dollars to buy out the 10 per cent stake held by Borealis Infrastructure, but McCallion says that is money the city can ill afford.
She is now fighting back by calling a public meeting to discuss the issue tomorrow night.
Critics of the deal argue the veto limits the city's ability to properly control a major asset that is 90 per cent owned by taxpayers.
Carolyn Parrish, who has led the charge against it, argues the city can afford to buy out Borealis using cash reserves, the city's or those of the utility itself. The city could then issue Enersource public bonds with guaranteed and secure returns – something likely to be popular in these uncertain economic times.
But the underlying question has remained unanswered: Who wrote the veto into the Enersource contract in the first place?
The final deal as signed by the mayor was not the deal passed by council in 2000, say councillors who were present on council at the time the agreement was inked.
"What was signed was not what we approved," Councillor Pat Saito said recently.
"How on earth did a major agreement to deal with the city's largest asset ever get approved with those unacceptable clauses?" Councillor Carmen Corbasson wondered aloud at the same meeting.
Parrish has a motion before council today to force the public release of reports by an independent investment adviser and a law firm hired to look at how the agreement was created.
Efforts to scrap the partnership have intensified since councillors tried to slash the salaries of Enersource board members and found themselves blindsided by the Borealis veto more than a year ago.
They learned at that point that there were two shareholder agreements: the first approved by council, and one signed later by McCallion and the city clerk. Signatories for Borealis included David O'Brien, a former city manager who was seconded to the utility at the time.
O'Brien said he was aware of only one agreement and that it was the practice of the day to fully brief council on any deals.
"Any agreement that the city council signed or agreed to, they would have been fully briefed on it. Period. That's just the way it was done," he said.
The mayor defended her signature on the deal during a testy exchange with Parrish at a recent council meeting, saying she could not read every word of an agreement and relied on staff for advice.
"You have to depend on staff to tell you about the changes in the agreement," said McCallion. "You don't see every bylaw that goes through ... We don't see a lot of stuff. We have to depend on staff if they make any changes to any agreement."
McCallion told the Star a buyout "doesn't make sense," given that Borealis paid Mississauga $20 million about eight years ago to become a junior partner, and it could take $10 million to $15 million more than that to buy its stake back.
Her decision to bypass a recorded vote by council and go directly to the people isn't sitting well with some on city council.
Councillor George Carlson says McCallion is missing the point.
"It's no secret that many of us are extremely unhappy with this one-sided agreement, which gives inordinate powers to a minority shareholder," he wrote in an email to the mayor. "Perhaps you should take the time to find out why council never saw this second agreement – one which many of us would never have supported.
"How did it happen that you signed this without council approval?" he asked. "That's the real question for your public forum."
