Tuesday, July 22, 2014

Norm with Ian Jessop CFAX1070, July 22/14

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In the land of Not-Net-Zero

Actuaries advised teachers about a year ago that their pension contributions were rising (again) because the plan had an unfunded liability of $855 million, up from $289 million two years before. One of the reasons was underperformance of the investment portfolio. Other pension contributors in public service — excepting senior executives and politicians — also faced higher contributions for the same reasons.

However, underperformance of investments was not much on the minds of the people feeding at the trough of the BC Investment Management Corporation. The lack of restraint speaks for itself. (Note: Executive compensation reports provide information for only five individuals. A blank means the income was unreported for that year.)

bcIMC's Five Highest Paid Execs

Last September, CBC reported Wealthiest 1% earn 10 times more than average Canadian. Based on Statistics Canada reports, the article says the median individual income in Canada was $27,600. Our nation's very rich — the top 1% — earned $191,100 and more.

These five bcIMC executives average 42 times the median income and six times the amount that would put them in the top 1%. The lack of restraint at the top spreads throughout the organization too. bcIMC has a staff of about 175 people and almost 2/3 earn more than $100,000 a year.

BCiMC Salaries Above 100K

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Gifts for our children

When Liberals formed British Columbia's government in 2001, they had a commitment to manage provincial finances responsibly. The result: program cuts, reduced capital spending and lower costs of administration. Fiscal conservatism was the BC Liberal mantra and provincial debt reflected the style. In Gordon Campbell's first term, debt rose by $577 million.

However, parsimony discourages existing friends and wins few new ones. As the end of the second Liberal term came into view, the commitment to fiscal conservatism altered. It didn't merely soften; it dissolved.

The outflow of public cash was suddenly unrestrained. In the last four years, debt increased by $19 billion, a rate 33 times higher than in the Liberals' first four years.

Amazingly, direct provincial debt is only part of the story. Liberals were tossing out contracts and commitments by the billions. The political party that arrived with a promise of fiscal conservatism had become recklessly extravagant and wasteful. A different kind of party was in progress; a party marked by greed, waste and personal enrichment.

Clearly, Christy Clark, Rich Coleman and friends think there are more fortunes to be distributed and more pals to be rewarded. Despite the financial disaster that is ongoing, they are planning to spend tens of billions on the LNG fantasy that replaced the failed dream of exporting electricity. The province is on the hook for $55 billion for private power but LNG could be worse.

The claim of fiscal conservatism is proven a fraud. Liberal politicians governing British Columbia have been as prudent and conservative as Ken Lay and Bernie Madoff were while robbing investors of more than $100 billion. However, at least the victims of those fraud artists got angry and put a few people in jail. We won't do that; we're Canadian; we're too nice.
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Monday, July 21, 2014

From outside the Liberal spin machine

Does it surprise you to learn that British Columbia received a net of only $61 million in gas royalties in the last two fiscal years?

Revenue statements report $534 M in royalties from April 1, 2012 to March 31, 2014 but in footnotes to the province's audited financial statements, we learn that credits owed gas producers grew in the two fiscal years by $476 M, to a total of $1,250 M. BC Liberals choose not to record this liability because it will be deducted from future royalty payments. This is but one example of accounting flimflammery that distorts the province's true financial state. It also indicates that expectations of riches to come from massive public investments in LNG plants are sheer fantasy.

BC Natural Gas Royalties 2013 2014 2

Last March, the government MLA for one of Canada's wealthiest municipalities rose in the Legislature to speak about natural gas. Jason Sturdy said,
"our government's deep-well royalty credit and infrastructure royalty credit program will also help to increase the competitiveness of our province's natural gas sector and support the long-term prospects of the industry."
The credit programs Sturdy describes are tax expenditures, which are described by a business dictionary as,
"Revenue a government foregoes through the provisions of tax laws that allow (1) deductions, exclusions, or exemptions from the taxpayers' taxable expenditure, income, or investment, (2) deferral of tax liability, or (3) preferential tax rates."
Politicians often use tax expenditures when they don't want to draw attention to transfers of wealth from public to private hands. If the BC Government's objective is to reward natural gas producers billions of dollars while citizens — like disabled people in their seventh year of a benefits freeze — are told cupboards are bare, Liberals prefer little discussion or comment not processed by their spin machine. In this case, Robin Austin, opposition critic for natural gas development, did not provide the rest of the story. Instead, he stood after Mr. Sturdy and applauded the government's gas strategy. That, I believe, is opposition that is too loyal.

I am prepared to wager that not one in twenty carbon tax paying British Columbians — perhaps including MLA Austin — know the amount taxpayers subsidize fossil fuel development. Since handout beneficiaries are among their funders, the Canadian Taxpayers Federation does not rate as important the billions in tax expenditures encouraging fossil fuels. Today, one of Jordan Bateman's complaints is about $77.82 the Ministry of Finance spent at an online Disney store. Gas subsidies have not been on Bateman's list of subjects fit for examination.

Search Google for BC natural gas subsidies and you will find the corporate press has almost no coverage. It is discussed at sites like this and by The Dogwood Initiative and the Common Sense Canadian. Otherwise, the subject is considered not something taxpayers need to know. God knows it is material, but that's not the measure that matters to corporate media.

The following is extracted from documents published by the Ministry of Finance, including audited financial statements of British Columbia.

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Sunday, July 13, 2014

Hudson Mews v. Portland Hotel Society

The Code of Ethics published by the Society for Professional Journalists includes, among others:
  • Be vigilant and courageous about holding those with power accountable.
  • Deny favored treatment to advertisers and special interests and resist their pressure to influence news coverage.
Is the pro-media of British Columbia guided by those or similar principles? Consider the following.

When insiders at the Portland Hotel Society were caught misusing tens of thousands of dollars provided them by public agencies and donors, outrage echoed for weeks and heads rolled at the PHS. I did a Google search tonight, using the phrase,
"Portland Hotel Society" audit.
The search engine returned 165,000 results. Among the first listed were numerous items by Postmedia, Global TV and CBC. Even a release produced by www.newsroom.gov.bc.ca was near the top of the Google search page. Undoubtedly, the PHS story deserved wide coverage. That occurred and I have no objection.

Has the same diligence been applied respecting the powerful Ilich family's Townline Group of Companies and parties also associated with the Portland Hotel Society affair? Those others are Cabinet Minister Rich Coleman, BC Housing and auditors acting for the public. I did a Google search, using the phrase,
Townline "Hudson Mews" audit.
Hudson Mews
The search engine returned one result. That was Bob Mackin's article at The Tyee, Internal Audit Slammed BC Housing Deal in Victoria. He wrote about Rich Coleman's plan for BC Housing to invest $32.8 million in a decidedly upscale Victoria housing project being developed by people the Minister knew well,
...But a May 13, 2011 Internal Audit and Advisory Services report released to The Tyee via Freedom of Information tells a different story. The report said auditors rejected B.C. Housing's claim that Hudson Mews would improve directly or indirectly social housing in Victoria. It concluded that the project would expose the province to "significant and unnecessary financial risks."

"B.C. Housing was prepared to go forward with this project despite the fact there were significantly unresolved issues with respect to the project's financial viability," said the report. "Further, B.C. Housing management knew of these issues, but appeared undeterred in proceeding with the project."

...The executive summary said auditors found the Townline-retained appraiser overstated the property value by approximately $900,000, leading to a public perception that the province was receiving a substantial discount on the announced $4 million land purchase.

In fact, the province was receiving a discount of less than $100,000 in exchange for the direct award of the management contract to TLHS.
So, if the overstatement of value uncovered by auditors was close to a million dollars, the obvious conclusion is that Hudson Mews was potentially a financial controversy far larger than that involving the wayward Portland Hotel Society. If that's the case, why is it only covered by one independent investigator?

If mainstream media's political reporters were truly vigilant and courageous about holding those with power accountable, they'd have been all over the Hudson Mews story before one under-resourced freelancer could get his laptop warmed, even though he is the most diligent and feared public affairs journalist in the province.

If Postmedia didn't offer favored treatment to advertisers and special interests, it might have had one of its non-conflicted political reporters working on Hudson Mews. But then, the publisher of BC's largest daily newspapers seems determined to follow its current business plan for whatever time is has left before the Trustee in Bankruptcy arrives.

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Saturday, July 12, 2014

BC's crony capitalism in action

This item was first published March 17 but is worth reviewing because it fits with Thursday's post, Patronage and private privilege - BC Liberal P3.

It is apparent that Christy Clark and her Minister of Graft and Corruption believe no rules constrain them. Even when a senior public official like Michael Graydon is determined to have offended standards of good conduct, his former colleagues pretend surprise, avert their eyes and walk away saying, "Nothing can be done."

What they really mean is, "Nothing will be done."

* * * * * 
Flipping channels Sunday, I paused to watch as Vancouver Whitecaps FC played an MSL game at StubHub Center in the Los Angeles suburb of Carson, CA. In a facility capable of seating 27,000, the announced crowd was 6,684. No way was that a head count. Feet, maybe. Or, toes.

Regardless, I learned that no matter how many, or how few, sports fans paid admission, California taxpayers were unaffected because StubHub Center was financed by its operator, Anschutz Entertainment Group. I looked at the financing of other sports arenas - or multi-use facilites, as the spinmeisters prefer - and learned that BC Place sets a standard than none of the others come close to meeting. The graph illustrates:

Dollars in the following detail have not been adjusted for project timing or exchange and that would change the comparisons slightly.

This would be amusing if it were not such an impactful situation. For more than a decade, BC Liberals have claimed to be skilled managers of the people's finances, saving us from economic disasters that would result if lefties were in charge. The taxpayers of BC paid almost $15,000 for each and every seat of BC Place. Yet, the Socialist squanderers in Sweden managed to open the equivalent sized Friends Arena in Stockholm for a public cost of $1,325 per seat.

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Thursday, July 10, 2014

Patronage and private privilege - BC Liberal P3

By numerous measures — lower job and GDP creation, fewer public services and rapid expansion of public debt — BC Liberals are colossal failures. Most BC residents are unaware because the major accomplishment of this government is its mastery of disinformation as political strategy.

With a breathtakingly large crew of contractors, communication managers and social media engineers, along with political officers and spinmasters throughout the public service, taxpayers pay most of the costs. But the industrial and commercial beneficiaries of Liberal policies fund other elements of the disinformation machine. These include business associations and astroturfing "citizens" groups created in PR offices. For business, there is no net cost; expenditures are investments returned through friendly policies, corporate welfare and tax breaks.

A thoroughly compromised political media barely pretends to be outside the government orbit. It does little independent reporting of note, preferring to echo talking points and press releases. Punches are pulled and rewards gathered.

We live in a province where patronage and privilege has become government's purpose. Services to citizens interest Liberals only if there are major contracts to be awarded to loyal old friends or new friends with adequate generosity. BC Hydro, a utility that was established to provide decades of low cost power to businesses and residents, was seen as an asset pool to be sucked dry.

When Ministry of Finance experts work on the provincial budget, financial information is created that politicians treat as inconsequential beyond how it will effect their communications strategies. A good example of this assertion arises from private power policies, Here is a record of Ministry estimates of electricity values in the Pacific Northwest:

So, while the experts had a decent handle on the downward trends in electricity prices, Liberal politicians were determined to do business with private power producers, even if it meant billions in losses were to be suffered by BC Hydro customers. I reviewed average market prices along with various reports of prices paid to independent power producers. The quality of information from BC Hydro is poor and average prices paid for private power are manipulated by factors not fully disclosed. I think it is impossible for a person outside the industry to create an accurate picture of average prices but we do know the upper range of prices. These are reflected in the following graph. It is also clear that, as private power has come on stream, the overriding BC Liberal principle has been, "Buy high, sell higher."

Can anyone looking at these numbers think for a moment that honest and ethical management of public assets is intended in British Columbia? Don't assume the Legislative Press Gallery will be looking closely at this situation. They have places to go and people to see.

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Wednesday, July 9, 2014

Hey Tom, whose energy policy has been nonsense?

In the article "Unparalleled, indeed," I quoted from an item written in 2011 by Black Press proselytizer Tom Fletcher. In it, he
"lauded Gordon Campbell's "long-term strategy to export hydroelectric power" and he called John Horgan the champion of doomsayers. Fletcher wrote of "evidence that current NDP energy policy is nonsense."
Reader Merv Adey drew Fletcher's attention to this quote with:
Demonstrating, at the very least, poor arithmetic skills, Fletcher responded:

However, his was not a convincing answer since the International Energy Agency and the financial media had been reporting on a natural gas glut since 2008, three years before Fletcher tapped out his words. Besides, oversupply of electricity in the Pacific Northwest is not explained so simply. Respected energy expert Robert McCullough produced a report last winter that paints a more complete picture. It is a picture that suggests the policy that led to $55 billion worth of BC Hydro commitments for high cost private power was true nonsense in a world where electricity has been available from our neighbours for a fraction of what BC pays independent producers.
"He found there is regularly so much electricity available in the Bonneville Power Administration network that it can't sell it all.

"In fact, McCullough found, in the past two years, the market has been so oversupplied that Bonneville regularly paid customers to take electricity off its hands.

"There are a few reasons why energy prices have fallen so low. Two consecutive rainy years have put plenty of water behind the dams. Energy companies continue rapid development of wind farms, which have become more competitive in the cost of power..."
I reminded Fletcher of another of his inaccuracies, one from 2012 that demonstrated his lack of competence to report on provincial energy policy. He wrote,
"Natural gas replaced forest products some years ago as B.C.’s top commodity revenue stream, helping to keep the lights on in B.C. schools and hospitals."

Again demonstrating discomfort with calendars, the response of David Black's favourite pundit was a non sequitur:
Actually, Tom, it was two years ago you composed that misinformation and you've not corrected it since. And, aren't you one of those writers who likes to claim that BC was in the political and economic dark ages before May 2001? Heck, that was more than ten years ago. By the way, natural gas is not BC's top commodity revenue stream and here are the gas royalty numbers, drawn from Ministry of Finance documents,

Remember too that oil and gas rights sales had gone softer than a leaking balloon before Fletcher made the claim that gas was keeping the lights on in schools and hospitals. Of course, if Fletcher had his preference, lights would not be needed in public schools, but that's another story.

I don't often read Fletcher's work but I have seen enough to know he is a right-wing ideologue. Apparently, he's one who doesn't let fact get in the way of strongly held opinions that he wants to share with readers. I closed the Twitter conversation with this:

In preparing this, I looked at a number of items written by Tom Fletcher. I had forgotten his role in newspaper publisher David Black's campaign against the Nisga'a Final Agreement, a treaty initialed in 1998 and given legal effect by Parliament in 2000. Black was opposed, strongly opposed, to recognizing aboriginal rights and he ordered his entire newspaper group to give that message to readers. Many people thought that put editors in a position of conflict, perhaps forgetting that Black suggested any editors who were opposed could submit a letter to the editor for consideration.

Fletcher did not have difficulties with an instruction from the boss. In a letter to the Vancouver Sun, he said,
"What other editors and I were forbidden to do was to spend the owner's money and space to counteract his initiative on the treaty by commissioning contrary viewpoints. I have no trouble accepting that."
Of course, this presents a karmic situation. Some years ago, Black and his minions hated the very idea of negotiating treaties with First Nations. Today, they are big supporters of building Northern Gateway and other pipelines to transport fossil fuels across the BC wilderness.

What stands in the way? The consent of First Nations who, in the absence of treaties, have Supreme Court affirmed rights to control development in unceded territories.

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