Monday, October 1, 2012

Should Sam Katz Resign?

It has been a tough number of weeks for Mayor Sam Katz.

He has always had his supporters as well as detractors. However, he has always been able to shrug his shoulders, smile and dismiss concerns about his tenure as mayor when criticism arose. Many people liked the fact that he was owner of the Winnipeg Goldeyes and a businessman and figured he would know how to run a city.

Although the tax freeze started under Glen MurraySam Katz continued them until just very recently. To keep this property tax freeze, the city used every penny from parking fees, fines, service and utility charges and any other area where they could divert money. The result from the freeze was a decay in infrastructure and a massive contracting out.

The anger about the decay but resistance to tax increases has resulted in the use of public private partnerships. They have built city bridges and other projects all over the city. They have become so common place that the provincial government wants to analyse them and maybe regulate them more.

This would not be the first jurisdiction to do so. P3s can be extremely complicated and not always be the best use of taxpayer money. The accusation is that they are corporate driven. This has to be taken into consideration when looking at infrastructure replacement. Whose needs are we serving has to be asked? And how much savings or removal from risk is involved in letting the private sector take the lead?

In some cases, P3s have run into financial ruin and cost the taxpayer lots, sometimes for long term. And sadly, the city officials who put these deals are often out of office or retired.

We had an investigation into politics and development only twelve years ago during the early tenure of Glen Murray conducted by former auditor Shannon Hunt. The issues then were political interference and favouritism which the 18 month investigation said cost the city millions. The mayor, the council and bureaucracy were named as being complicit and all promised to do better.

The conclusion from the report was the city had to restore confidence as a good place to do business. In other words, consistent, transparent, clear rules, set objectives, good tendering processes, regular audits and the like to help maintain and develop the city at the same time.

So after 12 years, where are we? It would appear to be that we are in a bigger quagmire than we were with the last administration.

So where did it start? It started with no clear rules and enforcement for city officials about disclosure, conflict of interest or where private business begins and ends. One of the first promises Sam Katz made when running for office was that he would put his business in a blind trust. After winning office, he re-evaluated this, found out that there was no legal restraints on him and this became the first promise he broke as mayor.

The public certainly didn't find it concerning enough and the mayor was re-elected twice after. However, we only have gotten a glimpse of the business the mayor does outside his civic duties due to the fact that some of it is never disclosed or it requires freedom of information requests.

And so it is with the lawsuit that one restaurateur has undertaken against the mayor over his hospitality spending. It is only now, years later, that we see how much spending has taken place in businesses the mayor owns or his family owns. This will be for the court to decide in terms of whether it violates the provincial Municipal Council Conflict of Interest Act.

In the end, it isn't meals out that will cost taxpayers a pretty penny but real estate and infrastructure deals that the city is doing. And to this end, the mayor's business relations are now starting to bare examination. He has continued to run the Goldeyes operation and for many years was president of Riverside Management which managed a city owned parking lot near Shaw Park. It was there that  the mayor has had and continues to have issues related to conflict of interest.

The city owned land near the baseball stadium will be the last component filled in the area surrounding The Forks. However, since the disposition of the site could have an economic impact on the Goldeyes, the mayor cannot be part of the decision making process regarding it. It is a fact that often has to re-stated over and over.

As owners of the Goldeyes, Katz has a relationship with the Sandy and Robert Shindleman who are directors and co-owners of the team. Katz has downplayed the relationship and said he knows them well enough to say hi at the stadium. This seems unlikely for co-owners of a team. It is like saying the Chipmans and Thomsons of the Winnipeg Jets are not on a first name basis.

The house that Katz bought a house in Arizona from sister of Shindico executive Diane Shindlman, is an indication that the mayor has more than a passing relationship with the family.

Real estate assets outside Manitoba are not included in the disclosure rules. The problem is that we have a mayor who lives in Scottsdale a good deal of the year to be close to family. He regularly is down there and regularly does business. This was the impetus for buying a shell company from his chief administrator Phil Sheegl. The shell company, which costs thousands of dollars to set up was sold for a buck to the mayor so he can conduct real estate deals down in the U.S.

The fact that Katz did not reveal the deal until the CBC found out about it speaks to the gap in the conflict of interest coverage. The mayor should have known better as the legislation indicates the elected official should reveal any potential area of concern.

There is no doubt the mayor has been concerned that it might be a liability if it was well known that he was down in Arizona many weekends and was homeowner there. He has bought and sold many properties in the south, some with with his chief administrator.

Brian Kelcey, a former advisor in the mayor's office, has said that because the mayor thinks that it is no one's business if he buys a house from someone in another country linked to one of Winnipeg's most prominent real estate businesses, he should resign. The Canadian Taxpayer's Federation says more should be revealed about Katz's Arizona business dealings.

And round, round it goes. The mayor shrugs but it is increasingly looking like Katz is growing uncomfortable answering questions about his business.

In the end, there was no ignoring the siren call for an audit about real estate and development deals that was voted on last week.

The Shindleman's primary business is real estate through Shindico. They are good at what they do and as a result are at city hall regularly for business.

They're also aggressively involved with city infrastructure whether it is buying, selling or developing properties. The latest is the Westport Festival development beside Assiniboia Downs.

The mayor usually votes where Shindico is involved despite his business relationship citing no conflict with their present developments.

We've had mayors who were business owners in the past. Susan Thompson owned Birt Saddlery for three years into her term as mayor. However, it is safe to say that we have not had a mayor with as many disparate business interests since the city was young.

Sam Katz has bought and sold many properties, continues to work as a promoter with such events as the Wedding Show and Baby Show.  He still does concert promotion via travelling musicals, owns the Goldeyes and has owned restaurants.

By Katz's own admission he has been fortunate. He also made a decision not to put his business in a blind trust. By contrast, the 10th richest man in the U.S. Michael Bloomberg, mayor of New York City placed his business in a blind trust. This was done to protect him and the company from running into conflict of interest accusations or the hint of favourtism. For the most it has worked and Bloomberg has been a fairly successful mayor as a result.

The increase in private participation in city business such as bridges, police stations and fire halls has plainly demonstrated just how much need there is of consistency, fairness, transparency and proper financial analysis. No matter how you look at it, the construction of a fire hall on land the city doesn't own is bad. It is worse that the deal seemed to include a land transfer that council was unaware of until the new fire hall was built.

The Number 12 fire hall might have been the trigger for the audit but ultimately an outside investigation may result in a terrible fall out if it appears that bad deals have been made, favourtism granted or interference been involved.

Should Sam Katz resign? No.

But if he wishes to remain mayor, he should put his business in a blind trust and disclose everything he owns even if it is outside the province. He should set an example beyond what the legislation outlines now. This is no longer just an issue of personal privacy but a question of where Sam Katz's business crosses into city business.

Will the mayor do this? It remains to be seen. It may be that his hand might be forced by changes to provincial legislation.

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