Winnipeg city Coun. Paula Havixbeck talks to reporters about an external review report into a controversial fire hall land swap.
City councillors finally have a long-awaited fire hall land swap report that calls for major changes at city hall and directly implicates Winnipeg’s former chief administrative officer, Phil Sheegl, in the deal.
The Ernst and Young report, released Monday, said the deal showed favouritism toward local developer Shindico and as a result, the city’s interests were not protected in a deal that is now worth almost $18 million.
The report charged the land deals were made under bad management at city hall, and it did breach city policy but not the city’s code of conduct.
Auditors did not detect anything illegal, but the report did find contracts were awarded to Shindico on a non-competitive basis and deliberate moves were made to keep the deal out of the hands of city council.
In total, the report made 14 recommendations to the city about how to move forward from a confidence-shaking land deal, including taking away power from the city’s CAO when dealing with sole-sourced contracts.
Auditors recommended the city review how it awards single-source contracts and inform all companies bidding on a city project in the same way, in order to avoid favouritism to one bidder.
In a news release, the city said the executive policy committee accepted all the recommendations contained in the report and officials were committed to implementing the results quickly.
A number of the councillors said they want all of the recommendations implemented immediately.
“The fact that one vendor, Shindico, had an advantage, is beyond troubling,” said. Coun. Jeff Browaty.
Browaty said he wanted to see the report’s 14 recommendations implemented immediately.
Coun. Mike Pagtakhan also supported implementing all recommendations, while Coun. Russ Wyatt said he supported some of the recommendations but also wanted to see a greater involvement in council of selecting the next CAO.
“Clearly we delegate a lot of power to the CAO,” explained Wyatt.
How the deal worked
The fire hall saga began in 2012 when news surfaced that former fire chief Reid Douglas had made a deal with local developer Shindico to swap three city owned pieces of land for a parcel on Taylor Avenue.
In the deal, the city would trade two vacant fire halls and a city-owned parcel of land on Mulvey Avenue for a parcel of land on Taylor, where a new fire station would be built.
City council was never notified of the deal and ended up quashing it.
By the time city council nixed the deal, though, construction on the Taylor fire hall was almost complete.
Now, a fire hall sits on land still owned by Shindico, and the city is on the hook for the price of the land.
Ernst and Young was commissioned to write the external review of the controversial deal after Mayor Sam Katz admitted mistakes had been made in the tendering process for the fire halls.
The company was tasked with finding out if the city was getting the best possible bang for its buck in the land swap, and if city practices had been followed.
But before the report could be released, both Douglas and Sheegl left the City of Winnipeg. Douglas was fired in late September, but city officials would not say if his firing was tied to the land deal.
Sheegl then resigned on Thursday without providing a reason. Sheegl had originally defended the land swap deal.
Sheegl given too much authority over project
The report directly implicated Sheegl in many of the issues with the fire hall deal.
"The current CAO has taken an active role in the project since the beginning," it said. But added, "It appears that both the CFO and COO provided little to no oversight."
The report noted the project, which was meant to replace four crumbling stations with three new ones, was supposed to cost $15.3 million but ended up costing more than $18.5 million.
The underestimating of the cost was largely due to reports that Sheegl made to the city.
It also said Sheegl tasked Douglas with making the deal happen, and Douglas "did not have the appropriate skills or training to do so."
The report specifically referenced an email sent directly from Sheegl to Douglas that commanded Douglas to, "Get it done."
The report also noted auditors were surprised with the "level of authority given to the CAO" in a single-source negotiation situation."
Sheegl has been the subject of controversy at the city since his appointment to the position in 2008.
The Canadian Centre for Policy Alternatives said Sheegl’s background in land development would create problems, as developers’ interests often conflict with the public’s interests.
Councillors want Sheegl held to account
City councillors Jenny Gerbasi and John Orlikow called the report "scathing," while Sheegl’s name was repeated again and again throughout the afternoon, as councillors angrily confronted the city’s executive policy committee about how a controversial fire hall land deal was made under his purview.
'The same people authorizing a potential payout to the CAO had the report sooner. Why would we give the CAO an exit strategy when he was directly named in this report?'- Coun. Paula Havixbeck
“This is not a good day for city hall,” said Coun. Paula Havixbeck. “I see the CAO as being directly involved in what has gone on in this file.”
Havixbeck urged the committee to reconsider any severance Sheegl may have been paid and expressed frustration that he was allowed to resign despite drafts of the report being available to EPC.
“The same people authorizing a potential payout to the CAO had the report sooner. Why would we give the CAO an exit strategy when he was directly named in this report?” she asked. “I believe there was wrongdoing, and no one should be rewarded.”
Coun. Ross Eadie agreed. He said the deal was “completely mismanaged,” and Sheegl showed favouritism in awarding contracts. Eadie added he did not believe anything criminal happened in the negotiations of the deal.
“I don’t even know why we hired that guy,” said Eadie.
Eadie said he supported a recommendation to take power away from the CAO in awarding single-sourced contracts.
Coun. Harvey Smith also piled on. He called the deal “shoddy” and mainly blamed Sheegl for its mismanagement. Smith said Douglas never should have been fired, as he answered directly to Sheegl.
Smith added he wished the city could take legal action against Sheegl and added he thought the man never should have been appointed CAO.
Shindico shown favouritism
Local land developer Shindico had a significant advantage in the bidding process for the four fire halls, the report stated.
'Shindico preferred a land exchange over a cash purchase as they indicate that they are in the land development business'- Ernst and Young report on fire hall land swap
In the original bidding process for a single fire station at Sage Creek, "Shindico had information not available to other proponents," resulting on the company being awarded the contract for that site as well as three others.
Shindico's bid for the Sage Creek location was actually the highest of all seven bids received for the site.
"Significant issues existed which bring into question the openness and fairness of the processes used," the report said.
It also said Shindico was given the contracts to build four fire halls through an non competitive, unfair process. Once Shindico had been awarded the contracts, they indicated they preferred a land exchange with the city rather than be paid for the plots.
"Shindico preferred a land exchange over a cash purchase as they indicate that they are in the land development business," the report said.
However, the report did note the swap was beneficial to both sides because it meant the fire service didn't have to make a cash exchange and have it approved in the capital budget.
At one point, the city was charged two sets of fees for the Taylor Avenue station, but the report writers could not figure out why. "No explanation has been provided for the increase in feeds paid to Shindico," the report said.
'Stronger administrative process’ needed
Part of the report said the purchase of four fire halls had been split into separate deals so there was no need under city policy to consult council on the deal. If the deals had been considered together, they would've totalled more than $10 million and council would have had to be consulted.
The report said council should have been kept abreast of what was happening with the land deals.
But Katz said council was still to blame.
"I would say everybody on council would all bear responsibility. We are the ones where the buck stops," he said.
He added, "There is no violation of the code ethics or no criminal activity by anyone in the administration."
On Monday, Coun. Scott Fielding conceded the need for a “stronger administrative process” at city hall and said he hoped the report would help in that regard.
“There was obviously a lot of errors on an administrative basis that really have lead to a breach of trust,” he said. “The report … is hopefully something that can reset what has gone wrong at the city.”
Read the report's 14 recommendations