Agilis press release a mistake: GSTA

The head of a local lobby group admits he rushed a May 28 press release that alleged a city-owned telecommunications company was losing money. 

But Dan Melanson, president of the Greater Sudbury Taxpayer's Association, says even if the company, Agilis, is making money, the group still wants the city's auditor general to conduct a thorough review of the business.

“On a fundamental basis, we don't believe the public sector should be competing against the private sector unless it's absolutely necessary,” Melanson said in a studio interview. “In the telecommunications field right now, I don't believe it's necessary for Agilis to be competing against the private sector.”

Melanson said he bore full responsibility for the May 28 release, which said partial financial statements leaked to the GSTA indicated the company was losing money – more than $2 million as of Dec. 31, 2010.

“Those documents were provided by a whistleblower and not available on the (Greater Sudbury Utilities) or Agilis websites,” the release said. “The GSTA says the only way to get answers to all these questions is for mayor and vouncil to direct the city's auditor general to investigate Agilis, GSU and their associated companies thoroughly.”

However, the leaked financial statements refer only to “loss carryforwards,” an accounting procedure that allows a business to reduce its income tax payable, but doesn't refer to current-year operating losses. The GSU has since said Agilis has turned a profit every year since 2005.

When asked why he didn't research what the statements meant before he issued the release, Melanson admitted it's something “we should and could have done.

“In retrospect, absolutely. And we're no more perfect that anybody else ... We didn't and that falls directly on me and I take full responsibility for that.”

He said the May 28 release was intended to spark a public debate over the future of Agilis and the GSU, and whether the city should be competing against the private sector.

Formed in the 1990s, the company operated for years as a loss-leader in Sudbury to attract new industries that required a fibre optic network, such as call centres.

In 2003, as the losses mounted, the company reorganized itself and came up with a new business plan. In an interview earlier this month, Agilis CEO Frank Kallonen said the new business plan led the company into a new era of profitability.

Melanson said it may well be the case there's huge benefit to having Agilis as a city-owned corporation, but it's time for a forensic audit to bring the company under public scrutiny so the debate over its future can be an informed one.

“I'm not saying they should sell Agilis at this particular point in time,” he said. “What I am saying is a lot of questions have been raised in the community about Agilis. And we need to have a performance review audit so we can get some answers as to whether it should be sold or not.”

The GSU has said that members of the GSTA were invited to come in and have any questions about the financial statements answered before the May 28 release.

Melanson said a member of his group met with Kallonen, but “the information that came back wasn't enough to convince me to change the tactic we were going on.

“I didn't think that a face-to-face with anyone at the GSU was going to change anything.”

He said there is much talk in the community about the GSU, such as the fact Kallonen has a GSU telecommunications tower on his property.

“Do you really think it's really appropriate to have a private telecommunications tower at his home? And the excuse for that is he needs to be in communication with the office 24/7? Well, last time I checked, telephones work very well for communicating with people back and forth.”

Ward 10 Coun. Frances Caldarelli, who chairs the GSU board, declined the opportunity for a studio interview, but in a telephone interview, she said the tower was put up several years ago, before Kallonen was head of the GSU.

At the time, he was one of three staffers on call around-the-clock in case there was a problem with the network.

“The reason that one was put there was, there was a thing in the collective agreement that said that unionized staff could not be on call more than one week a month,” Caldarelli said. “In that department, there were two union people and there was Frank. So that meant he had to be on call two weeks out of the month.”

So they put the tower on his property so he could work from home while he was on call. When asked whether it looked odd for an executive to have a tower on his own property, Caldarelli said the alternative was to hire two more staff members to cover the on-call periods.

She said they got the tower free from TVO, so the only costs was the $17,000 expense of moving it from Gogama and putting it up in Kallonen's property.

“I don't think it looks odd when you consider that, otherwise, we would have had to hire two more technicians to cover that 24-hour call,” she said. “You probably would have paid salaries and benefits to those guys of more than $150,000 a year for two of them.

“So installing a tower, where he's paying the hydro costs of running it, I really don't think it looks that weird at all. I think it looks like a good business decision.”

When the day comes that Kallonen no longer works for the GSU, she said “I'm sure we'll move it.”

Caldarelli has defended Agilis and the GSU, saying the city profits financially through money it receives from Agilis, and the fact municipal departments receive fibre optic service at rates lower than offered in the private sector.

Mayor Marianne Matichuk initially backed the GSTA's call for a review by the auditor general, but withdrew her motion until the GSU's own auditors, PricewaterhouseCoopers, makes a presentation to city council in the coming months.

“I'm going to see what comes out, and what is said,” Matichuk said June 20, after her state-of-the-city address.

“And if it answers the questions, then it would be redundant. If it doesn't, then I will do what I said I was going to do from Day 1, and that is to put a motion on the floor to have the auditor general take a look at it.”

Caldarelli said she's puzzled by Matichuk's stance, since she was a member of the GSU's board of directors until the mayor stepped down after Christmas.

“She raised these issues at hydro meetings, and we had discussions about them. And I thought that, in her mind, everything was fine,” Caldarelli said.

“She raised the questions, did Agilis make money last year? Did it have a loss? Which it didn't. Is it a company we should keep? Those questions were raised and, I thought, answered.”

For his part, Melanson said there has been private-sector interest from more than one company interested in buying Agilis, something the city should take a serious look at.

“You have an asset that is worth $20 million, more or less,” he said. “But let's say $20 million. You can take that $20 million and put it in a savings account.”

That money could be used for whatever pressing need the city has, whether it be infrastructure or anything else.

Caldarelli said there is interest in buying Agilis, but the offers haven't been close to what the company is worth.

“We've had a few people locally express interest in Agilis, but let me be clear: they're interested in it, if they can get it for nothing,” she said.

“They don't want to pay, really, what it's worth ... Anything could be for sale, if you're getting a reasonable price for it. But we're not going to give it away.”

She said that the issue has been raised in the community in such a way that it plays to the negative view some members of the public have about politicians.

Unlike a decade ago, when people complained in coffee shops and street corners, today can get together on blogs to make all sorts of accusations.

“With social media now, you can have 10 guys make a huge thing out of nothing,” she said. “They blog back and forth, people read it ... Sometimes it's correct, but the things you read in blogs, you really should take with a grain of salt, but some people don't.

“People have always liked to complain about their government, but it's just so much easier now.”

But Melanson said there's enough questions being raised quietly in the community, that it's worth spending the money to have the auditor general examine the GSU.

He points out that city auditors gave Sudbury Transit's books a thumbs up a few years ago, but Brian Bigger uncovered more than $800,000 in missing ticket money when he took a look.

“I believe that if Brian Bigger does a forensic audit, I believe he will find things that are not appropriate,” he said.

“And there will be repercussions from it. That's my personal belief.”