TCHC fire sale?

[Peepers]

An interesting article in the Star:

TCHC: Looking beyond the spin

Published Fri, Mar 11, 2011

By Lindsey Reed

Losses on the stock market? Appliances from China? Splitting purchase orders? Holt Renfew chocolates? What was TCHC thinking?

Those who are watching the media closely are beginning to understand the story behind the headlines. It now appears the $75 million TCHC received from Toronto Hydro was never at risk. The funds that were lost in the crash of 2008 are being recouped, and it looks like TCHC will meet its $200 million investment target by 2015. .[/I]

This opinion piece in the Star is itself nothing more than spin aimed at minimizing the mess at TCHC. The writer is the CEO of a non-profit organization that has Keiko Nakamura as a director.

Included in the quote above is a major factual error. The writer states "it now appears the $75 million ...was never at risk". In other words he is TRYING to make it sound like it was just a loss on paper at the time and that the stocks have regained value. THIS IS FALSE! As explained in the below Sun article the losses ARE REAL as the TCHC cashed in these investments. The money is gone and cannot be "recouped". The TCHC CFO at the time had tried to pass the losses off as just being "paper losses" but it took two audits to get to the truth:

http://www.torontosun.com/comment/columnists/sueann_levy/2011/03/07/17529716.html
Quote:
"In fact, when Del Grande first asked ex-CFO Gordon Chu at the Sept. 24, 2009 audit committee whether they’d taken a $41.4-million hit in the stock market, the former money manager suggested it was only a loss on paper — even though the TCHC had actually cashed in the investments and restructured their portfolio in April of 2009."

When he came back to audit committee — with acting CEO Keiko Nakamura — on Oct. 20, 2009, Chu finally admitted that the investment had indeed been cashed in six months before and they’d taken the $41.4-million hit.

Del Grande says they have never really admitted they lost another $7.8-million on an interest rate hedge, which brings their total investment losses to nearly $50-million

"When Del Grande questioned Nakamura as to whether she knew that the city was consistently making 4.5% on its own (lower risk) investments, she insisted they’d made back two-thirds of their loss following the restructuring — completely ignoring the fact that they could have had an extra $40-million or $50-million to invest in repairs to their decaying stock."
Unquote

Trying to conceal a $50 million loss from gambling on the stock market is the main reason why Nakamura must be fired, and with cause. As for the other stuff I really don't see a problem with a $40,000 Christmas party considering it was for 800 people. Every company worth working for treats their employees to a Christmas party. Same with the Chocolates (especially if they were to recognize volunteers).

I notice that this opinion piece has been scrubbed from the Toronto Star website most likely due to the major factual errors.

 

[AKS]

Yes...stocks are variable...I get that.....my response was taking issue with your notion/suggestion that these losses make them " crooks"!

I was just stating a POSSIBILITY. You never know. My uncle had a company in China who he let his relative in charge of and it went bankrupt. Seems it was embezzled through selling merchandise at a low price to a company owned by his relative.

Bottom line, I don't believe in stocks as short term investments.

 

[freshcutgrass]

Not sure what you mean by the loss of $300 million in revenues being a bad thing. Are those revenues "net", ie is the city making $300 million?

Likely I think those are gross revenues and are exceeded by the expenses in operating the portfolio. In which case, the gap between the $300 million and the expenses (ie the loss) could be the starting point of the amount of subsidy a private sector buyer should/would seek for purchasing the units.

Well, it really doesn't work any of the ways you suggest. TCHC does't really operate on a "profit" or a "loss". It simply operates on its revenue. Its annual operating budget is around $600 million, and that's the money it receives. Half of its revenue comes from rental income and the other half comes from tax-funded subsidies (it's a little more complicated than that, but I'm just keeping it simple). It has assets and it has debt leveraged against those assets.

It would be difficult to determine how much of that $300 million in rent revenue represents a "profit" over and above the "cost" of maintaining a particular unit. Since their rent-geared-to-income tenants pay based on their income, that 30% of their income could be a loss...a break even...or a profit. The market rent tenants are obviously profitable. TCHC has an advantage over private landlords, in that it can increase rents to anything it wants (if it chooses).

There are alternatives that balance the fiscal needs of the city and the housing needs of the community. To not, at least, look at the options is (IMO) far to dogmatic a position to take

Well, people have looked at the options, and that's why they are against privatizing "public" responsibilities. The people who advocate privatizing social services are usually the ones who are doing so based on dogmatic, conservative style ideology.

The general consensus among those concerned with both the fiscal and social responsibility is that it is more costly to rely on rent supplements in the private sector than to help low-income tenants in publicly-owned buildings. You mentioned the "profit motive" as if it were a minor detail...when it is the make-or-break factor. At least if the city owns the buildings, it can control its own costs...it has no control over private units...but it will still be on the hook for that 30%, regardless of how much that 30% represents. There's no free lunch to be had here....we are responsible for providing social housing and there's no magic way around that....it's messy...but it's a reality. The older rental stock isn't exactly cheap, but do to the condo boom and low interest rates, these units aren't in as much demand as they could be. If and when that changes, demand for those rental units will go up...along with rents and the city's responsibility for rent subsidies.

There's nothing wrong with private-public ventures, and Regent Park is a good example of that. But selling (giving away) your assets is just not a wise idea when you actually still need those assets. You can make it look good on the books for a year or two, but you're skewed in the long run. If you're going to give anything away to private enterprise to entice them to provide low-income housing, give something away that doesn't actually cost you anything...like density bonuses. We let you build an additional 100 condo units on that project, and in return, you supply us with X amount of units free of charge or at a discounted price. The developer still nets out ahead and the city gets social housing units at way below the cost of constructing them themselves.

But as I already mentioned, why not just leap-frog the whole business of making deals with private developers for whatever little scraps they can get, and have TCHC become a condo developer themselves. People say TCHC goes to far...I say they don't go far enough. We're in a condo boom...why not take advantage of it? TCHC has the access to large amounts of capital and borrowing power. The city owns tons of prime real estate and can approve whatever they want (no need to fight themselves at costly OMB hearings). For example, TCHC could build 1000 condos over Eglinton station...sell however number of units to private buyers that pays for construction, and the remainder are used for public housing. Other than having to cover the initial financing until the building is completed...those new social housing units were free, yet remain appreciating assets for TCHC to fund the next building.

And hey...at least it beats investing in the stock market.

 

[freshcutgrass]

This opinion piece in the Star is itself nothing more than spin aimed at minimizing the mess at TCHC.

You didn't just accuse the Star of "opinion" and "spin", and in the same breath quote a Sue-Ann Levy Sun article did you?

Hmmmm....what's the word I'm looking for?

 

[Torontovibe]

OK, so now we are going to have a whole new crop of people running TCHC but will we still see contracrs with built in goodies? Will the public have access to these contracts and be able to see how much all this will cost us or are we now just going to give huge amounts of money (with golden hand shakes for those who get caught in dirty deeds) to the friends of Ford? In other words are we really changing the system or just bringing in more of the same, just conservative crooks? (like Harper did in the Senate)

It just seems to me that whenever we have a scandle and calls for change ring out, we just change the people in charge but not the way things are done. Then it happens over and over again. Why are there always $500,000 severance packages in the contract? I want to see what the new TCHC contracts consist of. Screw those severance packages!

 

[Automation Gallery]

TCH residents share stories of poor living conditions, safety problems

TCH residents share stories of poor living conditions, safety problems. Edward Lantz, a member of social activist group ACORN, takes part in a protest outside a Toronto Community Housing building on Eglinton Avenue in Scarborough Tuesday afternoon. ACORN was at the building to raise questions about the condition of community housing buildings in Toronto.

More.....http://www.insidetoronto.com/news/c...ies-of-poor-living-conditions-safety-problems

 

[freshcutgrass]

A couple of interesting points from this article...

Witch Hunt 2.0

MARCH 18, 2011 BY ADRIAN BASHFORD


When something bad happens, it seems to be human nature to find something –or someone– to blame it on. A few-hundred years ago, it was easy to find a scapegoat for a bad harvest, mental illness of a loved-one, the sudden death of your goat, a boil on your butt, or a hangnail. This scapegoat was called a witch.

It must have been pretty easy to find someone in any 17th century town that could be easily labelled a witch. It could be someone that didn’t follow societal norms, had mental illness, had a preponderance of warts, or had the dreaded third nipple (these were sometimes called the ‘witches mark‘ as the nipple was supposed to be used by demons to feed).

Today we are so much more knowledgeable about the world. When we have a bad harvest, we generally recognize that weather patterns have a random element. Mental illness is generally considered to be something hereditary, or environmental, and not the result of being cursed. We seek rational and scientific explanations when things go wrong, right?

Not so in politics and business. It’s the Witch Hunt 2.o.

Now, instead of comparing the weight of the accused to a duck, the yard stick of choice is an auditor.

We like to think that auditors are unbiased, truth-seeking individuals right? Well, if your competence is estimated by your ability to find fault in something, I think you are likely to find fault in anything.

For comparison, think of a crown prosecutor or district attorney: are they lauded by the number of cases they won, or with the number of cases where justice was done? Yah, when an auditor is asked to find fault, they go for the win too.

A case in point: Toronto Mayor Rob Ford goes after the Toronto Housing Board (TCHC).

Mr. Ford has asked for the resignation of the volunteer TCHC board members citing the auditor’s findings that revealed: “between $4 million and $10 million was wasted on sole-sourced contracts. The report also revealed issues with record-keeping at the agency and found that $200,000 was misspent on luxury chocolates, spa trips and a Christmas party.”

Wow, doesn’t that piss you off? A government agency wasting $10M and spending $200K on chocolate. The nerve! Fire all those evil volunteer board… WITCHES!

But lets scratch the surface by actually reading some of this auditors report:

Significant cost savings are likely possible if the recommendations contained in this report as well as the City Auditor General’s previously issued audit reports are implemented. Procurement at the TCHC is in the range of $200 million. Savings as a result of increased competition could in our view be anywhere from two to five per cent of this amount. Conservatively, cost savings of approximately $4 million to $10 million may be possible. In addition, significant savings are possible as a result of increased coordination of operations between the TCHC and the City.

Wait, 2 to 5%? I’d be willing to bet that any armchair quarterback could look at any organization’s books and find 2-5% that could have been saved. Would you call for the leadership’s resignation? If they took such liberties with $4-10M headline, I am starting to wonder how much was spent on chocolate…

What happened next? The volunteer, unpaid, counsellors were dismissed and replaced by a close friend of Rob Ford (he lead his transition team) who is going to receive an undisclosed paycheck! Wha?

The point of this post is not to show that Rob Ford is reading from a well-worn copy of ‘Dictatorship for Dummies!’, but how we as citizens and employees so often get duped by the same refrain: “The system is broken because of evil corrupt people that go to work every day trying to screw us!”

Nobody seems willing to look at all the people they know, and at themselves, and realize that the vast majority of people don’t think this way (Rob Ford could perhaps be an exception here).

Lets look at some of the drawbacks of using the Witch Hunt 2.0 mentality when trying to improve organizational performance:

Successful organizations are based on trust, you start with a serious trust deficit if you treat the organization as they enemy

Fear is a poor motivator, when was the last time you heard of a team winning a championship because of fear?

One of your first moves is usually to oust a bunch of people who have organizational knowledge of the very problems you are trying to fix

A focus on bad people ignores a much more prevalent problem: bad systems

So what can we do about the Witch Hunt 2.0?

Stop supporting (or electing, or appointing) people who spend most of their time pointing fingers.

 

[spider]

-sorry you lost your gig at TCHC, are you suggesting we revert to counting nipples?

 

[jaycola]

From the Globe and Mail

Ford plans to sell social housing stock to close budget deficit
Toronto Mayor Rob Ford is keen to sell more than 900 units of social housing stock to the highest bidder and use some of the millions it generates to plug the $774-million hole in the city’s budget for next year.

The plan to put social housing units up for sale is the brainchild of the mayor’s hand-picked adviser, a former city councillor brought in to clean house after a spending scandal at Toronto Community Housing Corp.

Case Ootes, who is set to leave his post next week, made public Thursday some of the advice he is delivering to the mayor and the new board of the social housing agency – replacements for the previous board ousted by city council this spring. Mr. Ootes estimates the selloff of all the agency’s single-family homes could raise more than $400-million.

That’s money, he argues, that is desperately needed to solve a “crisis situation” created by a $650-million repair backlog that is so severe it is forcing the country’s largest landlord to leave units empty because there is no money to fix them. This, at a time when 77,000 households are on its waiting lists.

Toronto’s mayor was quick to give his public backing to that proposal, but indicated he has other ideas about what could be done with the dollars it generates.

“I agree. Let’s sell these homes. Let’s take that revenue,” he said. “Obviously, we need the money to fund next year’s budget.”

I think these homes should be sold off. Toronto has no business owning single family homes. Many of these are presently vacant, in need of repair and the resources gained from their sale can do more good if realocated.

Saying that, I feel the money garnered from their sale should be directed into supporting housing. It should not simply go into the general coffers.

I think there could be some creative uses for this money that could put this money back into the local economy and at the same time increase the inventory of social housing.

 

[jje1000]

Ootes wants the money to go into fixing the TCHC's other houses- an okay, if controvesial move.

Ford wants the money to go into the general budget- a foolish and selfish move.

Edit: It's actually not foolish, just plain selfish. Ford blows the surplus and now expects the TCHC to pay for his deficit? Spoken like a true populist!

 

[Peepers]

This is unbelievable. TCHC owns 50 derelict homes in PRIME Cabbagetown with an estimated value of $30 Million!

Even if these single family homes were in good condition why would we house TCHC tenants in one of the most exclusive neighborhoods in Toronto

As they stand the homes are just bringing down the character of the area. I don't think that there can be any question that they should be put on the market straight away.

http://www.theglobeandmail.com/news...splays-ills-of-social-housing/article2054954/

 

[TrickyRicky]

I'm cautiously supportive of selling these TCHC assets. However, like others here I think it incredibly foolhardy to suggest diverting the proceeds into general revenues to plug up structural deficits from other departments.

"The general consensus among those concerned with both the fiscal and social responsibility is that it is more costly to rely on rent supplements in the private sector than to help low-income tenants in publicly-owned buildings. You mentioned the "profit motive" as if it were a minor detail...when it is the make-or-break factor. At least if the city owns the buildings, it can control its own costs...it has no control over private units"

Freshcut, I'm not familiar enough with the numbers to challenge this statement but I would be surprised if these statments were true. From anecdotal experience I am aware that costs at city owned buildings, in terms of wages and maintenance contracts are very high and produce poor outcomes relative to privately owned buildings.

 

[cdr108]

Ootes wants the money to go into fixing the TCHC's other houses- an okay, if controvesial move.

Ford wants the money to go into the general budget- a foolish and selfish move.

Edit: It's actually not foolish, just plain selfish. Ford blows the surplus and now expects the TCHC to pay for his deficit? Spoken like a true populist!

i agree ... frankly if numbers from DCN are to believed, $400 million would be enough to build brand new 2 x 40+s condo and provide 800+ units, but then again, Ford doesn't want to provide social housing.

 

[Torontovibe]

Ford wants to use TCHC to fix the problems he created. I say, let him find his own way out of his mess. I think they should look at the option of redeveloping the sites into mid-rise apartment buildings. (where appropriate) TCHC should be building more apartments, not selling off the ones they have.

 

[GraphicMatt]

Even if these single family homes were in good condition why would we house TCHC tenants in one of the most exclusive neighborhoods in Toronto

Do you think we should dump all subsidized housing en masse into poor neighbourhoods? Do I really need to point out historical examples of why this is a bad idea?