KPMG report outlines missed opportunities for ESTC - March 2, 2017
BY DENNY SCOTT
After months of sitting in draft form with North Huron staff, a review of the Emergency Services Training Centre by KPMG has unveiled some missed opportunities for the North Huron facility.
John Rockx of KPMG presented the document during council’s Feb. 21 meeting and said council likely wouldn’t find many surprises in the document.
The document, which was originally given to the township on Sept. 26 of last year, explains there were several missed opportunities for the centre in its years due to delays in finalizing programs and changing directions in provincial government.
The 50-page document looks at the history of the ESTC, the opportunities the centre has had and what it can afford as far as the existing debt that follows the building. It also outlines the existing funding structure of the site.
The ESTC program is responsible for 55 per cent of the building-related expenditures and principal and interest payments on the original $1.2 million loan for the structure. The remaining 45 per cent is taken on by the Fire Department of North Huron.
“We tried to carve out the training of the ESTC, when they do provide courses, and tried to split that out,” Rockx said.
He pointed out that, without the cost of the building, the training centre was operating at an average deficit of $2,200 per year since the new building was opened. He also said the structure was built larger than it needed to be.
“For the size of operations, the ESTC is larger than what’s required,” he said. “I don’t think that’s a surprise to anyone, I’m just stating the facts.”
Rockx said the fundamental purpose of the report was to give council and staff the information to decide the future of the training centre.
“The ESTC is sort of run on behalf of the township by the fire department and fire chief,” he said. “One thing that came up in the discussions is that you might want a board of directors.”
Rockx said such a board would allow the ESTC to have its operational and financial factors maintained without every decision having to come from council.
“You can design it how you wish,” he said. “The fire chief could still be involved and representation from council could be involved as well.”
In summation, Rockx said there is competition for the centre out there, and there are no easy answers to how council should proceed, but the report did outline three options of how to run the centre.
The suggested options include maintaining the existing client and program base; continue without change; or look at growing the centre into a financially solvent entity, which KPMG believes would require a general manager at approximately $82,000 per year.
Councillor Brock Vodden said that the report had not presented any new information and, while he wasn’t blaming anyone for the lack of revelation, he was hoping for some solutions to be presented.
Rockx said that while North Huron’s centre struggles to attract programming weren’t unique, the fact that it had been saddled with so much debt was.
“There are a number of other centres that have appeared across the province,” he said. “They don’t have the debt behind them that is here. Their operations keep them in the black.”
Councillor Trevor Seip said he was disturbed by the fact that the centre, independent of the cost of the building, wasn’t breaking even.
“It’s a service,” he said. “We should know the cost [of running it] and adjust revenue [expected accordingly.”
Rockx said that it can be difficult to increase the cost of courses as there are other options for training. He also said that, as most of the training is being done by municipal staff and volunteers, like firefighters, those signing up for the course are always looking for the best price.
Fire Department of North Huron Chief David Sparling said that the ESTC’s revenue in 2015 was greater than training centres in Waterloo, London and Kingston combined, but that the site is constantly seeking for more and better programming.
“We put a lot of money, time and energy into pursuing projects and that costs us,” he said. “For some reason or another, they might not come to fruition.”
Sparling said courses are run in a way that ensures they will turn a profit.
“I agree, there is no point in running a course if it’s going to cost us money,” he said.
Changing the cost of the programs could also be difficult, Sparling said, due to potential travel costs.
“We can’t get our rates a whole lot higher,” he said. “Travel plans can make it cheaper to go to a more expensive centre for some of these programs.”
Later in the meeting, council discussed the issue and noted that, against the suggestion of KPMG and an earlier report from Sparling, they were planning on having the yet-to-be-hired fire chief in charge of the ESTC, as well, at least on an interim basis.
Sparling reported that staff could re-establish a board of directors for the centre as a means of overseeing operations, noting that the first board of directors disbanded after a single meeting. In his opinion, it was due to the fact that the budget wasn’t manageable with its amount of municipal debt.
He said pursuing options for the centre is no small task and requires dedication, time and effort that go beyond a single staff member.
“There are real opportunities beyond basic fire training here,” he said. “They need to be investigated by someone. We need someone to be a quarterback or champion, not someone to do it alone.”
Sparling said a lot of research goes into a program to ensure it’s viable before the centre pursues it.
Other council members said they weren’t convinced the centre could be viable, even with programming opportunities in place. However, the report outlines several opportunities to make money that were missed.
For example, the township declined to partner with a solar energy company that offered $35,000 annually to rent the ESTC roof for 10 years. Unfortunately, due to the prevalence of solar opportunities, it is no longer feasible.
The report also indicates that in 2015 the ESTC turned a profit on training. The site cost $182,600 to run and brought in $185,600. Unfortunately, due to what is required for the ESTC to pay back the loan for the centre, it likely wouldn’t be able to turn a profit, which is a concern that the Huron County Economic Development Board aired. While the operational costs and loan cost have the ESTC paying $66,000 per year to the municipality, KPMG feels that $12,000 a year is all the organization can currently pay and realize a profit.
Stephanie Currie, who previously worked at the centre, was at the meeting and explained that the ESTC needed to be treated like a business to succeed.
“When things started to hit the wall for us, we had a private career college [and] a marine emergency duty training program that wanted to sign contracts,” she said. “There were others. We had a number of opportunities that, by the time it was presented to council, had passed us by.”
Currie pointed to specific opportunities that were missed because they were presented prior to an election and couldn’t be dealt with until several months later.
“Although I understand there are steps that need to be taken, I encourage you to recognize that . . . there are other people that will [entice these programs away]. As a ratepayer it concerns me that more opportunities will be missed. I really hope that is taken into consideration as the committee is formed. All these things that prolong action cause opportunities to be missed.”
Currie said she “lived and breathed” the ESTC when she was there and it was “beyond frustrating” when opportunities were missed and council then [tasked] the centre with generating revenue.
Currie suggested that a board of directors could be used as a more efficient way to handle the ESTC and keep time frames more succinct while allowing council input.
Sparling also pointed out that when he brought issues to council and senior staff, they didn’t seem to be a priority.
In response to Councillor Brock Vodden questioning why opportunities seem to be passing by without council hearing about them, Sparling said he had brought an agreement with the Public Services Health and Safety Association to the township last spring that has yet to come to council.
Prior to the end of the council meeting, Seip said that the ESTC needed to be made more of a priority if it were to succeed as council hopes it can. He said that, with shared services, OPP costing and service reviews, the ESTC fell off of council’s priority list but that needed to be remedied.
Council took no action, stating that a committee would be formed to look at KPMG’s three options, but that the committee would need to include a new fire chief.
“Missed opportunities like those in the report are why the ESTC need a board of directors,” he said in an interview with The Citizen after the meeting. “These issues could be handled.”
Sparling, in that same interview with The Citizen after the meeting, said he was similarly frustrated. He pointed to the fact that the most successful years the ESTC had, financially, were before the structure was built.
He also said that the governance model of having every decision handled by council had potentially cost the centre $500,000 per year.
“There was a marine training program available to us and we had expended energy and time pursuing it, but it would require a capital investment, which we had,” he said.
Sparling approached council with the private funding secured to complete the program, but the previous council declined the opportunity.
The program was federally regulated and the first organization to have funding in place to make it work received the program, which he says would have brought $500,000 to the ESTC per annum. However council turning down the private, non-tax-payer funding prevented the program from being pursued and it went elsewhere in Ontario.
Deputy-Reeve James Campbell, in an interview with The Citizen said council needed to have a business plan in place before it could accept the funding and couldn’t secure the funding to produce a plan. He also said that, to the best of his knowledge, aspects of the program were never confirmed.
“After awhile, you lose confidence in projects like this that seem to come and go very quickly,” he said.
Campbell also said that, at the time, not all of the information was making it to council’s desk and information packages, which was a significant problem.
Some of the information in the KPMG report presented Feb. 21 was new information to council he said, which he felt pointed to problems.
“We are still talking about the report and will still be talking about it in the future,” Campbell said. “There are a lot of unanswered questions there.”
Sparling said a second tier of that same program that would have brought less money to the ESTC was also missed because the federal government changed the requirements shortly before the ESTC was prepared to host it.
A harbour fire training program is still available for the ESTC to pursue, Sparling said, but, due to the limited number of harbours in the province, it is less lucrative than the previous two options. Sparling added the ESTC is close to launching that program.
He also said there is an opportunity for the ESTC to partner with a private career college now that insurance complications have been resolved, however the opportunity needs to be pursued quickly before it too passes by.
Sparling said the programs don’t just help the ESTC to prosper but, due to the number of people it could bring into the community, would help local businesses and could increase the tax base.