The smoking gun & accountability

By David Broadland, April 2013

Did Victoria City Manager Gail Stephens misrepresent the financial state of the Johnson Street Bridge project before the 2011 civic election?

Last month I wrote here about the circumstances surrounding the City of Victoria’s efforts last year to bar three people (freelance journalist Ross Crockford, Focus editor Leslie Campbell, and myself) from obtaining certain records the City apparently wished to keep secret. The City had applied under a rarely-used provision of the Freedom of Information and Protection of Privacy Act to effectively block access to those records. The City abandoned that process once the Office of the Information and Privacy Commissioner unexpectedly called an expedited hearing of the City’s Section 43 application. I ended last month’s story by telling you that a portion of the records being sought had finally been released to Ross Crockford—10 months after he first requested them—through provisions of FIPPA. The information contained in that release—which has been dubbed “the smoking gun”—raises serious questions about the veracity of a public statement made by the City’s top executive just before the 2011 civic election. The following series of events have been reconstructed from that release, other FOI releases, and public records.

 

AT A MEETING of Victoria City Council on October 6, 2011, City Manager Gail Stephens introduced an update on the then two-year-old Johnson Street Bridge Replacement Project by noting, “interest in the bridge remains very high.” She went on to tell councillors, media and members of the public, “A lot of work is being done to prepare for the construction, but it’s all behind-the-scenes kinds of work, and not clearly visible to the public. However this preparatory work is critical to the successful delivering of the project, that I’m pleased to note continues to be within the budget of $77 million and the March 2016 timeline.”

Near the end of her short address, Stephens announced the project had received confirmation of an $8 million grant from the CRD which, she said, “can be applied to reduce the amount of money we have to borrow” to complete the project.

That the project was on budget and on schedule and was so well-managed that the City wouldn’t need to borrow as deeply as previously thought must have sounded like beautiful music to the ears of Victoria Mayor Dean Fortin. After all, he would soon be pounding the pavement and knocking on doors in search of votes so he could retain his $100,000-a-year job in the upcoming civic election, just 45 days away. Stephens’ public reassurances would surely help him in that effort. Indeed, two days after the meeting, Fortin wrote on his Facebook page: “The good news Victoria City Council received this Thursday is that the amount we need to borrow for bridge construction has dropped 8 million due to a federal gas tax grant administered by the CRD.”

But as buoying as this news was for Fortin and his pro-replacement councillors, it came with a potentially serious problem attached for Stephens, who is a certified general accountant. As such she was required, as stated in her professional association’s Code of Ethical Principles, to “not be associated with information which the Member knows, or should know, to be false or misleading, whether by statement or omission.” And her “within the budget of $77 million” statement, along with her inference that the City would be able “to reduce the amount of money we have to borrow” was directly at odds with information and recommendations given to Stephens by the City’s finance department months before.

 

THE JOHNSON STREET BRIDGE Replacement Project Steering Committee, hereafter referred to as the Steering Committee, was established by the project’s Charter in January 2011. To borrow from the Charter’s bureaucratese, the Steering Committee occupies the position in the accountability structure between City council and the City engineer running the project. That is to say, the Steering Committee controls what information is passed on to councillors. And as Stephens had been at the helm of that committee since its inception, she was the gatekeeper that separated councillors from the rest of City staff working on the project back in 2011. So when the City’s Director of Finance Brenda Warner first approached the Steering Committee in the spring of 2011 with concerns about the project’s budget, Stephens was guarding the pass.

Warner had identified millions of dollars in project-related costs that were not included in the $77-million project budget approved by City councillors before the referendum in 2010. But that was the only approved budget that she could assign those costs to, and they were steadily eating up the project’s contingency fund.

Warner had initially been assured councillors would be informed of these costs at a council meeting scheduled for July 2011. But after attending a Steering Committee meeting on June 24, 2011, where she provided an account of these costs, she was told by Stephens that councillors would not, in fact, be informed until October, when new drawings and a project cost update were to be completed by the City’s consultant, MMM Group, a private engineering and project management company. An hour after that June 24 meeting, Warner was told by the City’s JSB Project Director Mike Lai that “we will need to strategize with the Steering Committee on the timing of that update.”

Why the secrecy and strategizing? Why not just tell councillors the truth about the project and get their input and direction? Well, that would have dumped the millions in unaccounted costs into public view just before an election, and the Steering Committee had previously identified a “change of council” in an election as a definite risk facing the project. Moreover, both Lai and Stephens were aware of other serious problems: the overall cost had been badly underestimated in 2010 and now the project team was furiously reworking the design to contain costs. But keeping a lid on costs also meant reductions in the functionality, expected life, amenities and architectural qualities of the bridge, and that could result in a legal challenge to the referendum that approved borrowing for the project. As well, the lifting mechanism had undergone a radical design change, necessitating additional construction cost increases. Revealing all this at the wrong time—especially before an election—might force a public reconsideration of the entire project.

A few days after that June 24 meeting, Warner, perhaps sensing the project had gone beyond the point where council approval ought to be sought, asked Acting Assistant Director of Finance Troy Restell to put together a detailed account of the unbudgeted costs. On August 12, 2011, Restell, a certified management accountant who had been with the City since 2006, sent a memo to Lai that was circulated to Stephens. Restell’s memo stated, in part, “$5.2 million of construction/ design and City costs have been identified that are in addition to the original $77 million budget…The total revised estimate for the Johnson Street Bridge project is $82.2 million.” Restell went on to say, “It is recommended that council be advised, based on the attached analysis, of items not included in the budget that will be required to complete the project.”

Troy Restell August 12, 2011 memo

Two months later, Stephens made her “continues to be within the budget of $77 million” statement. Was there something that happened in between to reduce costs? No. Key City staff had to be aware that costs were on the rise. Look at what happened two days after Victoria electors had cast their votes. On November 21, MMM Group, the company providing the City with project management and engineering for the new bridge, delivered to the City a document called the Project Definition Report that showed construction costs had climbed $5.85 million above and beyond the costs outlined in the Restell memo, bringing the total cost estimate to over $88 million. Originally, this report and budget update had been planned for release before the election. Its delivery two days after the election was likely no coincidence.

And the cost escalations weren’t over. On January 6, 2012, Assistant Director of Finance Susanne Thompson estimated costs at $91.25 million; she noted that the project had used up all but $660,000 of its $8.9 million contingency; and she recommended council be informed. By mid-January the cost was set at $92.8 million. So at the time when Stephens said the project “continues to be within the budget of $77 million,” she should have been aware that costs on various fronts were escalating rapidly.

None of the cost escalations were revealed to councillors or the public until March 2012.

Focus asked Stephens for an explanation of why the warnings and recommendations of Warner and Restell, made months before her October 6 statement, were apparently not factored into her announcement that the project “continues to be within the budget of $77 million.” Here is Stephens’ full response:

“Based on the preliminary information I  had received as of October 2011, I believed the project was within the approved budget. In preparation for a budget update for council, I instructed staff to do a full review of the costs and funding related to the project, and at the same time the project team was finalizing the 30 percent design drawings necessary for the Project Definition Report [delivered November 21, 2011]. Upon completion of further engineering and financial analysis, I was confident in the information and a council meeting was scheduled for early March [2012]. The complete information was presented to all of council at the same time. Information is brought to council when it is complete and the proper due diligence has been conducted.”

I asked Stephens, again, if the “preliminary information” on which she based her “within budget” public statement had included Warner’s and Restell’s information. She replied, “The preliminary information I received was incomplete and was related to pre-construction costs. In addition, the Project Definition Report and value engineering had not been completed, which significantly informs budget analysis. Complete and tested budget information was presented to council when the necessary due diligence had been completed.”

What Stephens seems to be saying is that she could not have declared the project over-budget at that October 6 meeting until a number of things had happened, roughly summarized by her expression “due diligence.” But shouldn’t that same logic have applied to a declaration that the project “continues to be within the budget of $77 million”?

Stephens’ decision to characterize the financial state of the project as rosy had real consequences. Most obviously, voters were given an inaccurate picture of a controversial project just as they were being asked to make decisions about how to cast their ballots in an election. I recently asked Victoria Councillor Lisa Helps, a first-time candidate in that election, what she had experienced during her campaign in terms of the bridge. Was it an issue? Helps said, “When I was door knocking during the 2011 election campaign, the single issue that I heard most about was the bridge. I’m not saying that everyone on every door step mentioned it. But uninvited and unprovoked, people wanted to comment on the bridge—on the public engagement strategy around it, on the cost, on the necessity of one big infrastructure project when there were so many other important things the City could spend their money on. I’m not sure how much the bridge actually swayed people on voting day, but there was certainly a lot of discussion—and more critique than praise—in the months leading up to it.”

I asked Stephens if she had withheld the information Warner and Restell had provided her in order that the escalating cost of the bridge project did not become an issue during the 2011 civic election. She responded, “Civic elections do not factor into the timing of staff reports to council.” 

Stephens did not respond to questions about whether Mayor Fortin had been informed of the information provided to her by Warner and Restell, or whether Fortin had advised Stephens to make public Warner’s and Restell’s information on unbudgeted costs. Fortin did not respond to emailed questions.

 

WAS STEPHENS SIMPLY exercising due diligence when she claimed the project was on budget? Or did she know costs were escalating and misled voters before an election? And why does it matter?

I asked Colin Macleod this last question. Macleod is a UVic associate professor in law and philosophy whose research focuses on issues in contemporary moral, political and legal theory, including democratic ethics. He is also the associate editor of the Canadian Journal of Philosophy.

Macleod explained that civil servants play a crucial role in facilitating the proper functioning of democratic governance by providing accurate information: “Such information is relevant to democratic deliberation amongst citizens and politicians about the wisdom of different policies and projects…If civil servants distort or withhold relevant information bearing on matters of public interest, they frustrate deliberation by the public. The confidence that citizens should have in civil service and the government is threatened by deception or misrepresentation. In the absence of some genuine emergency that somehow posed a significant threat to the immediate health or safety of the community, it is hard to imagine a case in which a municipal civil servant would be justified in knowingly misleading the public.”

Ross Crockford has carefully scrutinized the bridge project for the past three years as a director of the watchdog group johnsonstreetbridge.org. He was told about the “smoking gun” by a concerned City Hall insider.

I asked Crockford what action he thought was needed so that the theoretical accountability that’s at the heart of access to information laws could be turned into actual accountability—a very tricky process. “Normally, a city manager would have to answer to mayor and council,” Crockford said. “In this case, though, they could be in a perceived conflict of interest: the members of council running for re-election in 2011 may have benefitted from voters getting a false impression that the project was ‘within the budget of $77 million.’ So I think the mayor and council need to appoint an independent inquiry. I believe one is needed here if we’re ever going to find out what’s really going on at City Hall.”

David Broadland is the publisher of Focus. 

 

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October 2011 JSB Update Stephens on budget.mp31.11 MB