3. AUDIT OF CARP RIVER WATERSHED STUDY AND RELATED PROJECTS - POTENTIAL CONFLICT OF INTEREST with respect to consultants and the community lands development recommendations

VÉRIFICATION DE L’ÉTUDE SUR LE BASSIN HYDROGRAPHIQUE DE LA RIVIÈRE CARP ET DES PROJETS CONNEXES - CONFLIT D’INTÉRÊTS POTENTIEL par rapport aux recommandations touchant les consultants et la mise en valeur des biens fonciers de communauté

COMMITTEE RECOMMENDATION as amended

That Council amend the City’s Purchasing By-law to implement the audit recommendation 12 with exceptions authorized by the DCM or City Manager being reported to CSEDC as an information item.

RECOMMANDATION modifiÉe du Comité

Que le Conseil modifie le Règlement sur les achats de la Ville afin de mettre en œuvre la recommandation 12 issue de la vérification, en tenant compte des exceptions approuvées par le CS ou le directeur municipal, présentées au CSODE à titre d’information.

For the information of council

The Corporate Services and Economic Development Committee approved the following directions to staff:

1. That staff be directed to develop a report for consideration by the Corporate Services and Economic Development Committee in September that will explore the terms of reference for an independent development corporation for appropriate city owned lands (surplus / impacted by development land – subject to development potential – as examples);

That this report be reviewed by the Governance team to ensure that it is consistent with the mid-term governance report;

That the staff report include a mechanism to ensure that Council maintain its right to direct the independent development corporation to seek specific zoning, amenities, plans and kinds of construction in the public interest, on each of the specific parcels of land or projects under the authority of the independent development corporation; and

2. That staff report to the Corporate Services and Economic Development Committee on an appropriate mechanism for full disclosure of the City’s role and interest in development projects and initiatives where the City may have a potential conflict of interest.

Pour la gouverne du Conseil

Le Comité des services organisationnels et du développement économique a approuvé les directives suivantes :

1. Qu’on demande au personnel de préparer un rapport à l’intention du Comité des services organisationnels et du développement économique, que celui-ci consultera en septembre pour analyser le mandat d’une société indépendante chargée de l’aménagement de certaines terres appartenant à la Ville (terrains excédentaires ou aménageables – qui recèlent un potentiel d’aménagement – à titre d’exemples);

Que le rapport du personnel soit examiné par l’équipe de gestion publique pour vérifier sa conformité au rapport qu’elle produit au milieu du mandat;

Que le rapport du personnel comprenne un mécanisme pour que le Conseil conserve son droit de diriger la société d’aménagement indépendante, dans l’intérêt public, en ce qui a trait aux dispositions de zonage, aux agréments, aux plans et aux types de construction, pour chaque parcelle de terrain ou chaque projet sous la responsabilité de la société d’aménagement indépendante;

2. Que le personnel fasse part au Comité des services organisationnels et du développement économique de ses conclusions concernant un mécanisme qui permettrait la divulgation complète du rôle et de l’intérêt de la Ville dans les projets et les initiatives d’aménagement risquant de soulever des conflits d’intérêts;

Documentation

1. Coordinator, Corporate Services and Economic Development Committee’s report dated 24 April 2008 (ACS2008-CMR-CSE-0028).

2. Extract of Draft Minutes, 6 May 2008.

Report to / Rapport au:

Corporate Services and Economic Development Committee

Comité des services organisationnels et du développement économique

and Council / et au Conseil

24 April 2008 / le 24 avril 2008

Submitted by / Soumis par: City Council / Conseil municipal

Contact / Personne-ressource : Diane Blais, Committee Coordinator /

Coordonnatrice de comité,

City Clerk’s Branch / Direction du greffe

580-2424, Ext. / poste : 28091, Diane.Blais@ottawa.ca

City Wide / À l'échelle de la Ville

Ref N°: ACS2007-CMR-CSE-0028

SUBJECT: AUDIT OF CARP RIVER WATERSHED STUDY AND RELATED PROJECTS - POTENTIAL CONFLICT OF INTEREST with respect to consultants and the community lands development recommendations

OBJET: VÉRIFICATION DE L’ÉTUDE SUR LE BASSIN HYDROGRAPHIQUE DE LA RIVIÈRE CARP ET DES PROJETS CONNEXES - CONFLIT D’INTÉRÊTS POTENTIEL par rapport aux recommandations touchant les consultants et la mise en valeur des biens fonciers de communauté

REPORT RECOMMENDATION

That the Corporate Services and Economic Development Committee consider the issue of potential Conflict of Interest with respect to consultants and the community lands development recommendations, as outlined in the Auditor General’s report titled “Audit of Carp River Watershed Study and Related Projects”.

RECOMMANDATION DU RAPPORT

Que le Comité des services organisationnels et du développement économique examine la question de conflit d’intérêts potentiel par rapport aux recommandations touchant les consultants et la mise en valeur des biens fonciers de communauté, tel que décrit dans le rapport du vérificateur général intitulé « Vérification de l’étude sur le bassin hydrographique de la rivière Carp et des projects connexes ».

BACKGROUND

City Council, at its meeting held on 23 April 2008, approved the following referral motion:

“Be it resolved that the recommendations of the Auditor General’s Report - 2007 Audit of Carp River Watershed Study and Related Projects be referred to the Agriculture and Rural Affairs Committee meeting of 8 May 2008 and the Planning and Environment Committee meeting of 13 May 2008 and that the issue of potential Conflict of Interest with respect to consultants and the community lands development recommendations be referred to the Corporate Services and Economic Development Committee meeting of 6 May 2008;

And be it further resolved that the reports of all three Committees rise to the Council meeting of 14 May 2008.”

As such, the Corporate Services and Economic Development Committee is required to consider the issue of potential Conflict of Interest with respect to consultants and the community lands development recommendations and to report back to Council with its recommendations on same.

CONSULTATION

This item will be advertised in the local dailies as part of the Public Meeting Advertisement on Friday preceding the Committee meeting.

FINANCIAL IMPLICATIONS

There are no financial implications associated with this report.

SUPPORTING DOCUMENTATION

Document 1: Auditor General’s report, issued previously to all members of Council and held on file with the City Clerk

DISPOSITION

Staff to implement Council’s decision(s) / direction(s).

AUDIT OF CARP RIVER WATERSHED STUDY AND RELATED PROJECTS - POTENTIAL CONFLICT OF INTEREST with respect to consultants and the community lands development recommendations

(Referred from City Council meeting of 23 April 2008 / Reporté de la réunion du Conseil municipal du 23 avril 2008)

ACS2008-CMR-CSE-0028 city-wide / À l’Échelle de la ville

Appearing before Committee on this item were Mr. Steve Finnamore, Executive Director of Business Transformation Services, Mr. Rob Mackay, Director of Economic and Environmental Sustainability, Mr. Gordon MacNair, Manager of Real Estate Services, Mr. Alain Lalonde, Auditor General and Mr. Ray Kostuch, Manager, Office of the Auditor General. Mr. Finnamore and Mr. Mackay spoke to a PowerPoint presentation, which served to outline staff’s response to the audit recommendations pertaining to potential conflict of interest and community lands development. A copy of their presentation is held on file with the City Clerk.

Mayor O’Brien then invited the Auditor General to summarize his report.

Mr. Lalonde reviewed the background relative to the audit report in that the audit was initiated as a result of a report to the fraud and waste hotline. The audit was completed in November 2007, at which time the Office of the Auditor General (OAG) provided a draft of the report to City management and management provided their response to the OAG in mid-March 2008. He discussed three main observations:

· That there was an engineering firm working both for the owners’ group and for the City;

· That although there was nothing illegal in the process because it was fully declared, it raised issues with respect to controls and perception; and

· The fact that the City acted as an owner and the regulator at the same time.

Mr. Lalonde then commented on the staff presentation. With respect to the term “arms’ length” and he referenced Hydro Ottawa as an example of an arm’s length corporation as opposed to an organization within the City structure. He referenced staff’s position that the City had to be part of the owners’ group in order to protect the public interest and he submitted that the best way of doing that was as the regulator, not as the owner. He noted that the City owned 5% of the lands in the area, which it had no intention of changing or rezoning. Therefore, he again questioned the intent of participating on the owners’ group.

Subsequently, staff responded to questions from Committee members. The following summarizes the main points raised.

Responding to questions with respect to arms’ length organizations, Mr. Lalonde indicated the City should define what that means and he suggestion one of the attributions would be that both bodies could make decisions. In the case of Hydro Ottawa, he acknowledged that the City was the sole shareholder and therefore had some influence. However, he maintained that Hydro Ottawa was clearly independent in terms of day-to-day operations. He noted the same could be said for Ottawa Community Housing.

In response to follow-up questions on this topic, Mr. Finnamore re-iterated a point made in his presentation – that the current model for the Community Lands Development Corporation could be evolved from a holding company to a fully independent corporation. He indicated that when staff originally came forward with the concept, the intention was to ultimately evolve it into an arms’ length corporation to deal with the development of surplus lands based on criteria set forward by Council. He believed it would not be hard to get there and suggested he could report back to Committee in two to three months with the pros and cons and to define a model.

As a result of these discussions, Councillor Hume indicated he would be moving that staff be directed to develop the independent development corporation and present a report to Committee and Council in September 2008.

Mayor O’Brien noted that the upcoming governance review would deal with other organizations in terms of transit, parking and land authority and therefore, he suggested incorporating Councillor Hume’s proposal with the over-all governance review.

Responding to questions with respect to provisions in the Planning Act and the Conflict of Interest Act, Mr. Lalonde indicated he was aware that legislation specifically deemed this not to be a conflict of interest situation. However, he maintained that in this case, he considered the land holdings, which the City had no intention of changing, and the global context of what this audit studied. He noted there was nothing illegal about what happened but he referenced the information that was missing in terms of the studies and the fact that some studies were wrong and he wondered where the safety nets were to pick up these issues. He argued the legal and the perception aspects were two different things. He indicated his point was that in this case, the process had failed and he was trying to provide some explanation as to why it had failed.

Councillor Chiarelli referenced examples in other areas, such as Centrepointe, where the City had land holdings and an interest, not only in protecting the value of those lands, but also in causing certain types of developments to take place. Mr. Lalonde wanted to stick to what the audit had found in Kanata West. However, he maintained the City’s powers were in its position as regulator in that through zoning, it could dictate how land was to be used.

Responding to a follow-up question, Mr. Lalonde acknowledged that the term “conflict of interest” had negative connotations. However, he maintained it came down to disclosure so that everyone involved was aware and could deal with it. He re-iterated that nothing illegal happened in Kanata West. Having said that, he wanted to bring to Council’s attention the fact that this situation existed and that it would be up to Council to either take measures to change the situation or to continue with the status quo. He believed the current situation, with respect to ownership and the relationship with the owners’ group, could have an impact on the City’s role as regulator.

In response to a question with respect to the hiring of consultants, Mr. Lalonde suggested that, in terms of controls and perceptions, the City had to ensure that in hiring consultants to do work on its behalf, these consultants did not have an interest in what they were doing; that they were free from any potential or perceived conflict of interest.

When asked to provide definitions regarding “conflict of interest”, Mr. Carey Thomson, Acting City Solicitor, read from the lawyers’ rules of conduct, which he submitted would also apply to other professions such as engineers and architects. He indicated a conflict of interest meant and interest that would be likely to affect a professional’s judgement on behalf of or loyalty to a client or that a professional might be prompted to prefer to the interests of a client and potentially compromise the quality or impartiality of the professional’s advice. In the case of lawyers, he submitted the guide was that the professional shall not act or continue to act in a manner when there is or is likely to be a conflicting interest unless, after disclosure adequate to make an informed decision, the client or prospective client consents. He argued the client’s ability to make an informed decision was the key point. Speaking to the concept of an arms’ length corporation, he acknowledged that Hydro Ottawa and Ottawa Community Housing Corporations were separate legal entities, that such organizations acted through their Boards of Directors and that the way to ensure more independence was to increase the number of non-elected officials on these Boards of Directors. However, he reminded Committee that in incorporating such arms’ length organizations, the City had to retain majority control of them.

Responding to a question with respect to the City’s participation on the owners’ group and its land holdings in the area, Mr. Finnamore acknowledged that this situation was atypical. However, he advised that when Council amended the Official Plan with respect to this, it highly recommended, if not directed, that all land owners participate in sharing the costs associated with the over-all concept development. Therefore, he submitted that because the City paid into the costs of all the studies and services, he assumed it would want to be at the table, at least listening to what was going in with respect to future costs. Furthermore, he indicated there had been some talk about relocating the Maple Grove yard, which had set off alarms for program staff. Therefore, as the corporate landlord, RPAM staff had worked to protect the corporation’s interests.

Thirdly, he advised that, as with all its land holdings adjacent to development, the City got dragged into discussions with respect to the peripheral uses of those lands; whether they be access roads, stormwater management ponds, or other uses. In that respect, it became particularly important to participate in order to protect the City’s interests.

In response to a specific question with respect to the Maple Grove yard, Mr. Finnamore indicated he assumed that there would have been communication between RPAM staff, as the corporate landlord, and Planning staff.

Councillor Bloess summarized the issues at play: the City’s land holdings in various areas, many of which were adjacent to development, and the importance of protecting its interests versus the City’s role as regulator; and the fact that even with an arms’ length corporation, the City would own it and everyone would know it. He wondered if the way to eliminate the perception of conflict was through full disclosure; that when a report came forward to Committee and Council, it clearly stated the city’s interests, why the recommendations were being made, and the implications of approving the report recommendation.

Responding to questions with respect to the hiring of consultants, Mr. Mackay confirmed that in this case, a number of major local engineering firms had worked on the project at one point or another, which would have limited the City’s ability to get subsequent work done by a local firm not previously involved.

Mr. Lalonde felt management should first try to have a process in place, perhaps through the RFP process, to ensure the consultants it hired had not done previous work on a specific project. Beyond that, he suggested there could be some disclosure mechanism. He maintained that at the end of the day, it was all about disclosure.

Responding to a question with respect to the report he would bring forward in response to the motion Councillor Hume intended to move, Mr. Finnamore indicated he could include an analysis of how to deal with City-owned lands that were adjacent to development but were not being declared surplus. However in the interest of clarity, he suggested he would want to see such a direction come forward in the form of a motion.

Speaking to the issue of timelines, Mr. Lalonde indicated that from his point of view, there was no urgency to this situation. He noted there were different options being put on the table and it would be up to Council to determine how and when to proceed.

In response to questions with respect to recommendation 4 of the Audit report, Mr. Lalonde recognized that some people may have an issue with the choice of words, however he explained the idea behind mentioning a blind trust was to say truly at arms’ length. He indicated the focus of the audit was on the specific project, therefore they had not explored best practices to see how other municipalities dealt with similar issues.

He acknowledged that had it not been for the call in to the fraud and waste hotline, these recommendations would not have come forward because it was not part of the audit plan.

At this juncture, Mayor O’Brien summarized the issues raised and the points made so far in the discussion. He believed everyone agreed that, provided the economics were right, there should not be a consultant working on both sides of the fence. He referenced the motion Councillor Hume had indicated he would put forward in terms of a structure that might replicate Housing or Hydro. He maintained that regardless of the structure, it was ultimately Council’s job to make these decisions and that the prevailing concerns should be public interest, transparency and openness. He referenced the notion of real conflict versus perceived conflict, Council’s level of comfortable with the risks associated with making such decisions, Councillor Bloess’ suggestion of a simpler way of dealing with it and whether or not there was some urgency to it. He concluded this was not an easy issue, but that it warranted increased study.

Committee heard from the following public delegations.

Mr. Edwin Dreessen of the Carp River Coalition, indicated his organization took no position on the matter of conflicts of interest, though he felt it was an issue worthy of research and debate. He referenced pages 17 and 18 of the Audit report, which offered examples of potential conflict between the City’s role as reviewer of development proposals, its ownership of land, and its membership in the landowners’ group. He submitted the report’s examples were evidence of a breakdown in the development review process at City Hall and that the Conservation Authority and various Ministries needed to equally share the blame. He proposed additional questions, which could be explored through a further audit. He discussed technical failures of the Carp River Watershed Study and Related Projects and whether or not these were a result of the potential conflict of interest signalled by the Auditor General. In closing, he asked for leadership in further exploring these issues. A copy of Mr. Dreessen’s written submission is held on file with the City Clerk.

Mr. Ted Cooper identified himself as the City employee having contacted the Office of the Auditor General to request an investigation of the Carp River watershed plan and proposed floodplain development in Kanata West. He indicated the purpose of his presentation was to encourage Committee and Council to expand the scope of the audit to examine corporate governance issues that may shed additional light on the conflict of interest issues identified in the audit. He questioned decisions made by Planning and Legal staff after they received the draft audit report in November 2007. He wondered if the Kanata West Owners’ Group had access to the draft audit document and therefore knew of it months in advance of the Mayor and Councillors. He asked for an investigation with respect to the removal of qualified professionals from doing their jobs on behalf of the City and Council.

In closing, he suggested one approach to increase accountability in staff reports coming forward to Committee and Council; requiring clear identification of the consulting engineering firm and professional engineer taking responsibility for the project as well as the name of the City’s professional engineer responsible for the project’s review and approval. A copy of Mr. Cooper’s written submission is held on file with the City Clerk.

Responding to questions with respect to his reference to the 1996 and 2002 floods in Glen Cairn, Mr. Cooper acknowledged that the referenced community had been built in the 1970s and he explained that he drew a connection between it and this project because, as a professional engineer, he would have exercised some caution in moving forward with the subwatershed study, given the history of flooding on this system.

In response to follow-up questions with respect to the sensationalism of this project and the fear of flooding upstream, Mr. Cooper suggested that because the analysis had not been completed to Provincial standards, no one know where the impacts would be.

With respect to his recommendation that professional engineers be required to sign off on reports, Mr. Cooper explained this was intended to identify the lines of responsibilities of these projects; so that it was clear who stood behind the work.

Responding to a follow-up question, Mr. Lalonde indicated he also believed members of Council should know who had worked on a report, whether it had been reviewed by internal staff and if so, by whom. However, he submitted that, regardless of the consultant having prepared a report, at the end of the day, the City should own it.

When posed a question raised by the delegation, Mr. Mackay advised that the Audit report was circulated to the Kanata West Owners’ Group only when it became public, not before.

In reply to questions with respect to the impact of municipal roads and the Transitway, Mr. Lalonde indicated that had not been within the scope of the audit and therefore the auditor did not study it. Mr. Cooper suggested these would impact on the amount of water draining into the Carp River and therefore they would impact on the required size of the stormwater management pond.

Mr. Ted Fobert, FoTenn Consultants Inc., felt it was important to look back at the history of this project. He recalled that in September 2000, the former Region approved amendment 9 to its Official Plan, which brought almost 2000 acres of land into the urban boundary. He noted the expansion area was approved under a number of policies, one of which said that the concept plan identified “shall be prepared and financed by area land owners for approval by Regional Council or the new City of Ottawa Council or its designate under the guidance and review of municipal staff and in consultation with other interested parties and the public”.

He indicated the policy further stated that the concept plan had to include the means by which the cost of infrastructure required to support development in the benefiting area could be funded and apportioned among the land owners. He submitted that was a very clear direction, in the approval of that Official Plan amendment, with respect to the fact that the plan would be prepared by the land owners, that it would be financed by them, and that it would be an open and inclusive process involving the land owners and other interested parties. He reminded Committee that the Terms of Reference for the Kanata West Concept Plan was approved by Council in March 2001 and in this report, there was also recognition that the RFP process to solicit interest from qualified firms would be directed by the City. Therefore, he remarked that all of the consultants hired in the Kanata West process went through the City for approval. He indicated the Carp River Watershed Study was initiated in 1999 whereas the Kanata West Concept Plan started in 2001 so by then, more than a year of work had been done on the Carp River Watershed Study, which was a City-funded, City-initiated process. In 2001, as the Concept Plan was getting underway, City staff was asked to review the Terms of Reference for the various studies and the proposals submitted by the consultants. Staff recommended the same consulting engineer as had been working on the subwatershed study should be retained for the environmental work associated with the concept plan because they would be able to integrate the subwatershed findings and recommendations into the Kanata West concept plan. He indicated he believed this made sense and that it was the right thing to do.

Speaking to the Kanata West Concept Plan, he explained the plan was approved in 2002 and, flowing from that, there was a whole series of studies, which were being developed under Environmental Assessments. He maintained this was a very open, clear and transparent process. He submitted what the City had now was a situation where there was a measurement error in the modelling that had been identified in a process that was still under review as a result of a Part II bump up order. He re-iterated that in his mind, there was no flaw in the process. He felt the media had shed a negative light on the development community and he noted that when this Concept Plan was initiated, none of the current players were in the picture. He noted there were 42 land owners working diligently, over a 1½ year process with 3 major public meetings and over 100 people in attendance, to design and plan this community.

In response to questions, Mr. Fobert confirmed that he had experience both in working for the City and in private practice. He re-iterated his belief that there was no conflict of interest. He submitted that in any broad development plans, the City’s interests were multi-faceted and in this case, where there was clear direction from Council that all land owners should share in the costs, it simply added another dimension.

Councillor Hume expressed a desire to develop a policy that was clear and deliberate and he expressed an interest in doing it in a thorough and timely fashion. He referenced some of the issues raised in terms of the City’s position as landowner and as regulator and the need to balance the perception of conflict with the protection of public interest.

He noted Mr. Finnamore’s suggestion that the community lands development corporation could be evolved into a holding company and he felt this warranted further investigation. To that end, he moved a motion directing staff to prepare a report that would explore the Terms of Reference for an independent development corporation for appropriate city owned lands. He further moved that the report be reviewed by the governance team to ensure it was consistent with the mid-term governance review.

Councillor Chiarelli moved an amendment, which Councillor Hume accepted as friendly to his motion, that the staff report include a mechanism to ensure that Council maintain its right to direct the independent development corporation to seek specific zoning, amenities, plans and kinds of construction in the public interest on each of the specific parcels of land or projects under the authority of the independent development corporation.

At this juncture, Committee voted on the following motions.

Moved by Councillor P. Hume

That staff be directed to develop a report for consideration by the Corporate Services and Economic Development Committee in September that will explore the terms of reference for an independent development corporation for appropriate city owned lands (surplus / impacted by development land – subject to development potential – as examples);

That this report be reviewed by the Governance team to ensure that it is consistent with the mid-term governance report; and

CARRIED

Councillor El-Chantiry wanted assurances that the staff report would include an analysis of best practices in other areas. Mayor O’Brien responded affirmatively.

Moved by Councillor R. Bloess

That staff report to the Corporate Services and Economic Development Committee on an appropriate mechanism for full disclosure of the City’s role and interest in development projects and initiatives where the City may have a potential conflict of interest.

CARRIED

Moved by Councillor R. Bloess

That the Corporate Services and Economic Development Committee recommend Council amend the City’s Purchasing By-law to implement the audit recommendation 12 with exceptions authorized by the DCM or City Manager being reported to CSEDC as an information item.

CARRIED

Committee then voted on the item, as amended.

That this report be reviewed by the Governance team to ensure that it is consistent with the mid-term governance report; and

3. That the Corporate Services and Economic Development Committee recommend Council amend the City’s Purchasing By-law to implement the audit recommendation 12 with exceptions authorized by the DCM or City Manager being reported to CSEDC as an information item.

CARRIED as amended