Open letter from the Director General of the City of Montreal



    MONTREAL, April 30 /CNW Telbec/ -

    I believe that it is my duty to make my opinion public on the allegations
regarding the Faubourg Contrecoeur project that appeared in La Presse on April
30, 2009, not only with respect to the general administrative aspect of this
issue, but to my role in it.
    When I began working for the city on July 31, 2006, the Faubourg
Contrecoeur project had already been underway for about two years. The
Executive Committee had originally tasked the Société d'habitation et de
développement de Montréal (SHDM) with this project on August 25, 2004. On
April 26, 2006, the master plan for developing the entire Contrecoeur site was
referred to the Executive Committee, which then asked the SHDM to oversee not
only the project, but any land transfers. The City Council confirmed the
SHDM's contract on October 30, 2006.
    It was clear to me when I began working for the city that the elected
officials wanted this project to be assigned to the SHDM, which would then
serve as its principal contractor. It is not uncommon for the city to ask an
agency to carry out a particular development project or task. For example, we
have the huge success resulting from the former city's development of the
Quartier International, and more recently, the Société du Havre's contract to
redesign the Downtown Gateway at Ville Bonaventure and University.
    On December 20, 2006, the Executive Committee approved the planned sale
by private agreement of the Contrecoeur site for $14.8 million, based on a
recommendation from Joseph Farinacci, Director of the Direction des stratégies
et transactions immobilières (DSTI). The Auditor General also said on page 10
of his March 27, 2009 report that the DSTI's managers told him that the $14.8
million offer seemed suitable in view of the site's market value.
    During a statutory meeting on real-estate issues that was held in the
presence of the Executive Committee on February 14, 2007, Mr. Farinacci
submitted a note that had been sent to me on January 26 of that year sketching
out three scenarios for the land sale. These scenarios set the sale price at
$14,884,700, less soil rehabilitation costs "up to the price of sale." The
note went on to say that "the deduction could be substantial."
    The January 26 note clearly demonstrated that Mr. Farinacci was not
opposed to the sale as some maintained, but wanted to make sure the amounts
deducted were right.
    However, this same note from Mr. Farinacci said that the DSTI's three
proposed scenarios would result in additional delays of several months, rather
than finalize the sale.
    The SHDM, which had received proposals in response to its call for
tenders, subsequently advised the DSTI that it would offer $19.1 million for
the Contrecoeur rather than $14.8 million, but the deduction would be $14.7
million.
    Mr. Farinacci had reservations about this last point. He had no objection
to the sale price, which was higher than his own recommendation, but felt the
amounts to be deducted were too vague. He expressed these feelings to me,
which I then passed along to the Chair of the Executive Committee.
    Once Mr. Farinacci left, and in view of his reservations, I suggested the
following three-point solution to the Chair of the Executive Committee, which
he supported:

    
       1. Reject the SHDM's request to deduct a firm $14.7 million from the
          sale price.
       2. Immediately conclude the sale, but with a clause permitting the
          deduction of actual decontamination costs, up to a set ceiling.
          This would allow the SHDM to define the actual costs to be deducted
          based on additional studies or fieldwork. This fact is confirmed on
          pages 11 and 12 of the Auditor General's March 27, 2009 report.
       3. Clearly indicate in the executive summary that responsibility for
          optimizing the asset's net value and of minimizing costs to be
          deducted has been transferred to the SHDM (executive summary
          No. 1074312002).
    

    In short, the amounts to be deducted became ceilings to protect the city
against cost overruns and to ensure good project management that would
subsequently enable the SHDM to cut such expenses. Furthermore, the estimated
decontamination costs are still uncertain, since the work is not done yet and
some costs (such as seismic protection) will only be known later.
    With these ideas in mind, diligent management of these costs by the SHDM
should make it possible to exploit the sales structure more effectively in
generating additional profits for the city and the SHDM. This same perspective
persists today, as illustrated by page 46 of the April 2, 2009 report by
Samson Bélair/Deloitte & Touche.
    Whatever the reasons for sharing profits with the SHDM, their first
purpose was to create a financial incentive for good management. Furthermore,
any profit retained by the SHDM would allow the city to cut its contribution
by $2.7 million annually to absorb the SHDM's operating budgets. Finally, the
city would be able to recover any year-end surpluses from the SHDM.
    Mr. Farinacci never gave me his opinion on this strategy, because it was
developed after he left.
    With respect to allegations appearing in the media, I should mention that
management officials from the city's legal services and a representative of
the DSTI were all present during the discussions. For example, the file
submitted to the City Council on March 19, 2007 refers to input from legal
services.
    With respect to my substitute role at the time (since the city had no
general manager of the Service de la mise en valeur du territoire et du
patrimoine following the departure of the former incumbent), it consisted of
providing guidance to city workers, as is clearly indicated in the executive
summary adopted by the City Council in the rules of March 19, 2007.
    In conclusion, the city's sales to the SHDM as structured made it
possible to implement the decision of elected officials to have the SHDM
oversee the project, while protecting the city's interests in this real-estate
project and in consideration of the actual costs involved in decontamination
and in seismic protection.
    If the SHDM manages the project well, this agreement will contribute to
its success. The SHDM's new administration will be able to recover money owed
to the city if decontamination or seismic protection costs turn out to be less
than anticipated. I am fully confident that the SHDM's new administration will
deploy every effort to protect its rights and to ensure the success of this
project.

    Claude Léger, Eng.
    General Manager




For further information:

For further information: Gonzalo Nunez, Communications advisor City of
Montreal, (514) 868-1127

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