On Selling City Assets; There is a Middle Path

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The topic of selling City of London assets has come up quite often in the last few years. People have discussed what it would mean to sell Budweiser Gardens, downtown’s crown jewel, home of the London Knights and London Lightning. Selling London Hydro has also been discussed twice in the last year or so, and overall I don’t think that’s an idea worth pursuing. Here’s why.

Budweiser Gardens and London Hydro are both terrific, and profitable, assets. Budweiser Gardens is already partly owned by other entities; the City of London is not its only shareholder. So control is already split there, which helps when new capital expenses arise. It means the City isn’t on the hook for everything.

On the other hand, London Hydro is wholly owned by the City, which means only the City (and its citizens) benefit from the dividend it distributes. Last year that was over $7 million, which would mean the City would have had to find an additional $7M this year to avoid a massive property tax, user fee, or some other kind of fee hike.

That said, I’m not against looking what the City’s options are. Sure, let’s find out whether there are parties interesting in buying London Hydro. But let’s also:

  • See if there are suitors interested in purchasing a minority stake
  • Look at merging with another, likely smaller, utility
  • Outright purchasing another utility

Having another company purchase a portion of London Hydro may give us the best of both worlds: the City gets a cash infusion, perhaps $100 million for 33% of London Hydro, but the City and its citizens retain majority control.

Merging with another utility would achieve cost savings in reducing any duplicate positions, infrastructure, etc. So expenses could be lower, while revenues increase, leaving majority control with the City assuming London Hydro merges with a smaller utility. Purchasing a smaller utility would also achieve the same, but 100% of ownership would stay in London, whereas that wouldn’t happen in a merger.

On the other hand, there is at least one type of asset the City should offload: its golf courses. This was first bandied about two years ago, and then again last winter during budget season. River Road in particular has not done well overall, and it’s no wonder. London and area is chock full of terrific golf courses, including some nearby in Delaware, Komoka, Melrose, and even Strathroy. Even the middle of the road options in this case could have turned out to be disastrous, potentially losing the city another $500,000 in a single year. How many small businesses lose $500K and survive? Not many, but when you’re subsidized by a large tax base it’s much easier. When it looked all but certain that the city-owned golf courses would be shut down after letting them have one more year to turn things around, last year there was terrific weather and people flocked to play, so they made a bit of money. Not enough, however, to warrant taking money away from local businesses, in my opinion. The City shouldn’t be in the golf course market when there is plenty of competition from cheap-afternoon-out to luxury-experience.

And so, my point is, every situation has to be looked at individually. Adapting a “sell it all” mentality doesn’t do anyone any good, and blinds us to what good some of the City’s assets do. And on the other side of the spectrum, adopting a “keep it all” mentality also blinds us to the money pits some City assets can be, and certainly are, and where the City shouldn’t be extending its reach. Arena, hydro? Good. We don’t compete with private businesses in those markets, and overall they do the City a great service. Golf courses? Bad. Lots of competition, no net benefit to the City or its citizens; sell them.

 

My Phone Call with Councillor Henderson

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As a follow-up to my original letter to Councillor Henderson, a phone call and voicemail to his office, and then a subsequent phone call and voicemail on his cell phone did get him to call back on April 5, 2013. Here’s how the call went, along with some conclusions.

Councillor Henderson didn’t quite put my name and the letter together, so I refreshed his memory. He let me know he was driving to a meeting somewhere, so I told him I would do my best to keep the call short and not distract him. I cherry-picked a few questions to ask him, instead of going through one-by-one.

Henderson started explaining the whole fiasco by explainging that two years ago, extra money was allocated to councillor’s budgets. Currently there is a ratio of four councillors per secretary, which doesn’t provide much time for each councillor to get the help they need. Some councillors have used that additional funding to hire a secretary, as “we’ve been hobbling along” making do without dedicated staff. The aforementioned budget was increased to $15,000 per year.

Henderson said that in the last six months there’s been so much trouble, they can’t get their work done, and the City decided to hire some students(?). Council agreed they were going to provide an additional $7,500 per year for communication purposes – whether that’s getting training, hiring someone for help, taking out ads in the paper, etc. That money was finally appropriated last fall.

When I switched topics (or rather tried to get him on topic) to the recent video camera debacle, Councillor Henderson then harkened back to the revised smoking ban debate. He said he checked with clerk regarding the expenses, and then went into a rant about increasing the cigarette smoking ban from 2m to 6m, and that he didn’t want that ban approved. Henderson is the Councillor who suggested increasing ban from 2m to 3m, and that measure was approved. Then he mentioned that maybe we should talk about carcinogenics overall, and let’s look at Toronto. I’m not familiar with Toronto’s smoking bylaws at the moment, so I’m not sure what that means.

Henderson began breaking up a lot, but proceeded to talk about the smoking ban debate for two or three more minutes. He finally got around to his point where, because a bunch of different sound bites that went out via the press, he sounded like a nut case, and he know there was no way he was going to get re-elected again if things continued this way. He mentioned that Metro has a far more accurate article, which I’ve found here.

He finally circled back around to the camera and YouTube channel issue, stating that the funds were pre-approved by the City Clerk. He purchased a $1,000 camera, a couple of lights, and got a few good responses (responses to what, he didn’t elaborate). And as a follow-up to the City Council meeting that happened just prior to our conversation, he said that the City Clerk and Mayor have both confirmed that the equipment is Henderson’s to keep, despite the City reimbursing him for the purchases.

I moved onto the issue about comments being disabled on both his blog, and his YouTube channel; I didn’t understand how this was “engagement” when he’s not offering constituents the chance to engage using the very mediums he’s using to communicate with them. At this point Henderson went into a bit of a tirade, saying he receives 65 emails a day, along with phone calls. He said he doesn’t use a Twitter account because he can’t watch it for 10 hours a day. He didn’t address his blog or YouTube channel’s comments functions. But he did say that he uses email and phone only, as that’s all he has time for, meanwhile Councillors do just as much work as the Mayor.

I asked him about the ad distribution program with YouTube, to which Henderson responded that he didn’t know anything about the ad program initially, but that he saw the option for ads about a week after starting DaleTV. He said he’s going to keep any money sent his way from YouTube because it costs money to film, edit, and upload the videos (using equipment the City has paid for). He also went on to say that the City is going to start broadcasting more and more livestreams, bypassing the media, and that the media isn’t happy about it. I’m not quite sure how he reaches that conclusion, but it was very clear that Henderson dislikes most of the City’s press outlets.

The last thing I asked Councillor Henderson about was his comments about a ring road, annexation, and the need for “quietly deciding where road will go.”

He replied saying he wants to annex nearby communities, and get the Planning Department to decide where the best place for the ring road to go would be. It’s quite obvious he didn’t understand the legal implications of his statement. He does, however, think that a ring road north of the city would benefit people who live in the core. I’ve given this some thought, and haven’t been able to come up with any ideas as to how that would happen. Regardless, that’s his opinion.

We concluded our conversation with Councillor Henderson stating that his big focus (with DaleTV) is “definitely getting my ideas out there, no matter how crazy they sound.” And that, “I want to be a leader, and hear people say, ‘Hey, these are new ideas.’” He then attempted to prove his point by introducing me to the idea of a London Film Association, how it was going to kickstart job creation, that it wouldn’t have any membership fees, etc. He invited me to the launch on April 11, but it was scheduled during the day.

Conclusions:

  • The fact that the City Clerk pre-approved the purchase, and then stated the equipment was Henderson’s to keep, is very problematic. If the City pays for it, it ought to belong to the City.
  • Henderson doesn’t seem to understand the point of Twitter, and the fact that he does not need to monitor it for 1 hour a day, let alone 10 hours. The point is to be on there, response to questions/comments/concerns, perhaps provide a bit more insight into his thinking, etc.
  • There are a lot of issues preventing the Planning Department from simply putting a ring road wherever it wants, and doing so “quietly” without expecting any landowners not to ask for a decent sum of money to move them off their land. That issue alone is fraught with risk.
  • Henderson is definitely getting his ideas out there, “no matter how crazy they sound.” I still don’t think they’re helping his chances for re-election in Ward 9.

What do you think?

Letter to Councillor Dale Henderson

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Ward 9 Councillor Dale Henderson

Ward 9 Councillor Dale Henderson

Earlier today I sent this letter to City of London Councillor Dale Henderson regarding the recent revelations that he spent over $7,000 on video equipment, a website, and graphics for DaleTV.ca. Additionally, he has explained he will “probably” keep the equipment, despite being reimbursed, once he has completed his career in London municipal politics.

References: The McLeod Report | London Free Press | AM980

From: Derek Silva
To: Dale Henderson
CC: Joe Fontana, Bud Polhill, Joe Swan, Nancy Branscombe, Judy Bryant, Matt Brown
Date: Wed, Mar 20, 2013 at 10:00 AM
Subject: DaleTV

Dear Councillor Henderson,

I am, frankly, rather disappointed with how you have conducted yourself lately. Not only are you embroiled in today’s Open Meetings investigation being conducted by staff of the Ombudsman’s office, but yesterday’s controversy surrounding DaleTV, and it’s related expenses, have begin to shine one very dark light on you.

Personally I have not been very impressed with your tenure thus far as a City Councillor, and I suspect many of your constituents feel the same. In fact, I’m certain they do, as I’m personally in contact with many of them on a frequent basis as friends and acquaintances. I’m going to ask you a few questions that I believe deserve answers, and I’m sure I’m not the only one who’s looking for them.

  • Why was so much money spent on DaleTV? Why did it cost so much for something that could have been achieved for under $500 using a more suitable camera, less expensive video editing equpiment, building a green screen yourself (there are many tutorials online), and buying a stock photo to achieve a similar background?
  • If this is a community engagement activity, why are comments disabled on your YouTube channel and website/blog? It doesn’t seem to encourage much engagement if people cannot communicate with you using the same method you want to communicate with them.
  • Given that you want the City to reimburse you for the money spent on the equipment and production for DaleTV, will you also be sharing revenues derived from the YouTube channel? For example, I had to watch a 15 second advertisement prior to watching Episode 1. I’m also a member of YouTube’s revenue sharing program, and know for a fact that ad revenue will be shared with you from those ads.
  • If the City reimburses you for the money spent on the equipment, how do you justify your statement on “probably” keeping the equipment after you complete your tenure with London municipal politics?
  • You are, seemingly, a fiscal conservative. How do you justify these types of costs under the ideology of attempting to save taxpayers money, reduce City expenses, and lower spending overall? For example, you claim it will be less expensive for many of the communities north of the City if London were to annex them and put in the sewers for them. You have also supported the tax freeze that Mayor Fontana has put forth each year. Clearly you’re interested in reducing taxpayer costs.
  • In episode 2, you talk about a ring road and annexation. How exactly do you propose to, “quietly decide where that [ring] road will go, so we don’t have all the property values go to the moon,” as you put it? I’m fairly confident that would violate several laws related to open meetings, and therefore is simply illegal.

You, Councillor Henderson, have much to answer for. I’m afraid you have many ideas, but want to do many things in secret. That is highly unethical, and I don’t feel any of your ideas don’t result in going to taxpayers and say, “Gimme more, gimme more.” I look forward to your responses.

Oh, and I have also CC’d each member of the Corporate Services Committee. Given that they played a part in approving the DaleTV-related expenses, I felt they should see the questions I’m asking, along with your answers. I hope you don’t mind.

Sincerely,

Derek E. Silva

http://dereksilva.ca/

“My strategy can be reduced to two rules: 1) Find a way to make it fun and 2) If that fails, find a way to do something else.” – Paul Buchheit

The Fallacy of the Cloud

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As part of my efforts to formalize much of the IT experience and education I already have, making it easier to present and qualify, I took the opportunity of the recent Christmas/New Year break to start going through Rackspace’s Cloud University (CloudU) curriculum. I actually took the time to read all of the material provided for the 10 lessons, eschewing the hour long webinars. I also passed the final exam and obtained the certificate (you can see my badge on the right).

Much of the material, concepts, and decision points discussed were very familiar to me having researched and written extensively about cloud computing during my time at Info-Tech Research Group. However, one thing kept jumping out at me about the information compiled by Ben Kepes of Diversity Limited; this thing about a supposed lack of system administrators required for those organizations choosing to deploy their infrastructure in a public cloud (i.e. Amazon AWS, Rackspace Cloud, GoGrid, Flexiant, Joyent, CACloud, etc).

Mr. Kepes and I are both members of the Cloud Computing Standards Forum on LinkedIn, and share several connections, so I took the opportunity of being a 2nd degree connection to take a look at his profile. As I suspected, Mr. Kepes does not have an IT background. As far as I can tell, his experience with computers does not go to the depth required to actually go about deploying any cloud infrastructure, whether public, private, or hybrid, and so I’m no longer surprised about his conclusions.

In reality, he’s way off the mark. He consistently talks about how IT professionals will need to adapt their skills in order to ensure they’re still relevant to a business that chooses to deploy some, or even all, of its infrastructure in a public cloud. That’s true, but he assumes that not doing so will directly result in those same IT professionals losing their jobs.

Fortunately, he’s wrong. Smart, and very insightful, but wrong. The type of scenario Mr. Kepes is actually referring to is moving to a managed services provider… the kind of company that will not only host your infrastructure, but will also perform much of the system administration for you. In reality most public cloud providers, including the ones I mentioned above, don’t offer that level of service. And if they do it’s at a premium, minimizing the cost reductions a business is expecting to achieve (rightly or wrongly).

No, unless you’re training the Receptionist to configure a fresh Linux or Windows machine to run the application (effectively making them an IT pro as well!), SysAdmins are still very much a part of the future. One “skill” that moving to a public cloud minimizes/negates is how to size and buy a server. I don’t know any IT pro that’s ever put “server buying/sizing” as a skill on their resume, but this is one big step in the application deployment process that will no longer be required, or at least minimized, as public cloud infrastructure is increasingly utilized.

So, for all it’s worth, don’t believe everything you read about moving to a public cloud. It can absolutely be very beneficial, especially for web-based apps that you still want to control for yourself (e.g. SharePoint, Cynapse, an IP PBX/phone system), but don’t expect to reduce your IT staff because of it. Your employees still need computers of some sort to connect to those cloud-hosted apps, and therefore a corporate network is still required, and someone needs to maintain that network. And your employees’ machines need maintaining and support. And those cloud/virtual servers don’t configure themselves, nor do the applications you install on them. Even companies that adopt SaaS solutions will inevitably finding themselves stuck for skills to help them integrate everything.

You will, however, get out of the server-buying business, and therefore reducing your electricity costs, and capital expenditures. That’s fine, because buying servers is not what IT professionals enjoy doing all day, anyway. There’s nothing wrong with asking your IT staff to become more strategic partners to the business, and no doubt you’ll find many eager to do so. Just don’t expect to get rid of them simply because you’re not buying any boxes for the server room.

Why I Sold Orpheum

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Two years ago I founded a web hosting company, Orpheum Hosting Solutions. I set out to build a web hosting company that could compete with the likes of MediaTemple on infrastructure, and HostGator on price. As time went on I added more plans, did a wholesale move from a cloud server infrastructure to big, dedicated servers, and even switched backend client management systems to make things easier for everyone.

A few months in, I started to think, “Orpheum should be a business services company. A one-stop shop for small businesses to get their website, web-based applications, and even phone lines, or a phone system all from the same place without having to call Rogers, or worse yet Bell.” So, over the course of the next 36 months, Orpheum began to expand into managed servers, hosted PBX, SIP trunks, and eventually virtual private servers via the acquisition of AeroVPS.

Orpheum was doing well. It was not, however, doing well enough to pay anyone a full-time salary. Two years in Orpheum had acquired several high profile, lucrative customers worth over $1,000 a year. Unfortunately, due to a mix of issues with billing systems, and user interface challenges, onboarding these customers was time consuming. Too time consuming when you factor in that I still had a full-time job, and a young, growing family. Too time consuming when, through my own fault, each VoIP customer required several hours of assistance to get online.

So what happened? Orpheum expanded too quickly. I felt like I spent a lot of time finding the right solutions, and partnering with the right vendors. However I don’t feel like I spent enough time ensuring everything worked properly, that I really understood the technology behind the service and what Orpheum’s customers saw on a daily basis (with the exception of the web hosting and VPS services), and ensuring that customers were onboarded properly. I started to fix this a few months ago, but again… the things I *needed* to be doing had to come first, and the things I *wanted* to do came second, or even third or fourth. Orpheum’s customers suffered.

I brought on a team of people to assist with tech support. They provided level 1 support for the web hosting service, but they were not as familiar with the control panel I used as they were with other, more popular solutions. But it still took a lot of weight off my shoulders, and let me focus on supporting the VPS and VoIP customers. It wasn’t quite enough help though.

And then I really bunged things up when I spent several months, and a good amount of my capital, attempting to build a cloud infrastructure-as-a-service (like Amazon AWS, or Rackspace Cloud) offering. My vendors were not forthcoming enough with pertinent information, over promised, and then under delivered. I blew $1,000 to find out I couldn’t do something the way someone told me I could.

So, I made a very difficult decision to sell Orpheum Hosting Solutions. However, despite the disgruntled customers and accusations otherwise, I did not sell to the highest bidder. I had multiple bidders put offers in over five digits, but I chose to sell to a company/owner that I knew was going to leverage the existing services offered, regardless of whether they kept the brand intact or not. Those other high bidders wanted to dismantle the company, separate off the VoIP customers, perform wholesale moves off of the existing clustered hosting infrastructure onto more traditional, single-box solutions. I said “No” to those bidders.

At the end of the day, this was a lesson in growing too fast, without enough resources. You can build a business yourself, part-time, but it isn’t easy. You need razor sharp focus in the first few years… something I’ve read about time and time again, but once again I make myself learn it the hard way. I will be trying again… it’s in my blood, I can’t help it. But next time the messaging, the onboarding process, the support… everything will be polished, ready for customers on day one. And I’m going to focus hard on the core services people want and need out of the company.