city of owen sound integrity commissioner, principles integrity

Citation: O’Leary (Re), 2019 ONMIC 10 Date: April 9, 2019

CONFLICT OF INTEREST RECOMMENDATION REPORT

Notice: Municipal Integrity Commissioners provide investigation reports to their respective municipal council and, in most cases, make recommendations for imposition of penalty or other remedial action to the municipal Council. Therefore, reference should be made to the minutes of each particular municipal council to obtain information about the particular council's consideration of each report. When possible, a link to the relevant municipal council minutes is provided.

Please find below the link to the corresponding council decision. https://owensound.civicweb.net/filepro/documents/262?expanded=119821&preview=124574

TABLE OF CONTENTS

INTRODUCTORY COMMENTS.. 3

THE COMPLAINT. 4

SUMMARY OF FINDINGS.. 5

PROCESS AND TIMING: 5

PROCESS FOLLOWED FOR THE INVESTIGATION.. 6

BACKGROUND.. 6

CONFLICTS OF INTEREST. 8

SOME CONCLUDING OBSERVATIONS: 12

THE SUBMISSION OF A PUBLIC REPORT. 14

FINDINGS.. 14

RECOMMENDATIONS: 14

INTRODUCTORY COMMENTS

1Principles Integrity was appointed the Integrity Commissioner for the City of Owen Sound on March 5, 2018. We are also privileged to serve as Integrity Commissioner for a number of other Ontario municipalities. The operating philosophy which guides us in our work with all of our client municipalities is this:

The perception that a community’s elected representatives are operating with integrity is the glue which sustains local democracy. We live in a time when citizens are skeptical of their elected representatives at all levels. The overarching objective in appointing an integrity commissioner is to ensure the existence of robust and effective policies, procedures, and mechanisms that enhance the citizen’s perception that their Council (and local boards) meet established ethical standards and where they do not, there exists a review mechanism that serves the public interest.

2The City of Owen Sound has as part of its ethical framework a Code of Conduct which is the policy touchstone underlying the assessments conducted in this report. It represents the standard of conduct against which all members of Council are to be measured when there is an allegation of breach of the ethical responsibilities established under the Code of Conduct. The review mechanism contemplated by the Code, one which is required in all Ontario municipalities, is an inquiry/complaints process administered by an integrity commissioner.

3Members of City Council are also governed by the provisions of the Municipal Conflict of Interest Act. Both the Municipal Conflict of Interest Act and the Code of Conduct are relevant to and form the framework for the matters reviewed in this report.

4Integrity commissioners carry out a range of functions for municipalities (and their local boards). They assist in the development of the ethical framework, for example by suggesting content or commentary for codes of conduct. They conduct education and training for members of council and outreach for members of the community. One of the most important functions is the provision of advice and guidance to members to help sort out ethical grey areas or to confirm activities that support compliance. And finally, but not principally, they investigate allegations that a person has fallen short of compliance with the municipality’s ethical framework and where appropriate they submit public reports on their findings, and make recommendations, including recommending sanctions, that council for the municipality may consider imposing in giving consideration to that report.

5It is important that this broad range of functions be mentioned at the outset of this investigation report. Our goal, as stated in our operating philosophy, is to help members of the City of Owen Sound community, indeed the broader municipal sector and the public, to appreciate that elected and appointed representatives generally carry out their functions with integrity. In cases where they do not, there is a proper process in place to fairly assess the facts and, if necessary, recommend appropriate sanctions. In every case, including this one, the highest objective is to make recommendations that serve the public interest, if there are recommendations to be made.

6Our role differs from other ‘adjudicators’ whose responsibilities generally focus, to state it colloquially, on making findings of fact and fault. While that is a necessary component when allegations are made, it is not the only component.

7Our operating philosophy dictates the format of this report. The tenets of procedural fairness require us to provide reasons for our conclusions and recommendations, and we have done that. Procedural fairness also requires us to conduct a process where parties can participate in the review and resolution of a complaint.

8In this regard, we have assessed the information fairly, in an independent and neutral manner, and have provided an opportunity to both respondents named in this Report to respond the allegations, and to review and provide comment on the preliminary findings.

THE COMPLAINT

9On September 20, 2018, a Complaint was filed regarding concerns about then- Councillor O’Leary’s participation in matters before Council with respect to Mudtown Station, a brewery and restaurant (brew pub) in the City of Owen Sound.

10The essence of the complaint is that then-Councillor O’Leary (since the Municipal Election of October 22, 2018, Deputy Mayor O’Leary) had a conflict of interest:

• When, as a prospective shareholder of Mudtown Station, he participated in the decision of Council in April 2017 to Lease the CP Railway Station to Mudtown Station Inc.;

• as a result of decisions by Town staff to promote Mudtown Station in its Corkscrew City tours promotion, to share a billboard advertisement, and to promote Mudtown Station in the Escape to Grey Bruce magazine, in space reserved for community events as a shareholder of Mudtown Station;

• when, as a shareholder of Mudtown Station, he moved a motion on September 10, 2018 regarding replacement of the 10th Street Bridge, which would cause the re-routed traffic to pass directly in front of Mudtown Station, to the advantage of Mudtown Station.

SUMMARY OF FINDINGS

11We find that the Councillor had no conflict of interest when Council considered the Lease in April 2017 as he did not acquire shares in Mudtown Station until August 2018, some 16 months later.

12We find that the Councillor did not have a conflict of interest by virtue of Mudtown Station, in which he is a shareholder, being included in various promotional materials produced or funded by the Town.

13We find that the Councillor did not have a conflict of interest in moving the motion on September 10, 2018 directing staff to prepare a report on the logistics and full costing of the 5th lane option alternative.

14We find that Mudtown Station had no pecuniary interest in the Bridge Reconstruction matter before Council – with or without a 5th lane option - aside from an interest in common with all of the businesses in the downtown and harbour area which will ultimately benefit from an uplift in tourism generally. If Mudtown Station does not have a pecuniary interest in the matter before Council, then the Councillor as shareholder cannot have an indirect interest in such matter.

PROCESS AND TIMING:

15The City’s Code of Conduct includes an embedded ‘complaint procedure’. This procedure directs complaints to the City Manager. Because this procedure has not yet been updated to reflect recent Municipal Act amendments (requiring complaints be directed to an integrity commissioner), we have applied the city’s complaint procedure the extent possible, and otherwise applied the principles of procedural fairness to guide our process. The Code’s complaint procedure places a 6-month limitation for filing a complaint following an alleged violation. While we recognize that at least one of the allegations subject to our investigation occurred outside the 6-month limitation, we believed it important for the purposes of context, continuity and closure, to report on all of the allegations made.

16Recent amendments to the Municipal Act were made to discourage the politicization of the complaint process by prohibiting integrity commissioners from investigating or reporting during municipal election campaigns. While enacted, the respective amendments did not come into force until March 1, 2019, after the last municipal election. Though not required to do so, we respected the purpose of the legislation and did not conduct or advance investigations between nomination day (July 28, 2018) and the date of the municipal election, October 22, 2018. The complaint at issue, having been filed on or about September 20, 2018, fell within this abeyance period.

17The City’s complaint procedure also prescribes a 90-day period by which an investigation is to be reported on. While we will always attempt to conclude an investigation within a reasonable timeframe, it is at times necessary to go beyond an arbitrary timeframe and, as independent officers, integrity commissioners cannot be circumscribed in this regard. While investigations cannot languish, they must be conducted thoroughly and fairly, and with an appropriate investment of time.

18In the fullness of time, we expect that we will be working with the City of Owen Sound to adopt an updated Complaint Protocol to reflect these and other refinements.

PROCESS FOLLOWED FOR THE INVESTIGATION

19In conducting this investigation, Principles Integrity applied the principles of procedural fairness, guided in a general sense by the complaint procedure set out under the Owen Sound Code of Conduct.

20This fair and balanced process included the following elements:

• Reviewing the Complaint to determine whether it is within scope and jurisdiction and in the public interest to pursue, including giving consideration to whether the Complaint should be restated or narrowed, where this better reflects the public interest

• Notifying the Respondent Deputy Mayor O’Leary of the Complaint and seeking his response

• Reviewing the Owen Sound Code of Conduct

• Reviewing other relevant documentation, Council reports, and interviewing the complainant and relevant witnesses

• Providing an opportunity to the Respondent to review and comment on the draft findings of the Integrity Commissioner

BACKGROUND

21The City of Owen Sound owns the old CP Railway Station located in the east harbour area at 1198 1st Avenue East. The building had been left to deteriorate for years before it was acquired by the City in 2010. The City initiated several capital upgrades to the Heritage building and set about to find a tenant to lease the building hoping to provide a catalyst to waterfront re-development. Pursuant to a Council-directed RFP process, a prospective tenant was identified who proposed a brewery and restaurant – a “brew pub” called Mudtown Station - for the site.

22On April 10, 2017, Council considered a report, CS-17-076 entitled “Lease of the Former CP Railway Station – Mudtown Station Inc. recommending that the City enter into a Lease Agreement with Mudtown Station Inc. Councillor O’Leary, along with the rest of Council, voted on the report.

23In September 2017 Mudtown Station hosted an event. It is alleged that this event was held to create interest among prospective investors. It has been referred to by the Complainant as an “investors’ kick-off party”.

24The invitation to the event does not indicate anything about investors. It states simply: “Tour the building, share the vision, experience the brewpub atmosphere, sample beers & local jazz”.

25Several City staff, Members of Council and others attended the event. Then- Councillor O’Leary was one of the Members of Council who attended this event.

26It is alleged that at this event, Councillor O’Leary formed the intention to purchase shares in Mudtown Station. On August 28, 2018, Councillor O’Leary and his wife acquired shares in Mudtown Station Inc.

27Since the establishment of Mudtown Station, it has been included in various promotional material produced or funded in part by the Town, such as the Corkscrew City tours promotion, and an article in the Escape to Grey Bruce magazine.

28During 2018, the Council had before it decisions on design alternatives for the 10th Street Bridge Replacement. At its meeting of September 10, 2018, following extensive review and study, Council was asked to proceed with the preferred option of a replacement bridge using a 5-lane design.

29Councillor O’Leary, noting that the current bridge accommodates 5 lanes and results in significant congestion at certain times of day, asked that staff provide costing information on the possibility of a 5-lane design where one lane, the centre lane, has the capability of allowing one-way traffic at certain times of the day, and being reversed to accommodate traffic movements in the other direction at other times of the day. (This type of configuration has been used elsewhere such as Jarvis Street in Toronto, to accommodate traffic volumes at rush hour.)

30The motion moved by Councillor O’Leary provides… “City Council directs staff to prepare a report on the logistics and full costing of the 5th Lane Option Alternative for the October 1, 2018 Council meeting.”

31Mudtown Station is located along 1st Avenue East, a few blocks north of the 10th Street Bridge.

32The allegation is that Councillor O’Leary had a conflict of interest in moving the motion relating to the reversible 5th lane option, because the possibility of a one- way lane along the 10th Street Bridge introduces the possibility for increased traffic passing by Mudtown Station, in which he has an interest as a shareholder.

33For ease of reference the timeline of significant events can be depicted in graphical form:

CONFLICTS OF INTEREST

34In reviewing the allegation that Councillor O’Leary had a conflict of interest on any of the facts described, it is first necessary to consider the relevant conflict of interest framework.

35For many years, the only conflict of interest rules thought by many to apply to Members of Council were to be found in the Municipal Conflict of Interest Act (the “MCIA”). In actuality elected officials were also subject to common law principles as established by courts over the years. These common law principles were often incorporated into codes of conduct governing elected officials.

36Following the Bellamy Inquiry in Toronto (the Toronto Computer Leasing Inquiry, or the “MFP” inquiry), the Municipal Act was amended in 2007 to allow municipal councils to adopt Codes of Conduct. Several municipalities including Owen Sound were ‘early adopters’ of Codes of Conduct.

37Following up on the more recent Cunningham Inquiry in Mississauga in 2011-12, the Municipal Act was recently amended making it mandatory for municipalities to adopt a Code of Conduct and appoint an Integrity Commissioner.

38The City of Owen Sound’s Code of Conduct (Policy CMA63, as amended) contains a ‘Purpose’ section which suggests a high standard for Members to follow (emphasis added):

1. A Code of Conduct establishes guidelines for the ethical behaviour of all members of Council.

2. Members of Council are held to a high standard as leaders in the community and they are expected to carry out their duties in a fair, impartial, transparent and professional manner. A Code of Conduct helps to ensure that the members of Council share a common basis for acceptable conduct. It serves to enhance public confidence that their elective representatives operate from a base of integrity, justice and courtesy.

3. The City of Owen Sound Council Code of Conduct is a general standard that is intended only to supplement the legislative parameters within which the members must already operate including the Municipal Conflict of Interest Act. It is not intended to replace personal ethics.

39Most Codes of Conduct include provisions regarding avoiding conflicts of interest beyond the strict pecuniary interests addressed under the MCIA. Although the Owen Sound Code of Conduct does not contain specific provisions addressing conflicts of interest, we find the common law concept is captured by the “Purpose” provisions set out above. That said, where the MCIA contains specific provisions, such as with shareholders, that is the law to be applied.

40The MCIA applies with respect to the pecuniary interests (direct, indirect and deemed) held by Members of Council. Under the MCIA, an interest arises for a member of council where the member is a shareholder under the following circumstances:

Section 2

Indirect Pecuniary Interest

2.For the purposes of this Act, a member has an indirect pecuniary interest in any matter in which the council … is concerned if,

(a) the member…

(i) is a shareholder in, or a director or senior officer of, a corporation that does not offer its securities to the public,

(ii) has a controlling interest in or is a director or senior officer of, a corporation that offers its securities to the public, or

41The Complainant alleges that the Councillor had a conflict of interest when he participated in Report on the Lease Agreement when it came before Council April 10, 2017, on the basis that the Councillor had already formed the intent to become a shareholder of Mudtown Station Inc.

42If the Councillor had been a shareholder in Mudtown Station Inc. at the time of the report, there is no doubt he would have had a conflict of interest under the MCIA.

43It is clear from the facts that the Councillor did not actually acquire shares in Mudtown Station Inc. until August 28, 2018, some 16 months after the vote on the Lease Agreement report.

44We find that there was a “kickoff” event held September 21, 2017, attended by City officials, and others. We find it more likely than not that the opportunity of investment in Mudtown Station was likely a topic of conversation, at that event. We do not find that Councillor O’Leary engaged in discussions about this investment opportunity at that time. We find that he did not broach the possibility of investing until the summer of 2018, following the May 2018 opening of the venue.

45If the Lease Agreement report had been before Council immediately following that event, instead of 5 months earlier, there might be some inquiry as to whether the Councillor had already formed the intention of acquiring shares in the business. This would certainly be the case, for example, if the shares had been acquired in the days or weeks immediately following Council’s consideration of the matter.

46That is not the case here. In the circumstances of this case, Council considered the Lease in April 2017; the “kickoff” event was held September 2017; the shares were acquired September 2018.

47We find that there is no basis to conclude that the Councillor had a conflict of interest in dealing with the Lease in April 2017.

48Mudtown Station has been included in various promotional materials produced or funded in part by the Town, such as the Corkscrew City tours promotion, and an article in the Escape to Grey Bruce magazine.

49As noted above, the MCIA makes it clear that the Councillor, as a shareholder of Mudtown Station, would have a conflict of interest in dealing with any matter before Council in which Mudtown Station has an interest.

50So, for example, if the question of which local destinations are to be included in promotional materials were to come before Council for consideration, and Mudtown Station were one of the destinations being considered for inclusion, then the Councillor would have to declare a conflict of interest and recuse himself from participating in the discussion or the vote.

51However, these decisions of which local business destinations to include were not matters brought before Council for consideration.

52We find that the Councillor did not have a conflict of interest by virtue of Mudtown Station, in which he is a shareholder, being included in various promotional materials produced or funded by the Town.

53On September 10, 2018, when Council had before it consideration of the report “10th Street Bridge Replacement Preferred Design Alternative”, Councillor O’Leary moved a motion requesting information on the cost for making the 5th lane one which could accommodate traffic in one direction for half of the day, and the other direction for the other half of the day. An example of such a configuration exists on Jarvis Street in Toronto, where the ‘reversible’ middle lane on the 5-lane roadway accommodated additional traffic volumes, allowing 3 lanes of traffic to move into the City in the a.m. peak, and then reversing to allow 3 lanes of traffic to move out of the downtown core in the p.m. peak.

54Mudtown Station is located along 1st Avenue East, a few blocks north of the 10th Street Bridge. The allegation is that Councillor O’Leary had a conflict of interest in moving the motion relating to the reversible 5th lane option, because the possibility of a reversible lane along the 10th Street Bridge introduces the possibility for increased traffic passing by Mudtown Station, in which he has an interest as a shareholder.

55We find that the possibility of a reversible lane along the 10th Street Bridge increasing the traffic passing by Mudtown Station to be remote.

56It is our understanding that the reversible 5th lane option would not result in additional traffic but rather would reduce congestion at peak times along 10th Street.

57In any event, even if we were to find that traffic re-routing were to cause additional vehicles to pass by Mudtown Station, we are unable to find that Mudtown Station thereby has any particular pecuniary interest in the Bridge Reconstruction matter before Council aside from an interest in common with all of the businesses in the downtown and harbour area which will ultimately benefit from an uplift in tourism generally.

58If Mudtown Station does not have a pecuniary interest in the matter before Council, then the Councillor as shareholder cannot have an indirect interest in such matter.

59We find that the Councillor did not have a conflict of interest in moving the motion September 10, 2018 directing staff to prepare a report on the logistics and full costing of the 5th lane option alternative.

SOME CONCLUDING OBSERVATIONS:

60As we have noted above, since the Bellamy and Cunningham Inquiries, most municipal Codes of Conduct include provisions which require Members of Council to avoid conflicts of interest beyond the narrowly described pecuniary interests addressed under the MCIA.

61Conflict of interest provisions under a Code of Conduct typically require Members of Council to recognize broader conflicts of interest than are identified under the MCIA – for example, when family members beyond a spouse, parent or child has a pecuniary interest, such as when a sibling or in-law has a pecuniary interest in a matter before Council.

62Such provisions would require Members to recognize “apparent” conflicts of interest, where the public would perceive of a conflict of interest – for example, where a Member’s best friend, close former business associate or Godchild has a pecuniary interest in a matter before Council.

63This kind of provision addresses the “common law” concept of conflicts of interest, and recognizes that the perception that Council Members are acting solely in the public interest is as important as the reality. Public trust and confidence in local government depends on it. Even though the “Purpose” provisions of the Code of Conduct may capture the common law concept of avoiding conflicts of interest, we believe that better guidance could be provided through a more robust Code provision specifically addressing avoidance of conflicts of interest.

64It is important for the public to understand that, even if the Owen Sound Code of Conduct contained a conflict of interest provision – and we urge Council to revise its current Code to include one – we would not have found the Councillor to have violated such provision based on the allegations we have investigated in this report.

65The purchase of shares in Mudtown Station did not occur until 16 months after approval of the Lease Agreement, and we are unable to find that there was, at the time of such approval in April 2017, a basis for an “apparent” conflict of interest.

66No decisions to feature Mudtown Station in promotional material have been before Council for consideration. As noted, if such matter does come before Council for consideration, we would expect the Councillor to recognize and take appropriate steps to recuse himself from such matter.

67With respect to the 10th Street Bridge replacement, and the motion for alternative 5th lane options, upon close review of the issue being considered and the potential impacts on traffic movements, and in light of the location of Mudtown Station, we are unable to find an “apparent” conflict of interest exists for the Councillor.

68We note that the City Manager called a press conference for October 10, 2018 to provide clarity around the City’s actions regarding the CP Railway Station Lease. We understand that this was done to clear the air in the highly-charged atmosphere leading up to a municipal election.

69The calling of a press conference by the City’s administration should generally be avoided in the days and weeks immediately preceding a municipal election. That said, the election seemed to heighten community debate around the Mudtown issue and the City (as distinct from its Members of Council and candidates standing for election) found a need to respond.

70At the time, allegations were swirling about Councillor O’Leary’s ties to Mudtown Station and the holding of a press conference by City officials may have appeared to some as being partisan.

71The administration is expected to maintain neutrality and avoid stepping into the fray – a statement from a high-ranking city official at such moments risks creating the perception that the administration can be enjoined to jump in, to protect individual councillors at their behest. This involvement, on the eve of the election, risks portraying the City’s administration – who should be recognized as neutral, professional and non-political – as merely a tool for use on the political battlefield. It risks bringing the administration of municipal government into disrepute.

72We of course are in no position to assess the purpose or propriety of the press conference called in October 2018 and respect the City administration’s right, perhaps obligation, to make the decision to hold it. We raise it here because in the circumstances described the press conference seemed to be a motivating factor in the bringing of the complaint.

THE SUBMISSION OF A PUBLIC REPORT

73While a report is not often warranted where allegations of conflict of interest or code violations are found not to be substantiated, we are of the view that a public report in this matter may have a beneficial effect given the amount of public discourse that we observed had taken place in this matter.

FINDINGS

74We find that the Councillor did not have a conflict of interest when Council considered the Lease in April 2017 as he did not acquire shares in Mudtown Station until August 2018, some 16 months later.

75We find that the Councillor did not have a conflict of interest by virtue of Mudtown Station, in which he is a shareholder, being included in various promotional materials produced or funded by the Town.

76We find that the Councillor did not have a conflict of interest in moving a motion on September 10, 2018 directing staff to prepare a report on the logistics and full costing of the 5th lane option alternative.

77We find that Mudtown Station had no pecuniary interest in the Bridge Reconstruction matter before Council – with or without a 5th lane option - aside from an interest in common with all of the businesses in the downtown and harbour area which will ultimately benefit from an uplift in tourism generally. If Mudtown Station does not have a pecuniary interest in the matter before Council, then the Councillor as shareholder cannot have an indirect interest in such matter.

RECOMMENDATIONS:

78We therefore recommend:

1. That Council receive this report for information, and that it be posted on the City of Owen Sound’s web site for public access.

79We wish to conclude by publicly thanking the parties and everyone else who was asked to participate in our investigation. We express genuine appreciation for the sharing of time, knowledge and opinions by everyone concerned. Our task would have been much more difficult had there been a reluctance to contribute.

80We look forward to an opportunity of providing training for Owen Sound Council and local boards going forward.

81We will be pleased to be in attendance when this report is considered to answer any questions you may have relating to its contents.