AVICC — Governance and Financial Review of the Island Corridor Foundation (ICF)

Table of Contents

• The Assignment ........................................ 3
• Methodology .......................................... 3
• Context ................................................ 4
• Island Corridor Foundation Structure .......... 5
• Governance Review .................................. 7
• Financial Review .................................... 14
• Summary and Conclusions ........................ 16
• Recommendations ................................... 18
• Attachment 1: AVICC Resolution ................ 20
• Attachment 2: Stewart McDannold Stuart Legal Opinion .. 21

The Assignment

At the 2016 convention of the Association of Vancouver Island and Coastal Communities (AVICC) a resolution (Attachment 1) was passed calling for a financial and governance review of the Island Corridor Foundation (ICF). To fulfill the objectives of the resolution the AVICC Executive contracted with Kelly Daniels to conduct the review with direction to:

• Clarify and confirm the issues, concerns and frustrations prompting the review;
• Review current bylaws and system structure to ensure the owners of the corridor are properly represented and their interests are protected;
• Conduct a high level review of ICF budget and 2015 financial statements; and
• Determine if the ICF’s performance and accomplishments to date have been reasonable and if it is meeting the owners’ expectations.

The First Nation members of ICF were not party to the resolution although it was intended to contact at least the ICF First Nation Board representatives for their perspectives.

The review was specifically not intended to mediate differences between the parties nor to evaluate or make recommendations as to the viability of providing rail service on Vancouver Island.

This report reflects the findings, analysis and recommendations to meet the deliverables as identified by the Executive.

Methodology

The following activities were undertaken:

• All elected officials from the 5 member Regional Districts (RD) were contacted through their Chief Administrative Officers (CAO) and offered an opportunity to be interviewed. Each Regional District was given the choice to set up a process suitable for them resulting in a range of approaches including: a single joint meeting with all Directors from the Regional District; telephone interviews; individual face-to-face meetings at Regional District offices; and written submissions. Approximately 40 people were heard during this process;
• The CEO and Chair of the ICF were interviewed;
• Meetings with senior Provincial officials;
• A document review of:
  • minutes from the last ICF Annual General Meeting;
  • notes for the previous 12 months of Board Meetings;
  • the ICF’s bylaws;
  • the ICF 2016 budget and 2015 Audited Financial Statements;
  • the Schlenker v. Torgrimson Court of Appeal ruling;
  • a subsequent legal opinion obtained from Stewart McDannold Stuart (SMS) for this review (Attachment 2) as to how this decision would relate to participation of local government politicians on the ICF Board regarding the new Regulation and whether the fiduciary duty of directors of the ICF precludes them from discussing ICF matters with their respective Regional District Boards; and
  • a review of ICF website material including context, organization structure, objects and intent as well as progress toward goals.

ICF would have preferred a process of responding to specific issues and complaints but the review was designed for an independent, high-level evaluation of its governance and finances, not potentially an on-going question and answer exchange between ICF and Regional District members. Some general themes that were emerging from interviews were reviewed with ICF.

In a two hour meeting, to explain the process and obtain information to provide context and a clear understanding of ICF’s governance and finances, the Chair and CEO expressed the opinion that many of the questions were administrative in nature and that it was inappropriate for Regional Districts to be involved in ICF’s day to day affairs. Further attempts resulted in only partial information being provided.

While the First Nations members were not party to the original resolution the intention was to contact at least the ICF First Nation Board representatives for their input. This approach, however, was not supported by the ICF. They did not provide contact information for them, and we were told it was not necessary to come to the ICF Board meeting in July as planned. This is unfortunate since the First Nation perspective could have provided a fuller picture.

Context

When Rail America lost its largest freight customer in 2001 it announced that it intended to sell its assets and leave the island by the fall of 2003. In response a private organization calling itself the Vancouver Island Rail Corporation (VIRC), with Tanner Elton as its spokesperson, was formed to maintain rail on Vancouver Island and to operate the system. They initially worked with First Nation communities for support, particularly the Cowichan Tribes, and then approached AVICC with a proposal for a public-private partnership among the 5 Regional Districts and fourteen First Nations along the line.

The AVICC held a number of meetings to discuss the proposal from VIRC to enter into a public-private partnership to take ownership and operate the rail line. VIRC proposed the establishment of a Vancouver Island Corridor Foundation (a federally incorporated charitable foundation) made up of the affected regional governments and First Nations who would own and control the corridor. The Foundation would seek charitable status from Canada Customs and Revenue Agency and establish a Corridor Authority, a wholly owned subsidiary of the foundation, which would put into operation the objectives of the Foundation.

In 2003 AVICC passed a motion authorizing hiring a consulting firm to assess the proposal and make recommendations on:

• Whether a non-profit Foundation would be the most appropriate means to participate in this venture;
• The financial, business and other risks municipal governments and First Nations might face through participating in a private/public partnership of this nature; and,
• The financial requirements and exposure of member local governments within the following 6 years and in the long term.

The CAOs of the five Regional Districts were tasked with hiring the consultant and reporting to their respective Boards. Meyers Norris Penny (MNP) was retained to conduct the evaluation and in August of 2003 the CAOs forwarded the MNP report to their Boards with a covering report prepared by all five CAOs.

The result was that all five Boards approved the formation of a Foundation to own and manage the railway corridor. The Boards each appointed a representative to work on creating the foundation, including preparing “final documents, appraisals and environmental studies, and the business plan”. Those efforts essentially became the current bylaws and structure of the ICF.

Island Corridor Foundation Structure

The ICF is the governing body made up from the five Regional Districts and fourteen First Nations who are along the corridor. As identified in its bylaws, the Foundation is governed by a Board of Directors made up of a representative nominated by each Regional District, five First Nation representatives who represent the eight First Nation groups supporting nominees to the Board, and two members at large. The Board is responsible for the administration of ‘the affairs of the Corporation in all things and [to] do all such other acts and things and make or cause to be made for the Corporation, in its name, any kind of contract which the Corporation may lawfully enter into and, save as hereinafter provided, generally, may exercise all such powers and do all such other things as the Corporation is, by its articles or otherwise, authorized to exercise and do.”

There is a Members Committee that is comprised of designated representatives from each Regional District and First Nation. The role of the Members Committee is rather vague in the ICF Bylaws (ie) “each member shall appoint a designated representative to exercise its rights, including voting rights, at any meeting of members.” To date Members generally attend the Annual General Meeting, and preside over the appointment of the Board of Directors, the appointment of the Auditors, and the election of the Chair and Vice-Chair of the Board of Directors.

From an administrative perspective, the Chief Executive Officer is the sole staff person reporting to the Board of Directors. Currently this position is contracted to Granneke Management and Consulting Services, which provides services such as land management, maintenance of assets in good condition, trail development, and presentation of an annual budget. The Corporate Secretary role is performed by the only direct ICF employee while the Finance Officer and First Nation Liaison Officer are paid an honorarium directly by ICF.

We understand that there were initially a number of operating committees to assist in meeting the mandate of the ICF but they were disbanded some time ago. More recently we are aware of two committees the ICF has established to provide advice and direction to the Board and to improve communication with the members; a Local Government Liaison Committee (LGLC) and a First Nations Liaison Committee (FNLC). We were not able to review terms of reference for these Committees.

A schematic representation of the structure, largely taken from the ICF website, follows:

The Foundation’s by-laws provide a method for members to make changes to the bylaws by putting forward resolutions (section 2.6) at either a special meeting or the Annual General Meeting. The Board of Directors may, by resolution, make, amend or repeal any bylaws that regulate the activities or affairs of the Corporation. This process is outlined in section 14.1 of the Bylaws.

Governance Review

While the land within the corridor is legally owned by ICF, regional districts see themselves, along with First Nations, as owners of the corridor, partly because they are members of the Foundation, partly because of the efforts Regional Districts and First Nations made to save the corridor originally. As owners they feel they are entitled to more in-depth information than is provided on the ICF web-site.

The governance structure of the ICF was originally established to accomplish three primary objectives:

• to limit the owners’ financial exposure and liability both in running a rail line and in owning and maintaining a land corridor of this size;
• to limit political interference in a complex structure involving regional governments and First Nations; and
• to take advantage of charitable status, a requirement for the initial transfer of the corridor.

No one interviewed expressed dissatisfaction with the structure of the organization per se. Suggestions were made for working more effectively within the existing structure with minor changes to the bylaws.

One suggestion related to the qualifications of ICF Board Directors. Currently the Regional District Directors on the ICF Board are nominated by recommendation of their Regional Boards. They are often chosen because of their interest in the business of the Foundation and not necessarily because of any particular skill set they will bring to the Board. It was suggested that individual Board appointments could be made from the general public based on expertise required by the ICF Board. This would be similar to the process often used by Regional Districts for appointments to Airport Commissions.

The general feeling was that, while such a process may be valuable once the rail is operating, the current process for nominating political representatives from the Regional Boards should remain. However, the member-at-large representatives on the Board should be chosen for particular skills that strategically bring added value to the Board table, for example financial, legal, business planning, rail operations, or fund-raising expertise.

Recommendation #1: That the ICF Board appoint members-at-large from the public based on a strategic evaluation of skill sets that will provide added value to the Board.

Recommendation #2: That in the future Regional District Boards consider nominating Board Members to the ICF Board from the community based on specific skill set requirements.