A former St. Albert city manager is cautioning councillors not to rush to a vote on whether to start up an arms-length, city-owned utility corporation.
Bill Holtby, who spent 21 years working for the city including 10 years as city manager until 2011, wrote a letter to councillors Nov. 26 on the challenges he sees with the plan. He commended the city for looking at ways to diversify its revenue streams, but concluded he does not see how starting a utility corporation would be worth the financial risk.
On Monday, councillors will hold a public hearing on the prospect of starting such a corporation. For the past year and a half, city administrators have been investigating the feasibility of starting a utility corporation to help St. Albert generate money from services like waste-to-energy, wastewater treatment, garbage pickup for businesses and multifamily buildings, and consulting and inspection. That money would help offset property taxes — the city's main source of revenue at the moment — and would help buffer St. Albert against funding cuts from other levels of government.
In mid-November, councillors agreed to take the leap into waste-to-energy, approving up to $1 million in capital costs for a $4-million gasification pilot that would see the city partner with a third party to cover the remaining $3 million. Through previous council deliberations, council discussed how the small-scale pilot St. Albert is pursuing is an unproven technology. In the worst case scenario, the pilot project runs the risk of not being viable, in which case St. Albert and its partners would have to dispose of a $4-million asset. The location and potential partnerships for the pilot have not yet been disclosed.
Waste-to-energy is one part of the city's proposed utility corporation. A business case for the corporation released publicly last month projects the corporation could pay an average of $1.38 million to the city per year.
Holtby told the Gazette Saturday when he was city manager, St. Albert lacked the financial capacity to try leading edge initiatives.
"It's just the unfortunate situation of our geography that with a huge residential and a small non-residential tax base, we're not in a position to experiment as much as communities that are in a better financial situation," he said, noting communities with a bigger tax base can risk losing money on innovative ventures.
"We always said that we were fast followers and not leading edge. So we would let those who could afford to be leading edge do it, and if something was proven or close to proven, we would look at the initiative from a St. Albert perspective."
While there are examples of municipal utility corporations working across Alberta, Holtby said he couldn't find an example of a successful one that doesn't produce water, treat wastewater and create electricity or natural gas. Many successful examples have geographic access to natural gas and hydro that can be harnessed to benefit the company. The example of a municipal utility corporation not offering those services, which happened in Chestermere, ended in failure after utility rates ballooned for residents. Its failure left residents on the hook for millions of dollars.
Holtby said there might be something to wastewater treatment (the business plan includes a miniature wastewater treatment plant at a capital cost of $3.4 million), and there could be money to be made through consulting and inspection services. But he questions why St. Albert would need a utility corporation at all, since the city could technically offer those services in-house and maintain control over them.
Either way, some of these services would put St. Albert in competition with private industry, which Holtby said traditionally hasn't gone over well. Councillors passed a bylaw in August to give the city a monopoly on non-traditional utilities, prohibiting other companies from offering similar services without St. Albert's permission.
Holtby pointed to the Starbucks in Servus Place as an example of how such business ventures are perceived by residents and business owners. That example saw city council approve $280,000 to operate a Starbucks location, a decision that received wide criticism.
"We got in a lot of grief from the business community. The council of the day, we did a lot of in camera discussions, they came out and the (St. Albert and District) Chamber of Commerce killed us," Holtby recalled.
"In this (utility corporation) case, you've got a lot of St. Albert residents that would be consulting engineers, owners of businesses that provide municipal services, and would be concerned about, is it the business of government to be in business?"
Holtby said his advice to council would be to keep the public hearing open after Monday's meeting and reconvene in the new year so residents and the business community have enough time to review all the information. He suggests councillors go into the public hearing with an open mind instead of having a foregone conclusion of which way they will vote.
"I wouldn't proceed with another reading because of the fact there's an inference of where you're headed. So I think ... (council) should not make up their mind prior to the hearing, because the hearing is where you get your information, and you make up your mind after you listen."
If the city decides to proceed, Holtby suggests getting a second opinion through a committee or expert panel, like what was done after Servus Place ran a significant deficit after its first year.
The agenda for Monday's council meeting can be found on the city's website. It includes feedback from Holtby and three others, a presentation providing justification for a utility corporation, and a comparison of three other utility corporations in Alberta.
The recommendations from city administration are as follows:
1. That the City of St. Albert is authorized to establish and control, or obtain control of, a corporation as described in the Business Plan;
2. That the Chief Administrative Officer is authorized to take or direct the taking of all administrative and legal steps to cause the City to establish and control, or obtain control of, the said corporation;
3. That the Chief Administrative Officer is instructed to make further recommendations to Council in respect of the Unanimous Shareholder Agreement ("USA") required under the Act for the corporation, not later than March 30, 2020;
4. That a budget of $60,000 be approved to support activities related to establishing and controlling the corporation until the end of 2020, funded from the Stabilization Reserve.