Dollar signs will be in the eyes of councillors, as St. Albert city council prepares to review a potentially innovative idea later this fall that's claimed to have the ability to rake in more cash without touching taxes.
The day draws nearer for council to take their fine-tooth combs to a municipal utility corporation (MUC) business case, drawn up by third-party consultant Grant Thornton, which is supposed to come out sometime before end of November.
An MUC would act as an arms-length entity to St. Albert that offers services, with any dividends it makes flowing back to the city. The city is heralding this as a potential option to help offset a $16-million shortfall to its repair, maintenance and replacement (RMR) budget.
“If it can be successful, that’s great – but objectively I want to make sure that we’re not looking with rose-coloured glasses, but rather that we’re confident it will be a viable project that has both short and long term benefits to the city,” said Coun. Sheena Hughes in an interview.
While the business case should provide more detail on what services exactly could be offered by an MUC, waste to energy technology could be part of its portfolio, depending on the success of a city pilot project for such technology. A report on the waste to energy pilot program is expected to come forward at the same time as the MUC business case.
While council has not reviewed the business case yet so cannot speak on specifics, the Gazette asked councillors to comment on what components will be key within that business case to swinging their support for creating a MUC.
What goes into a decision?
Viability, benefit and risk analysis, and looking at comparable communities are all items council members listed as key to their eventual decision around green-lighting an MUC.
Coun. Jacquie Hansen said she is a strong supporter of finding new revenue streams, and said she is “quite positive” an MUC would not result in a financial loss. She added the city would be on the “right track” if an MUC could act as a new revenue stream that does not change the bottom line for taxpayers.
“I don’t think we should be afraid of change, but I think we just need to be very careful of how we move forward with it,” she said.
For Hughes, it comes down to whether an MUC is viable, both short-and long-term, and justified.
“Why a corporation is necessary, instead of just continuing to perhaps offer services outside of our boundaries without having a corporation in place,” she said.
“I want to see that this is actually viable and that it would not involve a large rate increase to our utility rates,” she added.
While municipalities are prohibited from making a profit on services they offer, running those services through an MUC would give St. Albert the ability to charge more than it costs to deliver services, if the city chose to do so.
Coun. Wes Brodhead said St. Albert needs to ensure an MUC would not end up costing the city, and its residents.
“It needs to be fiscally sustainable in that respect, just by doing this we don’t want to set up more money coming from residents,” he said.
Coun. Natalie Joly said she will be looking at what value an MUC would bring the city.
“I’m looking to see value for the city, making sure that it is going to generate revenue for the city, and not get into markets that are already well-established in the region,” she said.
Some also commented on the need to look at why other MUCs throughout Alberta have thrived, and why others have fallen flat on their faces.
For Coun. Ken MacKay learning best practises from other communities will be important.
“We all know about some of successes, but we’ve also heard some of the failures as well and so I want to know what those benefits and risks are,” he said.
Hughes spoke about Medicine Hat’s MUC, which is being forced to wind down its gas operations recently and let go of more than 100 employees. Medicine Hat is a unique story due to its large natural gas reserves, and the city has publicly owned and operated utilities for 110 years.
Hughes said this is a potential lesson for St. Albert, that its MUC would need to have a good understanding of its client base and revenue.
“Having an understanding of consistent, expected and reliable revenue source outside the residents of St. Albert is fundamental for this to be a realistic proposition,” she said.
Picturing an MUC
While most members of council were not willing to speculate on how they envision a utility corporation could come to fruition in St. Albert, there are various governance models from comparable communities that can be examined.
The models range from operating as a completely arms-length entity with no council involvement other than occasional reports, to one or two members of council serving on an MUC board, to all members of council being involved.
Hansen said she would prefer to see no involvement from city council within a St. Albert MUC, and would rather it run by a third-party governing board as a “separate entity completely.”
She said she would rather governance of a MUC be run independently because of “perceived conflicts”.
MacKay said he hopes to see what the role of council could be within an MUC in the business case.
Importance of partners
Members of council also noted the importance of regional partnership, some describing it as a must in their upcoming decision.
Hansen said she would not support a utility corporation unless evidence of partnerships was evident.
“I’m not looking for another big-ticket item. For me, that would be ... one of the questions that I have and assurances I would want, that we can use expertise that’s already out there and partnerships out there with infrastructure already in place,” she said.
Brodhead said he is a “regional collaboration guy,” but said he would have to see the business case to determine whether it is “absolutely critical” for an MUC’s success.
MacKay noted there could be access to “different levels of funding,” depending on what kind of partners St. Albert’s MUC could pull in, whether it’s a combination of private and other levels of government.
Is this a panacea for RMR budget woes?
The Gazette also asked members of council whether they view the MUC as a panacea for the city’s RMR budget shortfall issues, and if not, what else the city is looking at to deal with the problem.
Hughes said aside from a consecutive three-year 1.5-per-cent tax increase beginning in 2020 – and the MUC idea floated – “no other solutions have been brought forward.”
“I’m not aware of anything else being discussed, so certainly the utility corporation has been brought forward as an alternative revenue source,” she said, adding she put a motion on the floor for administrations to look at alternative solutions to the tax increase. If no other solutions are brought forward, the city would need to implement a 1.5-per-cent tax increase just for RMR issues for the next two decades.
Hansen said she would not describe the utility corporation as a panacea, but that “maybe 30 years down the road” it could be a “huge contributor”.
MacKay said there is no question the city is facing a “significant RMR challenge,” but an MUC would only be one part of a solution to a very complex problem.
Mayor Cathy Heron said in an email it would be “premature” to comment on a business case council has not yet seen. Coun. Ray Watkins did not respond to a request for interview.
