Innisfil’s Power Couple

There is ample surprise and some confusion over the announcement that Innisfil intends to sell a 50% interest in InnPower, the local electric utility, to Edmonton based Epcor. This follows quickly after the decision to create a Municipal Services Corporation indirectly owned by the town.

One letter writer (Innisfil Journal) says, “Why and what is their motive? … I was not aware that Innisfil was in dire need of cash.

Well, yes. The Town is indeed looking for ways to raise $110 million to finance infrastructure west of highway 400 in Innisfil Heights. The Town itself faces a legislative restriction on how much it can borrow directly. Nor can it bully developers to pony up that much in Development Charges years in advance of any future construction. The arms-length Municipal Corporation structure circumvents borrowing restrictions and allows other strategic options. Either way, through borrowing or divesting, you’ll be paying the $110 million, and a ‘reasonable return’, as interest or dividends.

As I see it, the whole thing was set in motion when the province allowed Barrie to once again annex a big chunk – about 2,300 hectares – of Innisfil in 2009. The decision effectively killed Places to Grow as a planning tool. If Barrie couldn’t be stopped, no rural municipality in Ontario is safe. It set the stage for a horse race to see who could sprawl faster – Innisfil or Barrie. The petite rural maiden, Innisfil, has found a muscular partner, Epcor, with pockets deep enough ($5.7 billion in assets) to out-spend and out-pace Barrie and fend-off its unwanted advances. Smaller utilities are being urged to consolidate and InnPower also wants to avoid a shotgun wedding.

It was strange to tour the new InnPower headquarters and see it substantially over built with supposedly enough unoccupied office space for decades of expansion, and yet, oddly enough, fully furnished now. Perhaps the ‘municipal services corporation’ concept has been in the planning for a lot longer than we realize.

This is, of course, just the beginning. I expect that once InnPower secures Energy Board approval for the sale, another holding company will be formed for water and wastewater services. (InnWater? InnDeep? InnCredible? Sorry, I couldn’t resist) Politicians love this because they won’t have to face the electorate every year to explain tax increases in the operating and capital budgets. They can sit back and collect dividends instead.

Bureaucrats love it because, as our Strategic Advisor says, it “takes out the politics and allows us to make rationale decisions based on a business case.” In other words, where, and how fast, can we make more money? There is a built-in incentive for sprawl because the company’s growth and prosperity relies on new greenfield development. But it also frees InnPower from operating mainly within our municipal boundaries. Epcor operates in Alberta, BC, Arizona and New Mexico. Mr. Skorobohacz says, “This will give us long-term partnership growth beyond our municipal boundaries while meeting our communities requirements.”

The corporate structure may also place utility managers beyond the reach of Ontario’s Sunshine List, which requires disclosure of top salaries, but I’m not sure.

Citizens don’t associate the taxes they pay with the services they receive. People don’t easily grasp that no tax = no service. Conservatives have drummed into many heads that all taxes are evil and all tax increases are doubly evil. So instead, you will have a monthly bill in hand specifying exactly what you owe for the service you received. What’s not to like?