It could be a classic case of short term pain for long term gain - or a huge red flag that the Town of Innisfil should heed.
At least that's how some Innisfil councillors are viewing the recent $8 million loan request from the town's hydro utility, InnPower.
"Our LDC is in a unique position to have such growth potential. In my mind it’s simply a decision of short term thinking or long term thinking," said deputy mayor Lynn Dollin. "Short term, there is a long line of ldcs that would like to acquire us. Long term, invest in the infrastructure and create a long term revenue generator."
So the choice for council comes down to whether or not they are prepared to front the cash, banking on growth that will result in lucrative dividends for residents sometime after 2023. If they aren't willing to wait, then the option could be to sell part or all of the utility to a bigger corporation like Barrie's Powerstream Inc.
InnPower is derived from the hydro system that served the Village of Cookstown since 1917. In 2000, Innisfil Hydro became a corporation, with a board of directors responsible to the shareholder, the Town of Innisfil.
Currently, a staff of 41 administer the day-to-day operations of the electrical distribution system - the "wires" that span Innisfil and south Barrie, distributing electricity to homes and businesses.
There are 10 substations, each with an incoming voltage of 44,000 volts, and over 525 kilometres of high voltage lines under the company's jurisdiction, covering the 290 square kilometre service area.
Many councillors were surprised by the loan - $1.6 million in 2016, $2 million in 2017, and $2.2 million in 2018 and 2019 - presented at InnPower's annual meeting last week. They also questioned proposed rate increases topping 10 per cent next year, and say they need more information and the issue was deferred to June 22.
"Unfortunately we were not provided enough information or even the actual meeting agenda in a timely manner to determine the possible effect of this," said Rob Nicol.
"The motion requesting the infusion was a late addition as well. We were told that it was not dire to provide the funding immediately and I was not willing to just vote for an $8 million influx without the true facts, including where the money would come from, details on the operating budget and a deeper look into the business of Innpower."
Town CAS Jason Reynar presented a positive spin on the situation, calling InnPower’s request for funding over the next four years "an exciting opportunity for the town as sole shareholder.
Reynar says the investment would strengthen and grow the hydro distribution company into lands annexed by Barrie a few years ago. By investing now, the town would be increasing the value of Innpower, he said.
Councillor Stan Daurio, however, says he supports the option of selling the recently-formed utility.
"A little-discussed element of this is that there will be no dividends forthcoming to the Town until after 2023, and even then growing very slowly," he said, but PowerStream has offered to trade PowerStream shares for InnPower shares, provide an almost immediate 14 per cen cut in hydro rates to match the rates of their current customers, and provide us with an immediate revenue stream from interest and dividends of at least $3.5m annually from right now.
"That’s a minimum $7.8 million annual value to Innisfil right now. I think this is worthy of debate by Council – WITH input from our ratepayers."
Also, projected rates do not include a future hydro transformer station to be built in the south-end Barrie annexed land, still part of InnPower's service area. The cost for that project is $85 million.
"InnPower needs this money to continue building, but when the need for $75 million to $100 million arises to build a new transformer station to serve the Barrie annexed lands, we clearly do not know where this will come from," said Daurio.
"Yes, I'm worried."
