Council should pull the plug on the idea of selling InnPower.
That was the message from Danny Persaud, president and chief executive officer of InnPower, InnServices and InnTerprises, during a special meeting of council Feb. 21. It was the second Wednesday in a row council had sat in special session to discuss its wholly owned utility companies.
The previous week, prior to the regularly scheduled council meeting, a presentation was led by Mohamed Bhamani, Ernst & Young’s national lead partner for local government consulting.
The Ernst & Young report provided 14 recommendations across three areas: Efficiency and Enhancement Opportunities, Strategic Growth Opportunities and Transformative and Restructuring Opportunities. Persaud told council his group could not support four of the recommendations provided, three of which were found under Transformative and Restructuring Opportunities.
Perhaps most important was the recommendation to explore the sale of InnPower.
“The town may consider the sale of all (i.e., 100%) or a percentage share of InnPower to another utility company or investor,” the report stated. “Additionally, this could reduce the overhead associated with owning and managing a utility, as well as provide an opportunity to further de-risk investments.”
It could also be an immediate cash boon.
“(The) sale of InnPower (whether all or in part) will provide the Town with access to immediate funds which may be re-invested into higher priority areas or into more revenue-generating opportunities (should any be identified),” the report stated.
That would be shortsighted, Persuad said, and ultimately a detriment to the community.
“We are not biased; our fiduciary duty is to the corporation and the decisions we make are in the best interests of the corporation and its stakeholders,” he said. “We believe there will be a loss of community value and community benefit.”
Perhaps the biggest reason to keep the utility is the growth expected in the next few years. When the City of Barrie annexed land from Innisfil more than a decade ago, there was no financial restitution for the swap. However, InnPower was still allowed to be the service provider for those lands.
With the construction boom in south Barrie — the very lands formerly part of Innisfil — combined with the ongoing construction within the municipality’s current borders, InnPower’s customer base is expected to double in the next 10 to 15 years.
That’s money for the community it might not otherwise see if InnPower were to be sold off. And it's not worth trading for about $30 million, Deputy Mayor Kenneth Fowler suggested during the meeting.
Persuad also highlighted a potential difference in customer service.
“Every dollar that residents pay into the distribution of their bill that goes to InnPower is invested in our communities,” he said. “All of the infrastructure we’re putting in benefits there, all of the storm (or) outage response goes strictly toward our customers.”
He then wondered if residents, especially those in the rural areas of the municipality, could expect the same service in emergencies or the same commitment to improving infrastructure if control of the utility was based outside of town.
“We don’t take the rates and invest anywhere outside of Innisfil or south Barrie,” Persaud said.
Another community benefit the town needs to maintain is InnTerprises, Persaud said.
The Ernst & Young report stated InnTerprises is ripe for sale or dissolution “as the entity has moved to a position of loss,” and “it may no longer be sustainable to continue operating the entity within the current state of operations.”
That misses the point, in Persaud’s opinion, as he feels it is intrinsic in its mission that “InnTerprises is here for community benefits first before profits."
While the service is a “low-profit business” today, it's “forward-thinking” and provides value-added services for residents. Persaud highlighted improved cellular phone service and electric vehicle charging stations as two of the benefits InnTerprises has brought to the municipality.
The Ernst & Young report also suggested dissolving InnServices and making it a town department once more.
“Implementation of this opportunity may reduce the associated overhead costs for operating and governing a separate entity with no impact to financing requirements as the increased debt capacity gained through establishment of the entity has not yet been leveraged,” the report stated. “Bringing the function in-house may also give the Town greater leverage and control over development decisions and ease collaboration efforts. As many of the functions are currently provided through a shared-services function with the town, dissolution and reintegration may be easier at this stage than in future if the entity were to be more established.”
Persuad particularly took issue with the comments made toward debt capacity. The municipality is regulated by the province on the amount of debt it can carry. Similarly limiting regulations don’t apply to InnServices as a municipal services corporation.
Spinning off the water and wastewater services from the town in 2015 was “innovative and ground-breaking,” Persaud said, and was done with an eye to the future that is rapidly becoming the present.
“It is recommended in the report that we start leveraging the debt capacity of InnPower, but what’s missing is that management made a strategic decision to not use that leverage. In fact, we made a strategic decision to reduce the amount of debt we had in the organization from 2017 onwards because we knew there would be major transmission requirements to facilitate growth in both Innisfil and south Barrie,” Persaud told councillors. “With the pace of growth that is being experienced and the major investments that are required throughout the town, such as the wastewater treatment plant expansion, we expect that we will have to explore debt financing over the next year.”
Moreover, if InnPower was sold, or InnTerprises or InnServices were dissolved in their current formats, the ability to explore multi-utility or regional utility models wouldn’t present itself.
“The town and InnServices may consider transitioning to a regional utility model to meet future service needs and align with the increasing trend towards regional service delivery efficiencies,” the report stated.
It also suggested growth and capital investments, coordinated service delivery and improvements of economies of scale and infrastructure could be possible in this scenario. Persaurd was keen to support this, noting there is already some cross-board servicing between Innisfil and Bradford West Gwillimbury, so Innisfil is already well-positioned to oversee a larger, regional utility.
“(This is) an opportunity for Innisfil to be masters of our own destiny and should be explored further, especially in light of the growth targets set out by the province,” he said.
The multi-utility model could also give the corporation the ability to leverage its combined assets in a way that could place less debt burden on the ratepayers of any one utility.
The report from Ernst & Young was created at the behest of council, who authorized it through a staff report in March 2023. Councillors were able to ask questions of Bhamani and his colleagues during the Feb. 14 special meeting of council, while Persaud was joined by other members of the InnPower and InnTerprises boards, as well as members of the public, in providing comments to council during the Feb. 21 special meeting.
In a report to councillors ahead of the Feb. 14 special meeting, town chief administrative officer Oliver Jerschow indicated staff would be seeking direction from council on the report and its recommendations sometime this spring.
To view the Feb. 14 presentation from Ernst & Young click here.
To view the report submitted to council, click here.
To view the Feb. 21 presentation from Persaud, board members and the public, click here and scroll to the 2:10:00 mark.
