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Globe: Blue-ribbon panel expected to call for sale of Toronto Hydro

Blue-ribbon panel expected to call for sale of Toronto Hydro

JEFF GRAY AND JENNIFER LEWINGTON
February 20, 2008

The sale of a wide range of city assets, including Toronto Hydro, is one of several key recommendations expected tomorrow from Mayor David Miller's independent blue-ribbon panel on the municipal government's finances.
The potential sale of the hydro utility, rumoured for weeks, could generate in excess of $2-billion if sold to a pension fund, for example, and lighten the city's debt load. (The average Toronto house assessed at $369,300 in 2007 contributed $266 a year toward debt charges, second after $532 a year for police.)
When Mr. Miller announced the panel last October - it was hastily convened in the bitter fight over his two controversial new taxes approved last year - he flatly ruled out a sale of the provincially regulated utility.
None of the panelists, including chairman Blake Hutcheson, president of CB Richard Ellis Ltd., a commercial real estate firm, would comment on the report yesterday.


But one source said it is expected to recommend changing the way the city makes decisions, including maintaining stronger control over its vast network of agencies, boards and commissions and its massive real estate portfolio.
It is also expected to bolster the city's calls for the province to "upload" certain costs, such as social programs, from local property taxpayers.
Councillor Denzil Minnan-Wong, who led the fight against Mr. Miller's new land-transfer tax and car-registration fee, said he was hopeful the panel would come up with unorthodox ways for the city to save money.
But he warned that Mr. Miller and his supporters on council had to act quickly on the report to prove it was more than a political move to convince waffling councillors to pass his tax plan last October.
"The city is in slow decline. We're sinking. The current thinking of city officials, including the mayor, is steady as she goes, and the only solution is to beg for money from the other levels of government," Mr. Minnan-Wong said.
"They [the mayor and city officials] haven't looked at different, innovative approaches."
Sources said the report does not include a recommendation for the province or its Metrolinx regional transportation agency to take over the costly Toronto Transit Commission, despite rumours last week fed in part by comments made by Premier Dalton McGuinty.
Few expect the report to stray too far into areas that would make Mr. Miller or his left-leaning supporters on council truly uncomfortable, such as recommending drastic changes to the city's fair-wage policy.
That policy, which mandates that non-union contractors must pay approximately union rates on city contracts, has long been a target of critics and business groups.
While the report itself was being written by Mr. Hutcheson, and the panel included business leaders such as Larry Tanenbaum of Maple Leaf Sports and Entertainment Ltd. and Paul Massara of the private equity firm Genesis Capital Corp., all of the panelists have signed off on the precise wording of its recommendations.
Panel member Jim Stanford, an economist with the Canadian Auto Workers union and a Globe and Mail columnist, would likely disapprove of any move to eliminate or dramatically weaken the fair-wage policy, for example.

Selling Toronto Hydro is the worst thing the City could do.. in fact, selling ANY city asset is pointless, as it provides only a one-time infusion of revenue.

Perhaps Toronto should look into what happened in Edmonton, when Edmonton Power and Aqualta (Edmonton Water) was branched off to create EPCOR, a publicly traded company with the City retaining the majority of shares in the company. Now, EPCOR is feeding millions into city coffers every year from dividends... while many cities sit envious at Edmonton's position, particularly Calgary, who sold their company completely to Enmax.

The publically held/city majority owner model works very well, as the company becomes completely separate from the city (A number of Toronto Councillors sit on the board at Toronto Hydro) and works towards profitability.

 

[ShonTron]

Indeed, the EPCOR model is an excellent one to follow. I generally dislike government asset dumping - the LCBO is another good example of a government run asset generating millions for the government coffers, and apart from fewer stores, and perhaps some lack of selection in certain niche product categories, the consumer benefits from generally very good prices.

 

[Dilla]

Feb 21, 2008 12:42 PM

Jim Byers

CITY HALL BUREAU

A panel of independent experts is suggesting a revolutionary overhaul of the city of Toronto’s operations, including higher residential property taxes, a parking lot tax, regional road tolls, selling of surplus city lands, improving city worker productivity and raises for some politicians.

The report released this morning by the six-member panel recommends:

* Trading the Don Valley Parkway and the Gardiner Expressway to the province in exchange for a share of regional road tolls;
* Getting the province to provide $200 million of annual funding and long-term, stable financing to Canada’s most populous city;
* Selling off some of the city’s estimated $18 billion in real estate assets to help slash its debt load;
* Giving pay hikes to members of city council’s powerful executive committee.

The report notes than 90 per cent of city jobs are unionized and represent about one-half the city’s budget. That leaves little room for flexibility, but panelists said the city could do a better job at the bargaining table and improve relations with workers to help reduce the burden on taxpayers.

“These (moves) can clearly put the city on the right track of fiscal responsibility and economic sustainability,†the panellists wrote. “Attaining this state will allow the city to embark upon … small initiatives to massive new social and economic projects.â€

The panel, which included Larry Tanenbaum of Maple Leaf Sports and Entertainment and was chaired by Blake Hutcheson of CB Richard Ellis, conducted more than 200 meetings over a four-month period.

“There is little doubt that the city can ignore some or all of them (their recommendations), or write them off as too simplistic and continue on its present course,†the panel wrote. “And in certain cases we freely acknowledge that more homework is required before a definitive decision to proceed can be made.

“It is our belief, however, that now is the time for the city to act before there is an acute crisis facing this great city – one that could have been avoided.â€

Panellists said the city should be able to find $50 million in efficiencies this year and $150 million per year in subsequent years and that politicians need to “get a grip†on the 119 agencies, boards, commissions and corporations that account for more than 30 per cent of the city’s budget. Those boards and commissions include the TTC, the Toronto Police force and Exhibition Place, as well as the Toronto Zoo and the Toronto Economic Development Corporation.

The panel noted that many of the boards and commissions have separate payroll, accounting and other departments and that there is a “huge opportunity†to save money by consolidating some services.

The panel said the Toronto Parking Authority could be a potential cash cow for the city, possibly by offering long-term leases on its lots.

The city has been trying to reduce the tax burden on commercial and industrial property owners. The panel said that work has to continue in order to bring those taxes in line with other municipalities in the area. That would likely mean higher residential rates for Toronto taxpayers.

There was no major call for contracting out of city services, which would prove hugely contentious for Miller and his union backers. But the report did point out that the city could save money through “outsourcing†and improved procurement policies.

The panel said all recommendations can be implemented in this term of council, which runs until November, 2010.

Panellists said they considered suggesting that the TTC be given to the province to run but that they felt it’s not practical at this time.

Panel members talked about road tolls for the region, but there were no specific numbers. There was also no particular amount suggested for their proposed parking lot tax.

Hutcheson said this morning that the city has been weak in monitoring its progress in some areas and that it needs to improve its competitiveness and transparency.

Toronto is not in a fiscal crisis but Hutcheson said the city’s debt load is a big problem and that “the status quo is unsustainable.â€

“The city has chronic expense problems, chronic revenue problems and a mountain of ambitious capital projects,†he said.

Hutcheson said moves the panel is recommending could “unlock massive amounts of money†for the city to use in the future.

Mayor David Miller, who set up the panel last fall, praised the group for its “extraordinary†work as he introduced panel members this morning, but has no immediate comment on their recommendations.

Hutcheson said the city was very forthcoming with information and that panellists were “in unanimous agreement on the full package.â€

“We are optimistic about this city and its future. we are very optimistic about this city and its future,†he told a packed news conference. “We genuinely believe it can make a big difference to the city and to people’s lives in this city.â€

Hutcheson said Toronto is critical to the entire southern Ontario region. "This city," he said, "can’t afford to fail."

Mayor David Miller said he has consistently spoken in favour of road tolls if they’re brought in on a regional basis and that the issue deserves "serious consideration."

Although they didn't recommend any specific numbers, panellists noted that a recent study estimated that a toll of seven cents per kilometer on major highways could raise $700 million a year.

They also said a parking lot tax of $25 on non-residential surface parking spaces in the Greater Toronto Area and Hamilton could generate $80 million per year.

Miller said he accepts the report in its entirety and that he'll begin acting immediately on some recommendations. Which ones will be first on his to-do list, however, wasn't clear.

Asked why the panel was able to come in with so many broad recommendations after just four months of work, while elected politicians haven’t been able to do the same thing, Miller said that that is why he wanted the group to be set up in the first place.

"It's a view from the outside," he said. "From time to time you need that."

Miller said the report represents a "ringing endorsement" of the city's civil service.

"The idea that the city is mismanaged is over," he said. "It's not true, and the panel is clear."

Miller said the city delivers "innovative and high-quality services," has improved accountability and transparency, is involved already in "creative partnerships" with the private sector and has top-notch policing.

Councillor Denzil Minnan-Wong, like others of council's right wing, has always insisted there are savings to be found within the budget, including contracting out.

"I think the report’s great. I think they’ve done great work," he told reporters today. "What it does show is there’s a solution here we can look at to put ourselves on good financial footing. There’s a way in which we can deal with our operating shortfall."

He added that he hopes the recommendations are taken seriously and are not put on the shelf to gather dust.

"They’re bold, they’re imaginative and innovative," Minnan-Wong said. "The city should be focusing in on the things it needs to do well. Those things it doesn’t need to be involved with, it shouldn’t be involved with."

 

[rpgr]

Here's another expense they can curb... stop paying high commissions to "famous rich guys" to give out poorly researched stuff I could have gotten off this board for free.

Seriously, this can be filed under "obvious" with the exception of the "pay hike" which should be linked to performance like everyone else in an executive committee.

If I could change one thing about these commissions it would be that they are done by a group of university students in the proper classes / areas of study.

 

[W. K. Lis]

If they are suggesting that the Gardiner and Don Valley Expressways become toll roads, consider a rebate for those with Toronto license renewals. If they do use an photo scanning like the 407, the receipts could be used for a partial rebate of some sort when we renew the license stickers in Toronto. That way the 905ers will pay the full toll, but the 416ers will pay less. After all, it is the 416's property taxes that pay for the Gardiner and Don Valley. The 905ers should pay for the use of them.

 

[waterloowarrior]

If they are suggesting that the Gardiner and Don Valley Expressways become toll roads, consider a rebate for those with Toronto license renewals. If they do use an photo scanning like the 407, the receipts could be used for a partial rebate of some sort when we renew the license stickers in Toronto. That way the 905ers will pay the full toll, but the 416ers will pay less. After all, it is the 416's property taxes that pay for the Gardiner and Don Valley. The 905ers should pay for the use of them.

According to their plan, the province would take over the Gardiner and DVP

 

[AlvinofDiaspar]

Here is the full report:

http://www.toronto.ca/mayor_miller/pdf/blueprint_report_20080217.pdf

I found the governance reforms interesting - it will conceivably put pressure on both the left and right wing councillors to vote for a strong(er) mayor system.

AoD

 

[JasonParis]

According to their plan, the province would take over the Gardiner and DVP

Nevermind tolling, would this be a good or bad idea?

I'm thinking MTO would maintain the highways much better than the City, but it would also seal the fate of a permanently raised Gardiner and possibly express HOV lanes on the DVP.

 

[Patrick Smyth]

I believe these kind of reports are just adding to the 'dumbing-down' of Toronto. I haven't read it yet but it seems to have gone politically-light on the quality of governance provided by Council members.

 

[Brandon716]

Selling land sounds like a poor, temporary way to balance a budget. A one time sale doesn't resolve long term problems.

 

[AlvinofDiaspar]

From the Star, by Royson:

Rescue plan for ailing Toronto
Feb 22, 2008 04:30 AM
Royson James

A panel of eminent Torontonians, linked in various ways to the mayor and who, as such, have no desire to embarrass him, say city hall can extricate hundreds of millions – billions even – from its $8.2 billion budget and massive operations.

The mayor sees this as a "ringing endorsement of our civil service."

The six-member group of experts says that after four months of nosing around city hall it has unearthed a treasure trove – enough to make the city fiscally stable well into the future.

The mayor says he'll look into it.

The business types say they were "most shocked" by the 119 boards, agencies and corporations the city owns but "has little say or control over their budgeting and decision-making."

The mayor says the report proves "the idea that this city is mismanaged" is nonsense. "It's not true."

Torontonians can read the recommendations and decide for themselves.

That Mayor David Miller interjected bald politics into the debate yesterday is a too-eager attempt to sugar-coat what can be interpreted as an indictment of his administration and others that went before.

Asked why a university president, a labour union economist, a financier, a paving magnate, a real estate executive and a non-profit executive can find so much buried money – after just four months of digging – the mayor stumbled through an answer, saying that's why he asked them to look.

In fact, the panel was forced on Miller. He asked the "experts" to look at the books after a torrent of criticism greeted his introduction of two unpopular taxes last year.

"First, get your house in order," ratepayers said. And some councillors refused to vote for the vehicle tax and land transfer tax measure until Miller called in fresh eyes to look at the city's entrails.

Miller relented. But he constituted a friendly enough group that wouldn't slam the city top to bottom and recommend massive changes, especially ones that would upset the unionized workers.

Yesterday, Miller said that when he established the panel he told them there would be two or three meetings. That, in itself, tells you how much stock he placed in this process. And it is a cautionary note about how seriously the recommendations might be greeted at city hall.

The panel's report is responsible, cautious to a fault and careful not to upset those who will have to implement the suggestions. Still, it found, after 200 meetings, the city can:

Squeeze $150 million a year in savings, starting next year; and earn $150 million annually through better real estate management.

Reap $3.5 billion from its holdings with Toronto Hydro, the parking authority and Enwave. This would eliminate the $2.6 billion debt and the $400 million we pay in principal and interest each year.

There's more, but that alone shows how much money Toronto might be sitting on. Do just some of the above and say goodbye to the annual embarrassing journey up to Queen's Park for a bailout.

So, who will drive this? Who will secure these savings and funds?

The panel, with its corporate view of the world, wants a "strong mayor" system where Miller hires and fires the chief administrative officer and is, by law, responsible for the budget.

It's hard to believe such a governance change can turn around the mindset at city hall. But the likes of Larry Tanenbaum believe so. The head honcho of the Leafs and Raptors says that, while the report he helped pen is not a ringing endorsement of the city's past, it is a "ringing endorsement of the future."

Everybody's a politician.


rjames@thestar.ca


--------------------------------------------------------------------------------
Business taxes too high: Panel

Taxes on Toronto's commercial properties are too high and residential taxes are too low, when compared with competing municipalities, so more shifting of the burden is needed, the panel says.

While Toronto began a process in 2006 to equalize the difference over 15 years, the panel thinks it needs to be expedited to just 10 years, to encourage business to stay in Toronto while still meeting the city's needs.

"We think it took guts to do that. We're just saying accelerate it," said panel chair Blake Hutcheson.

He added that, if the city implemented many of the panel's recommendations, there might not be a need for more significant annual property tax increases.


AoD

 

[AlvinofDiaspar]

From the Globe:

Raise taxes and allow tolls, Toronto told
Blue-ribbon panel also recommends boosting mayor's authority, slashing spending and 'monetizing' assets such as Toronto Hydro
JEFF GRAY

From Friday's Globe and Mail

February 22, 2008 at 3:42 AM EST

TORONTO — The city should give new powers to the mayor, slash $150-million a year in spending, hike property taxes for homeowners, allow tolls on its expressways and sell off or better manage Toronto Hydro, says a landmark report on fixing Toronto's ailing finances.

The 86-page document, produced by a six-member panel drawn from business, academia and organized labour, promises hundreds of millions in savings and new revenues in the short term, and billions in the long-term, if the city takes its advice.

Chaired by Blake Hutcheson, president of real-estate giant CB Richard Ellis Canada, the panel was assembled last fall by Mayor David Miller to bring a fresh eye to the city's books in the middle of a political battle over the mayor's controversial new taxes on property sales and vehicle registrations.

Produced after hundreds of meetings with city officials, interest groups and experts, the report criticizes provincial and federal governments for failing to offer more than ad hoc support and says the city faces a $250-million to $350-million budget shortfall every year.


Enlarge Image
Toronto Mayor David Miller. (Peter Power/The Globe and Mail)

It also includes a scathing passage about how the culture at city hall has hampered Toronto, calling council "highly parochial," "riven by factions," and full of "petty bickering, grandstanding to score points, mistrust, bad blood" and memories of past grievances.

And the report warns, in carefully couched language - Canadian Auto Workers union economist Jim Stanford was a member of the panel - that the city and its unions must "restrain" the growth of wages and benefits.

Mr. Hutcheson, a respected business leader with ties to the Progressive Conservatives, said he has new respect for the tough job the mayor and city staff have had in managing their budget. But his report,

he said, pulled few punches.

"I think we've been pretty hard-hitting about the political culture, and about the behaviour of some members of council," he told reporters yesterday at a press conference at the Fairmont Royal York Hotel.

The report urges the city to find $50-million in cost savings this year, and $150-million in each of the next two years; beef up the powers of the auditor-general; monitor its 119 arm's-length agencies more closely; bring in a "parking tax" and cut red tape.

It also says the city's relatively high business property taxes must be reduced even more quickly than the mayor's current 15-year plan, which would mean large property tax hikes for homeowners.

Mr. Miller said he accepted all the report's recommendations, but he did not commit to a firm timeline on bringing changes forward. The report also includes praise for the way the city has managed itself in tough times. Yesterday, the mayor was quick to seize on those passages, using them to rebut critics who argue that the city bureaucracy is rampantly wasteful.

"The panel says extremely clearly that the City of Toronto does much of what it does to extremely high standards," Mr. Miller said. "So the idea that some have held that the city is mismanaged and not working efficiently and effectively is over. It's not true."

But Councillor Denzil Minnan-Wong, who fought the mayor's new taxes arguing that the city could find the money through cutting waste, said yesterday the report vindicated his view.

"This report has confirmed that the city can be run more efficiently, that there are savings that can be had," said Mr. Minnan-Wong, who added he supports the report's suggestion to give the mayor the power to hire and fire the city's top bureaucrat, but opposes the idea of adding tolls to the Don Valley Parkway and the Gardiner Expressway.

That idea, pushed by panel member Larry Tanenbaum, chairman of Maple Leaf Sports and Entertainment Ltd., would see the two traffic arteries handed over either to the province or the regional transportation agency Metrolinx, as part of a possible scheme to toll all of the 400-series highways. This would save the city $20-million a year in maintenance, and the plan would be to give it a share of toll revenues.

Mr. Tanenbaum said yesterday the idea would help push drivers onto public transit, while providing millions to build new subways and light-rail lines.

The report also calls for the city to study ways to "monetize" - but not necessarily sell off - Toronto Hydro, the Toronto Parking Authority, and the lake-water cooling project Enwave, saying the move could produce up to $3.5-billion to help pay off the city's $2.6-billion debt. Mr. Miller has ruled out selling Toronto Hydro, but suggested yesterday that hiving off part of it, such as its telecommunications arm, might be worth investigating.

The report's warning that the city's unions would have to show restraint did not sit well with Ann Dembinski, president of Local 79 of the Canadian Union of Public Employees, which represents the city's inside workers.

"It's the City of Toronto workers who they expect to bear the brunt of all the wrongdoings of the City of Toronto. We went eight years without a wage increase in the 1990s," Ms. Dembinski said. "...We will not be going without a wage increase."

The panel, which also included Paul Massara of Genesis Capital Corp., former York University president Lorna Marsden and Toronto Community Foundation head Rahul Bhardwaj, was created as part of Mr. Miller's strategy to woo centrist councillors to support his controversial tax plan, which eventually passed last October.

*****

Fixing a broke city

In addition to routine budget chopping, the mayor's external panel on the city's finances suggests several new ideas to save the city money:

Tolls on the Don Valley Parkway and Gardiner Expressway: "Uploading" the DVP and the Gardiner would save $20-million a year, and more money if the move came in exchange for a share of a future tolling system on the province's 400-series highways. This idea is on the table at the province's new regional transportation body, and has Maple Leafs Sports and Entertainment chairman Larry Tanenbaum behind it.

A review of key assets: The report says as much as $3.5-billion could be recovered through monetizing - selling off or refinancing - key city assets such as Toronto Hydro, the downtown lake-water air-conditioning project Enwave, or the Toronto Parking Authority. This would be enough to kill off the city's $2.6-billion debt and eliminate the $440-million it spends annually in debt service charges. The mayor has ruled out an outright selloff of Toronto Hydro as a whole, but other options remain open.

Better managed real estate: The city should control all $17.9-billion of its holdings - and those of its arm's length agencies, such as the Toronto Transit Commission - from one office, with an aim to making an extra $150-million a year through development and selloffs.

A stronger mayor: The mayor should be given the power - now held by the 45-member city council - to hire and fire the city's top bureaucrat, and his cabinet-like executive committee should get more staff and higher pay than other councillors. While it will be up to city council to approve such changes, even the mayor's opponents sounded open to the idea yesterday.

A better-integrated transit system: In addition to a call for better co-operation between the Toronto Transit Commission and other transit agencies, the report calls for a study of the "costs and benefits of full integration of the regional transit system in the long term," which presumably involves the takeover of the TTC by the province's Metrolinx transportation agency, something the mayor has said he would fight.

Jeff Gray

AoD

 

[TrickyRicky]

I actually find this report encouraging because by stating the obvious it opens up discourse on steps to move forward. If the Mayor just picks and chooses recommendations or glosses over it or uses it to validate his seemingly ideological support for various interest groups and obviously false assertions (such as the fictitious efficiency of service delivery or competency of the city in negotiating contracts) then of course it will be of little value.

"Selling land sounds like a poor, temporary way to balance a budget. A one time sale doesn't resolve long term problems."

This is true but it is not what the report is suggesting. They are suggesting selling or "monetizing" assets in order to reduce or remove debt not deficit. As a way of eleviating structural debt problems it could actually make sense as interest payments are one of the cities largest annual expenditures. So in essence they are saying sell some assets in order to rectify past budget mistakes to improve the fiscal health of the city in the future.

 

[Junglab]

Selling land sounds like a poor, temporary way to balance a budget. A one time sale doesn't resolve long term problems.

Actually, payments on that debt do impact on a budget - in Toronto's case, some $400 million-worth. If the city can sell its assets to elimiate that debt, then yes, a one-time sale can resolve long-term fiscal problems, by freeing up that $400 million for other uses - which ideally are more effective uses of that money than simply holding onto the properties in questions. Alternatively, the city can attempt to realize an equivalent or better income from those assets - an idea also proposed in the report.

 

[rpgr]

Selling land sounds like a poor, temporary way to balance a budget. A one time sale doesn't resolve long term problems.

It does if zoned properly. Getting property taxes or taxes from businesses, etc.