CITY HALL BUREAU CHIEF
Toronto officials are quietly exploring the sale of some of the city's assets, including Enwave Energy Corporation, which is seen as a prime candidate.
"There is serious exploration," one City Hall source said yesterday of putting on the block a city agency whose claim to fame is cooling downtown buildings with water from Lake Ontario, reducing peak demand for electricity.
But the source, speaking on condition of anonymity, stressed that any decision to sell the city's 43-per-cent share in Enwave rests with city council.
The renewed talk of asset sales comes as Toronto grapples with a budget gap that is expected to be especially large in the next two years. Candidates to replace Mayor David Miller have begun floating proposals to close the chasm.
The city is headed into its 2010 budget cycle facing a shortfall of between $400-million and $500-million, though Mayor David Miller has vowed to present a balanced budget Feb. 16.
Elected and city officials are tight-lipped about what, if any, proposals for asset sales will materialize in time for this year's budget discussions.
Through a spokesman, Mr. Miller said "many options are being explored to address the city's structural financial challenges including monetizing and maximizing the value of public assets to achieve public interest policy goals."
He added that city staff continue to work on implementing recommendations from Mr. Miller's blue-ribbon fiscal panel, which in 2008 urged the city to look at the sale of some city assets to reduce debt charges and pressure on the $8-billion-plus operating budget.
Until now, most asset-sale talk has swirled around city-owned Toronto Hydro. But even proponents of selling Toronto Hydro say there are too many tax and other complication to sort out in time for this year's operating budget.
For example, a private sector buyer of more than 10 per cent of the utility (whose rates are regulated by the province) would have to pay a 33-per-cent provincial tax under current rules.
So far, one mayoral candidate has raised selling all or part of Toronto Hydro.
"The city has got lots of assets that tie up capital we need for other things," said Rocco Rossi. Other contenders are set to chime in shortly, meaning that future city ownership of the high-profile utility is sure to loom large in the Oct. 25 municipal vote.
Council critics who in the past have urged the city to consider the sale of some of its $60-billion in assets and $17.9-billion in real-estate holdings are skeptical the city would be able to pull off any sales in time for the budget.
"The city has been reluctant to develop a comprehensive strategy to make recommendations for the selling of assets," said Councillor Denzil Minnan-Wong (Ward 34, Don Valley East), a frequent critic of Mr. Miller.
In 2008 Mr. Minnan-Wong lost a vote, 22-18, for the partial sale of Toronto Hydro assets that could be reinvested in repairs to city rinks and swimming pools. Mr. Miller supported the initiative.
"You need some principles around which to consider asset sales," Mr. Minnan-Wong added. "You can't just start putting stuff up on eBay."
Budget chief Shelley Carroll (Ward 33, Don Valley East) said selling city assets "is a big fat decision," adding "you don't want to be giving something away."
Compared to Toronto Hydro, which on paper has a net worth of between $1-billion and $2-billion, Enwave by one estimate could generate between $80-million and $100-million for the city, depending on market conditions and interest from potential buyers.
Selling Enwave is seen as relatively straightforward compare to selling Toronto Hydro.
OMERS pension fund has a 57-per-cent majority stake in Enwave, with the city as the minority partner which holds the voting shares.
This is not the first time the city has considered selling its stake in Enwave; discussions between OMERS and the city several years ago never bore fruit.
There is at least one other potential buyer for Enwave: Toronto Hydro.
There is potential synergy between the regulated utility, a key ally in the mayor's conservation-oriented climate change initiatives, and Enwave, whose district heating and cooling efforts effectively reduce peak demand by industrial users for hydro power.
Yesterday, Hydro spokesman Blair Peberdy said "there have been no discussions" about the possible purchase of Enwave.
On the block
Over the past two years, the city has approved several measures to sell assets, generating funds for day-to-day operations.
- Toronto Hydro promissory note: In December, 2009, council approved an agreement for the utility to accelerate repayment of a city loan by several years. Proceeds of approximately $600-million had been earmarked for the city's share in the Spadina subway extension and waterfront renewal. But council decided to use the money to pay down existing debt and to borrow as needed down the road to pay the city's share of the subway and waterfront projects.
- Toronto Hydro Telecom: In 2008, following a mayor's fiscal panel review that urged the city to take a hard look at cashing in on some assets, council approved the sale of Hydro's telecom subsidiary. Of the proceeds, $120-million went to Toronto Hydro, while the city used its $75-million share to invest in repairs to its aging public housing.
- City street lights: In 2005, the city sold its street lamps to a subsidiary of Toronto Hydro Corp. for $60-million, freeing up funds to help balance the operating budget that year.