Long Term Plans

Backgrounder: Asset Optimization Review – Toronto Hydro Corporation and Toronto Parking Authority

November 24, 2016

This Backgrounder provides highlights of the report, Asset Optimization Review – Toronto Hydro Corporation and Toronto Parking Authority that is being considered by Executive Committee at its meeting of December 1, 2016.

Background

  • The City has undertaken an asset optimization study in relation to the City's investments in Toronto Hydro Corporation and Toronto Parking Authority as directed by City Council in June 2016.
  • The report summarizes the findings of the independent consultant and outlines options to maximize the City's investment in Toronto Hydro Corporation and the Toronto Parking Authority.
  • The City retained the services of Deloitte LLP to undertake the Asset Optimization Study.
  • Council adopted the Long-Term Financial Direction report at its meeting June 7. That report indicated that the City needs to develop a multi-year revenue strategy that examines ways it can optimize revenue generation from existing and new sources. It also recommended the development of a multi-year expenditure management plan and asset optimization plan.

Toronto Hydro Corporation

  • In 2016 the City budgeted Toronto Hydro Corporation (THC) dividend payments of $67.5 million and expects to receive $63.35 million by year end, based on 2015 net income.
  • On November 15, 2016, TCH advised that it intends to reduce dividend payments to $25 million annually beginning with the 2017 Budget in order to preserve capital and limit debt increases for its capital program.
  • The report recommends that the City consider an equity investment of $250 million to restore and enhance Toronto Hydro's capacity to pay dividends and to optimize the present value of the City's investment in THC.
  • In the event that the revenue options study "The City of Toronto's Immediate and Longer-Term Revenue Strategy Direction" which will be considered at Executive Committee on December 1 fails to result in a revenue strategy to begin to address the City's unfunded capital program, then a monetization of the City's equity in THC should be re-considered, combined with a strategy to mitigate significant transaction tax exposure.

Toronto Parking Authority

  • Toronto Parking Authority (TPA) is a public corporation owned by the City of Toronto. TPA fully funds its operations from revenues and makes significant contributions to the City's general revenues.
    • Currently, TPA has a revenue sharing agreement with the City in which it remits 75% of net revenue.
    • In 2016 the City will receive an estimated $47 million in revenue sharing dividend from the TPA.
  • The report recommends that the City retain its ownership of the Toronto Parking Authority under an enhanced net income scenario.
  • Financial Planning Division will be reporting back on the potential for increasing TPA's payout rate to the City be considered as part of the 2017 Budget process.
  • If the City were to increase its TPA net income sharing percentage from 75% to 85%, the City would receive an estimated additional amount of $6.3 million in 2017.
  • The report also identifies potential measures to increase TPA income including a review of the TPA plans for capital expansion through the City-wide Real Estate Review and a review of the TPA rate setting proves with a view to align future parking rates with market prices.


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Media contact: Wynna Brown, Strategic Communications, 416-392-8937, wbrown1@toronto.ca


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