The 800 million dollar question

The idea of putting Tbaytel up for sale is one that has been in the community for years. Proponents of the idea say that the sale of Tbaytel would rid the city of a potential liability and bring in a huge amount of cash to the city. People against the idea feel that selling would cause a huge increase in the city’s tax base (Tbaytel current subsidizes the tax base by 17 million or 12%) and that losing control would mean higher prices for consumers. Both sides have positives and negatives to them but I will look at what a potential sale of Tbaytel could mean for the city. Someone who works within the telecommunications industry believes that the city could fetch $800 million to $1 billion dollars for Tbaytel and its assets. Now these numbers are estimates and guesses but the $800 million is an interesting talking point.

So if we were to say that the sale has been completed; the government didn’t intervene in the sale and Tbaytel is now a private entity. Where do we spend the money and how do we go about spreading the wealth to the community. I believe that the city needs to look to the long term with this investment and take a page from Fort William First Nation and what they are doing with their land settlement claim money. A sudden investment of $800 million if not managed properly could easily be spent and gone in a matter of years. Making sure we have the right people in charge to make these decisions and involving the community are going to be incredibly important if we are too do this right.

If we were to sell Tbaytel we would lose an annual investment of $17 million dollars that are currently subsidizing the city budget. In order to reduce the burden on the city taxpayer some of the money would need to be used to pay down the city debt completely. Current the city debt stands around $180-$190 million dollars owed. Paying this off would allow the city to completely eliminate debt servicing charges and debt payments from its expenses. This means that we could reduce the burden of Tbaytel loss making the tax increase more manageable for the community. For ease of numbers sake we will say that the debt is $200 million which means that our total is now down to $600 million overall.

After the debt for me it gets a little murky on what we should do with the remaining money. We shouldn’t use it to subsidize our tax base to keep taxes low. We would simply burn through this money and then only delay the inevitable. We saw this with Mississauga who was forced to raise taxes 7% after burning through their reserve funds. I do believe that we should be setting aside a portion of this money to invest into our infrastructure and maintaining what we have. Roads, bridges, sewers, parks, sports facilities are all items that have been overlooked for years and are in desperate need of attention. If we were to set aside $100 million over 10 years over and above what we already spend we could effectively upgrade and maintain what we have. Making sure that fields like Chapples which are used by the Thunder Bay Chill aren’t unavailable for a majority of the season due to poor conditions. Managing effectively this money will be important to avoid the price increases that occurred with the marina. Of we throw a lot of money into a short period of time we may receive less then anticipated. If so this may need to be pushed back to a 15 or 20 year plan. We now have spent $300 million through this plan to invest in infrastructure and eliminate the debt.

With $500 million left it leave us with a lot of choices as to what we want to do with the money. I believe that if the sale of Tbaytel were to happen it should result in an improved quality of life for citizens in the community. The question then becomes how much money should we set aside and how should we be spending that money. I believe that $100 million over 10 years could be a fair number to not only the citizens of today but tomorrows taxpayers. $50 should be earmarked to increasing the size and scope of green spaces within the community. Investing in new playground equipment for children, bringing in new sports like Disc Golf, Cricket to the community and making these spaces enjoyable. The other $50 million should be earmarked for remediation of industrial land for future public use and removing dilapidated buildings in the community. These could include the industrial areas along the waterfront, removing grain elevators and old business/homes that are devaluing neighboring properties. After this additional investment into the community we are now down to $400 million in which to use.

This final $400 million should be split into two savings account where it can grow money through interest and benefit the community even more into the future. I would like to see $200 million go into the city reserve funds for future use and to help prop up the city’s reserves. This increase in reserves and a reduction in debt will increase the city’s credit rating and allow the city to take out loans at much lower interest rate. This will also allow the city some breathing room if the city goes over on snow removal in that budget year. Money in the reserve funds also grow interest which means the reserves will grow at a faster rate. The other $200 million should be put into a bank account where it cannot be touched for a 20 year period. This will allow the money to grow untouched for that period of time and increase the total amount available to the city in the future. When that 20 years is over there should be a restriction applied to the amount that can be taken out annually to protect from large project spending by the council members.

With this being said I have my own personal thoughts about selling Tbaytel. I believe that it is valuable asset to the community and is a good fit in our hands. Now it will be up to the council and community to decide if they want to sell the company or continue to hold onto it. I do believe however that the City of Thunder Bay needs to remove itself from Tbaytel’s annual contribution and allow the company to keep that money. With regards to the current dividend that the city is receiving from Tbaytel over and above that initial $17 million I think this should be up to the board. Successful companies provide a dividend to their shareholders when they are profitable and expanding. This money could continue to be pumped into a fund like ReNew Thunder Bay for projects such as the Event Center or Golf Links Expansion.

So this is what I believe we should do with the $800 million we got from a potential Tbaytel sell if we received it. What do you think we should do with the money?

Editors Note: The assessment value was provided by someone who works in the Telecommunication industry based on his assessment of the company. He didn’t have access to financial statements or asset values which would be necessary for a true costing of the company. This number was his belief.