By COLLIN GALLANT on January 14, 2021.
A new investment policy could see the city invest directly in private businesses with an eye to earn returns, spur tax assessment growth, boost utility sales or further economic diversification, a city committee heard on Tuesday.
Administrators told the corporate services committee that many municipalities are seeking new private investment and to create jobs, and Medicine Hat should have more to offer alongside often repeated municipal resources, such as land and utilities.
“These are tremendous resources that we have to leverage economic growth,” said division director Dennis Egert. “This (policy) would also leverage the strength of our balance sheet and investment portfolio.”
Under the plan, up to five per cent of city holdings could be dedicated, equating to a figure of up to $23 million considering the size of the current portfolio, with private placements in companies doing business in the city or region.
If approved at the Jan. 18 council meeting, staff would develop a system to determine net gain to the city, including direct income but also tax or utility revenue.
Investments could take a variety of forms, including secured bonds, limited equity stake with profit sharing, or a full joint venture, or other arrangements, like buying a building as part of a leaseback arrangement.
“Let’s face it, every city in Canada, in the world, is ‘open for business,” said Coun. Darren Hirsch, likening it to expanding a tackle box when fishing for new business investment.
“I’m pretty confident in this … drive city (investment) revenue and help the economy of Medicine Hat.
Coun. Brian Varga said the program could make the difference for not only attracting new business but helping existing businesses.
Chair Coun. Robert Dumanowski said the effort would follow several moves by the city to diversify its investments. He says residents have long called for the city to do more to bolster job creation, but the effort must make sense and be transparent.
“If there’s a sound business case, they’re probably coming anyway,” he said of potential investors. “This has to be sound business, and not just because we want something whether it will work or not.”
Egert said the goal of agreements drawn up with private companies would be to limit city participation in the business, or liabilities like guaranteeing assets or other loans, and would be viewed as passive investments.
If approved, finance officials would begin developing criteria, but also say that proposals would be evaluated on a case by case basis.
Overarching policies would be created to ensure “prudent” investments, as well as provide exit clauses and keep the funds diversified.
In terms of approval, straight ahead investments could be enacted on the authority of the city’s administrative committee, made up of top officials and the mayor. Council would approve measures if grants or other concessions are included.
Determining return on investment would include direct income as well as consideration for increased tax revenue, utility sales, or job creation, said Egert.
That could give the city greater leverage when incentives are offered.
In 2018, council approved up to $6.6 million in waived developer’s fees to Aurora Cannabis, which promised more than 300 well-paying jobs in the Aurora Sun Greenhouse.
That partially built project remains on hiatus nearly three years later, though administrators say they are confident the construction and any potential use of the facility will be a net benefit to the local economy.