Tax group urges power plant sale
The Canadian Taxpayers Federation is renewing its stance that the City of Medicine Hat should get out of the power generation business as the city considers a sale of the 110-year-old enterprise.
The fiscally conservative lobby group first called for the city to divest business units this summer as council members defended a critique of its expense and revenue.
On the other hand, some economists state that in a “whole cost comparison,” private-sector ownership of the generating station would leave local citizens at an overall disadvantage.
CTF Alberta director Franco Terrazzano told the News this week the private sector could operate more efficiently than government, and Hatters should support a sale.
“Let the city focus on potholes and roads and let business focus on business,” he said.“It’s not the job of governments to expose taxpayers to risks.”
In January, the city utility department said it would evaluate “strategic partnerships” with the private sector, including the sale of the power plant and longterm agreement on rates with the city-retained power grid.
Elected officials have described it as risk management, getting maximum value for the plant’s physical assets and contracts, and investing that money to earn a more stable return for city coffers.
That is only half the equation, said economist Mark Anielski, a business consultant and former member of the province’s public audit committee. He said any sale of a public asset should include a “whole cost” analysis, including the future costs to consumers and less tangible assets like economic attraction and reputation.
“There is always push for privatization, which by definition pays the shareholders first,” he said.
“There should be a side-by-side analysis that shows benefits, cost of amortization, all that, but very seldom does this happen.”
He said governments have access to much lower borrowing costs than the private sector, the city does not pay income tax on revenue earned on internal sales, and has control over its fees, rates of return, or profit.
These all affect business plans, and in the private sector are passed on to consumers.
Terrazzano claims governments in general have a poor track record when compared to private sector operations.
“You have to go with the record that’s proven,” he said, adding he’s watched the situation from afar with interest. “(A sale) is certainly a complex issue ... The city needs to do its research and make a sale transparent, and get the biggest bang for their buck (in a sale).”
The CTF led the call for the province to force a referendum in 2018 on the City of Calgary’s bid to host the Winter Olympics.
He said the CTF’s position is the power plant should be sold, but if council decides otherwise, a referendum calling for a sale should be held.
Anielski said the public, as ultimate owners of a government operation, should have wide access to financial details of the operation, and play a substantial role in decision making as they would in a co-operative ownership model.
But, that’s the responsibility of the city as operator, but he felt generally that government did a poor job of engaging citizens about the worth of public ownership.
“It’s not enough to say, ‘we’re the grandfathered power company that’s been around forever and are doing a good job,” Anielski said. “The relationship with customers is an asset that needs to be tended.”