Skip to content

Municipal corporation could help town borrow more money: Town of Olds

Town officials earlier called on the Olds Institute to look for ways to reduce or eliminate debt it had acquired on behalf of Olds Fibre Ltd.
mvt Olds town office-2
File photo/MVP Staff

OLDS — Town officials say a decision to turn consolidate Olds Institute (OI), Olds Fibre Ltd. (OFL), O-NET and other assets into a municipally-owned corporation will improve their ability to borrow money.

They previously cited $14 million debt racked up on behalf of OFL’s Olds Connected Community Network (OCCN) and a $4 million line of credit as a concern for the town because that debt “placed significant constraint on current and long-term planning for the town of Olds.”

In an email, The Albertan asked town officials how consolidating OI into a municipal corporation would solve that debt problem. 

“Doesn't the debt remain, whether the assets are owned by OI/Olds Fibre Ltd. or the new municipally owned corporation,” the email asked.

In reply, town officials said “consolidation of assets, operations, revenues and debts into a single municipally-controlled corporation does not in and of itself solve the town’s debt limit issues.

“It does, however, substantially reduce the existing complications of split of ownership of assets between OI and OFL, and it does provide many more options for how to capitalize and finance O-NET going forward. 

“One main advantage is that a municipally-controlled corporation can borrow on its own, and as a business enterprise providing services to the public these would not be considered debts of the town or included within the Town total debt calculation. 

“By consolidating all assets and revenues, the municipally-controlled corporation becomes well capitalized, and on a better footing for financing its own operations and reducing reliance upon the town in the near-term and the long-term.”

Local businessman and former OFL board member Joe Gustafson doesn’t get the reasoning behind the town’s decision.

“They’re saying it inhibits the town’s ability to do stuff. Well, I don’t understand that," he said during an interview.

“It’s either an asset or a debt. And we know it’s an asset and we know that it doesn’t impact the borrowing power of the community, so the whole process makes no sense.”

Town officials said they decided to have the assets consolidated and turned into a municipally-owned corporation when efforts to sell those assets to reduce or eliminate the debt didn’t work.

However, they say things may be different now.

“While the OCCN and O-NET concept was well ahead of its time, interest by other municipalities in fibre networks and services has caught up and while too early to tell, this does offer additional opportunities for investment," a town email says. 

“All of which have indicated to the town that restructuring the town’s investment through a municipally-controlled corporation simply makes the best sense, both now and for the future.”

In May 2020, the town and OI entered into a forbearance agreement calling on OI to find a way to repay or reduce the debt. 

Gustafson said in response, the OI board set up a committee that reached out to companies to see if they were interested in acquiring some or all of O-NET and its assets. He said about 20 indicated at least some interest.

Gustafson said the forbearance agreement appeared to be at least part of the reason those companies were scared off, despite the fact he said some town officials claimed it had no impact.

“Well, it does change how you look at a company. It changes how you look at a house for sale if it’s in forbearance from the bank, which is basically what the bank said.

“(It said) ‘we’re putting you into forbearance which means that we are going to curtail your activities.’ 

“That implies negative connotations. Meant or not meant, doesn’t matter. It implies that,” Gustafson said.

“So of course, these companies are looking at O-NET and they’re looking at it now with a very critical eye.”

As a result, he said, rather than negotiating from a position of power OI, through the committee, was “sort of in the beggar’s seat,” in effect saying, ‘we need to acquire money from you to remove this debt.’ 

"It doesn’t make any sense. The thing just keeps going around in my head saying, ‘what is this?’”

 



Doug Collie

About the Author: Doug Collie

Read more



Comments