Download Schedule 2 – Phase 1 Servicing for Innisfil Heights

COUNTY OF SIMCOE
To:
ECONOMIC DEVELOPMENT SUB-COMMITTEE
Section:
Matters for Consideration
Item Number:
EDS 16-018
Meeting Date:
May 10, 2016
Subject:
Innisfil Heights Servicing – Request for Support
Recommendation:
THAT Item EDS 16-018 regarding the request from the Town of Innisfil for the County’s financial
support in servicing of the Innisfil Heights strategic employment area, be received;
AND THAT Committee recommend a direction on what, if any, financial support option outlined in Item
EDS 16-018 is desirable;
AND THAT should Option 3 be selected, that Committee recommend further direction as to which long
term financing solution staff should work toward;
AND THAT should an equity option be selected, staff be further directed to investigate options for
County ownership to facilitate investment in this type of strategic initiative or service;
AND THAT the Warden and CAO continue to investigate further opportunities for strategic regional
economic investment and servicing solutions with member municipalities at their municipal meetings;
AND THAT staff report back to County Council as this work progresses for further direction.
Executive Summary:
At its meeting of April 12, 2016, the Economic Development Sub-Committee received a letter and
delegation from the Town of Innisfil, requesting that the County consider providing financial assistance
so that the Town could move forward with servicing of Innisfil Heights, identified in the Provincial
Growth Plan as a Strategic Employment Area (see Schedule 1). Provision of servicing to open up these
lands could be a significant economic driver for the County. This report outlines options to provide
financial support to Innisfil, recognizing that there may potentially be other opportunities to advance
economic growth elsewhere in the County, and seeks Council direction as to how to proceed.
May 10, 2016
Economic Development Sub-Committee EDS 16-018
2
Background:
Innisfil Heights Employment Area
Centred on the Highway 400 / Innisfil Beach Road interchange, Innisfil Heights is designated in the
County’s Official Plan as one of four Strategic Settlement Employment Areas. These areas are
specifically recognized in the Provincial Growth Plan for the Greater Golden Horseshoe as key
employment areas necessary to provide jobs and economic prosperity to the Simcoe Sub-area. It is
anticipated that Innisfil Heights will have the potential for 2,700 new jobs by 2031 plus additional spinoff
employment.
Water and Wastewater Servicing
The Town of Innisfil has been attempting to provide municipal water and wastewater servicing to Innisfil
Heights for several years and has had periodic discussions with the County to assist with moving the
initiative forward. A comprehensive Water and Wastewater Master Servicing Plan was completed in
2012 by the Town which identified that the 20 year requirement for water and wastewater servicing was
in the order of $200 Million, exceeding the Town’s debt limit as set out in the Municipal Act. Without a
cohesive developer group to provide upfront financing, Innisfil retained PricewaterhouseCoopers LLP
(PWC) to analyze the situation and recommend the best way to move forward.
PWC recommended that the town consider adoption of the Municipal Services Corporation (MSC)
structure and the Utility Model for water and wastewater. They reported that the MSC structure allows
the corporation to secure debt and/or engage in partnerships to fund the capital program that would not
be possible given the constraints of the Town. And that the MSC allows the use of a utility financing
model (similar to that used by electrical utilities) that finances debt based on future rate revenue.
Approving this recommendation, the town created InnServices Utilities Inc. and transferred all water
and wastewater assets to the company which is now responsible for all new servicing and capital
expansion. Town staff have indicated that upon creation of InnServices, the Town of Innisfil seeded the
municipal corporation with $25M to be used for other works commencing in 2016 that include new
linear sanitary & water main piping, sanitary pump station upgrades, water booster station upgrades
and water treatment plant upgrades.
The Town is considering a phased approach to servicing. The first phase of servicing would provide
trunk water and wastewater servicing to the area. Schedule 2 shows the first phase of servicing needs.
The RFP for this phase is scheduled to be awarded in August 2016 with design and approvals in
2016/17, construction in 2017/18 and operation commencing in 2018. The total cost of the first phase
of servicing is estimated at $57.7 Million.
Subsequent phases of the servicing improvements will include connection of the existing privately
serviced area to the municipal system, provision of services to the entire development area, and
expansion of water and wastewater treatment capacity. The long range (20 year) servicing build out is
expected to cost in the order of $200 Million.
Request for Financial Assistance
The MSC has had preliminary discussions with lending institutions, and should be able to obtain
financing; however, they are seeking a more expedited and potentially lower cost alternative in order to
SRT - Rev 2 – August 2013
May 10, 2016
Economic Development Sub-Committee EDS 16-018
3
meet desired timelines and complete the first phase of servicing by 2018. Once the first phase of
servicing is complete, this will encourage businesses to move into the area, generate revenues and
development charges, and facilitate the build out of the remaining lands.
The Town has requested that the County consider two potential options for financial assistance:
1. Provision of an interest free loan with repayment terms that follow the rate of development
charge payment in Innisfil Heights; or
2. Purchase of an equity share in InnServices
In discussion with Town staff, a request has been made for financing of the first phase of servicing work
of $57.7 Million.
Financing Options
Based on Council’s support in principal of Innisfil’s initial request for financial assistance, staff provide a
review of considerations for the two suggested financing options plus a potential third interim option.
1. Long Term Loan
Provision of an interest free loan with repayment terms that follow the rate of development charge
payment in Innisfil Heights
Considerations:
 The development of the Innisfil Heights Employment Area will likely take 20 to 30 years so a
loan will need to be structured over or beyond this period.
 Basing the repayment terms on the rate of development will require a detailed long term
agreement to be drawn up with provisions for a variable or modifiable term and payback
schedule.
 Payback starting after 5 years and completing in 30 years with potential interest cost between
1.5% and 3% would result in interest expense of between $11M and $21M.
 Loans provide no control or involvement beyond the loan agreement.
 Default provisions will be difficult to articulate given variable nature of terms.
 The County has typically not provided loans and could set a precedent for other municipalities
seeking funds for any number of locally significant projects.
2. Equity Investment
Purchase of an equity share of InnServices Corporation.
Considerations:
 There is no direct financial payback unless dividends are provided at a future time.
 Provides the County a more active role in the development of Innisfil Heights through
representation on InnServices’ Board of Directors.
 Potential for sharing expertise as a partner.
 The County could also assist with attraction of investors and businesses to the area through
existing relationships and partnerships.
 Company valuation to determine share of company will need to be worked out.
 Governance terms will need to be agreed to.
 Recognizing that there may be other opportunities within the County where an up-front
investment or partnership could unlock significant economic growth, an MSC owned by the
County could be considered to facilitate this investment and allow for additional partnerships.
SRT - Rev 2 – August 2013
May 10, 2016
Economic Development Sub-Committee EDS 16-018
4
3. Short-term Interim Loan
Recognizing that either of the prior options will take significant time to complete agreements, an interim
option is to provide a short term interest free loan for a period of 2 years (with a potential one year
extension) to allow a long term solution to be worked out. The County would provide a facility from
which the Town/MSC could draw upon over the next two years during construction. Then the loan can
be converted into one of the long term options or terminated if agreement is not reached.
Considerations:
 Can be put in place quickly with simple expiration terms.
 Allows for Innisfil to proceed and meet construction timing.
 Limits investment risk if agreement by either side cannot be reached.
Summary and Recommendation
The Innisfil Heights Strategic Employment Area represents a significant potential economic driver for
the County of Simcoe. The Town of Innisfil has requested financial assistance from the County in order
to meet desired timelines, lower financing costs and potentially share expertise to move this initiative
forward.
Based on Council’s support in principal of Innisfil’s request for financial assistance, staff provided the
following options for consideration:
1) Provision of an interest free $57.7M loan with repayment terms that follow the rate of development
charge payment in Innisfil Heights
2) Investment of $57.7M to purchase an equity share of InnServices Corporation
3) Short-term interim $57.7M loan with the intent to lead to long term financing.
Given the complexity and time required to complete either option 1 or 2, staff recommends that should
Council wish to move forward with providing financial assistance to Innisfil that option 3 be utilized.
Further, should option 3 be selected, staff requests direction as to which long term financing solution
staff should ultimately work toward.
This initiative again demonstrates the potential for coordination and partnership which the County could
have with member municipalities to further the economic and strategic development of the region. Staff
suggests that Council consider enabling further investigation into other opportunities by requesting the
Warden and CAO to continue to discuss the potential for strategic regional economic investment and
servicing solutions at their municipal meetings. Staff will also incorporate this philosophy into some of
the existing Council directed reports that are forthcoming.
Financial and Resource Implications:
External financing will be required for the financial support requested. Alternatives include short term
financing or debentures from Infrastructure Ontario and other financial institutions. Current borrowing
rates available from Infrastructure Ontario range from 1.5% to 3.5% depending on the term and type of
financing. Financing alternatives will be provided to Council for approval. Costs associated with the
financing option selected will be included in future budgets.
SRT - Rev 2 – August 2013
May 10, 2016
Economic Development Sub-Committee EDS 16-018
Relationship to Corporate Strategies:
This Item supports the following Strategic Directions:
 Growth related service delivery
 Economic and destination development
Reference Documents:
None
Attachments:
Schedule 1 – Request from Town of Innisfil
Schedule 1 to
EDS 16-018.pdf
Schedule 2 – Phase 1 Servicing for Innisfil Heights
Schedule 2 to
EDS 16-018.pdf
Prepared By:
Debbie Korolnek, General Manager, Engineering, Planning and Environment
Trevor Wilcox, General Manager, Corporate Performance
Approvals:
Date
Mark Aitken, Chief Administrative Officer
May 3, 2016
SRT - Rev 2 – August 2013
5