Public meeting outlines need for Bruce Telecom to become a municipal corporation

Bruce Telecom must become a municipal services corporation in order to survive in the highly-competitive, fast-paced, quickly-changing telecommunications industry.

That's the word from a panel at the public meeting held last night (Oct. 27), at the Davidson Centre in Kincardine.

About 40 people attended the meeting, to hear the proposal to convert the company, owned by the Municipality of Kincardine, to a municipal services corporation from the current municipal services board.

On the panel, were Kincardine mayor Anne Eadie, Bruce Telecom board chairperson Holly Robinson, and Mark Rodger, legal representative, of Borden Ladner Gervais. John Divinski of 98 the Beach, was the moderator.

Taking the microphone first, Eadie stated emphatically that Bruce Telecom is not for sale. The goal now is to ensure the long-time viability of the company, she said, and set it up for sustainability and growth which will benefit the municipality and the taxpayers.

Eadie outlined the constraints and restrictions of the current governance model which is more appropriate for local government than it is for running a company like Bruce Telecom.

Robinson then outlined the challenges the company faces under the current governance system which make it difficult to compete in the quickly-evolving telecommunications industry.

One of the major hurdles, she said, is that Bruce Telecom must invest millions of dollars into the business, but the municipality is in no position to fund this investment. "We have a growth mandate, and we must expand our infrastructure in order to compete. Technology is constantly changing and we need to evolve with it."

Rodger said Bruce Telecom is ready to pursue its growth mandate, and along with the municipality, has been considering options to do this.

He said the status quo is not really an option, unless the goal is to harvest the asset and watch it disappear. The option to exit the business has been rejected by council.

So, for the option of a growth strategy to work, the company must change, said Rodger. "We must provide Bruce Telecom with flexibility, allow it to obtain new financing separate from the municipality, and remove the barriers to its ability to grow."

He said the provincial Municipal Act changed in 2006, permitting municipal services corporations. In late 2015, Kincardine council directed the Bruce Telecom board to consider this option. Since then, the company, with Rodger's assistance, has worked through several legal issues and tax issues.

The advantages of a corporation, said Rodger, is more autonomy for Bruce Telecom, so it is no longer considered an agent or a department of the municipality; the board of directors can govern, and senior management can plan and operate the business, outside of political issues and process; and the debts and financing belong to the corporation, not the municipality.

Rodger said there are several steps yet for the conversion to take place. The meeting last night was to provide information to the public. Council must now adopt a business case study, and an asset transfer policy, then seek public consultation on the corporation proposal. It must also obtain a formal tax opinion to see if Bruce Telecom's status would remain as a tax-free corporation, create a holding company and an operating company, and seek licence approvals.

"This process is going to take a few months," said Rodger. "Once we receive a tax ruling, we can set up another public meeting, and we can expect the conversion to Bruce Telecom Inc., to take place next spring.

During a question-and-answer session, Dorne Fitzsimmons asked where the public accountability exists with a municipal services corporation?

"The board of directors is appointed by the municipal council as sole shareholder of the company," said Rodger. "There will also be a shareholder's agreement between the Municipality of Kincardine and Bruce Telecom Inc., and there will be an annual general meeting which is a great opportunity for the public and the municipality to hold the company accountable."

Rick Stow of myFM Radio asked if the approximate $750,000 is the final cost for the failed arbitration between the municipality and Eastlink (Bragg Communications), part of the aborted sale of Bruce Telecom two years ago. He also asked if that municipal debt will go on the 2016 budget or the 2017 budget.

Eadie said there is no final figure yet for the arbitration cost, and she cannot comment on the arbitration, itself. However, she said the cost will be borne, partially in 2016 and in 2017.

In response to a question of clarification, Eadie said council agreed in May to proceed with arbitration, but the municipality lost.

Fitzsimmons asked if the municipality objected to keeping the arbitration quiet.

"We had no choice," said Eadie. "It went to the arbitrator and it was his decision that we cannot make the information public. That was a condition of the settlement."

In response to a number of questions about ownership of the corporation, Rodger said the municipality would own 100 per cent of the shares in the new municipal services corporation, which includes all assets in Bruce Telecom.

"But we'll have a new council in two years," said Stew Neely, "what if they decide to sell it?"

"That's always a possibility," said Rodger, "and council could do so."

"But they would just sell the shares," said Ken Knight.

"Yes, and it could be a competitive process," said Rodger.

Barry Schmidt asked if there could be other shareholders in the corporation besides the Municipality of Kincardine?

"It's possible," said Rodger, "but if the Municipality of Kincardine sells off more than 10 per cent to other municipalities or individuals, it could change the company's tax status."

Neely asked what the cost is for the conversion?

Eadie said there is no definite figure, but the estimate is between $100,000 and $150,000. Rodger said about half that cost is being spent to obtain the tax ruling on the new corporation, but if it remains tax-free, that means millions of dollars in savings to the company.

When asked what the conversion will mean to the average Bruce Telecom customer and the average Kincardine taxpayer, Robinson said for the customer, it means improved services, and a company that can compete in the industry with its constantly-changing technology. "We're looking to move into other regions and enhancing our services in other areas."

Rodger said that for the taxpayer, if Bruce Telecom succeeds, that means increased value for the asset and increased dividends for the municipality.

Eadie said another public meeting will be scheduled once council receives a tax ruling on the municipal services corporation.

Rodger said if that tax ruling is not favourable, meaning it does not allow Bruce Telecom to maintain a tax-free status, then the issue would go back to council to consider the conversion to a taxable corporation.