By Chris Pickup
Haldimand council in committee spent considerable time last Tuesday listening to Karen General, the county’s General Manager of Corporate Services, explain the Haldimand Hydro Legacy Fund Policy.
Created from the net sale proceeds of $72.4 million from the sale of Haldimand Hydro to Hydro One in June 30, 2015, council passed a resolution to preserve the principal proceeds in perpetuity.
The governing bylaw for the Fund cannot be overridden or amended easily, General said. But as no council can fetter the rights of a future council to run the operations of the municipality as it deems necessary, there is a risk this bylaw could be repealed, amended or overridden. Staff have therefore incorporated what General terms a unique principle.
This or any future council can only spend the income earned from investing the capital, unless it goes through a very onerous process including public hearings that do not require registration as a delegate.
Council must approve all transactions affecting the Hydro Legacy fund via resolution and the treasurer must monitor to ensure all transactions comply with the Policy. Any that don’t must first be vetted through a public hearing process, with at least four weeks notice and full details.
A $7 million litigation allowance has been set aside from the capital to indemnify Hydro One from any claims related to 2015. The fund is not indexed for inflation and a statute of limitations applies. $150K of that has been spent to date. Any surplus funds can be reallocated to the protected principal.
In April 2016 the county revised its investment strategy based on a consolidated and diversified portfolio. The hydro capital funds are pooled with other investments at the corporate level. There is currently $171 million invested, 46% of which is fixed earnings and 54% growth. They are presently earning 5%.
An annual $750,000 from the Hydro Legacy Reserve Fund will form some of the seed money for the new Growing Communities Reserve Fund.
Four types of allowable uses of investment earnings are set out in the Policy, which recommends approval through the annual budget.
Priority #1 is to annually index the net principal so there is no erosion due to inflation.
Priority #2: cap the investment earnings at 60% after inflation, and use for capital works. The uses are nebulous, General said, and up to the council of the day, but “should be for the big stuff” requiring major capital expenditures, and benefit the entire county.
Priority #3: $300K annually depending on earnings towards tax relief by reducing the annual operating levy.
Priority #4: A strategic economic initiative that should have jobs or assessment benefit.
“It’s important the public becomes more aware of this fund,” General said. “The county must ensure public accountability, transparency and awareness of the Hydro Legacy Fund activities.”
She recommends an annual report to council on its financial position “with substantial details”, a dedicated section to the Hydro Legacy Fund on the county website with extensive information, as well as other publicity such as social media, newspapers, and specific signage at capital project locations.