City ramps up Tbaytel dividend
Thunder Bay’s city council has approved a slight bump to the dividend it receives from Tbaytel, ramping up the company’s annual contribution by $750,000 over four years.
The yearly dividend from the city-owned telecommunications company, currently set at $18 million, translates to a roughly 8.75 per cent reduction to the average resident’s municipal tax bill, city staff estimate.
The dividend policy was last updated in 2019, when the fixed dividend was raised from $17.5 million.
Under the revised policy, the annual fixed dividend will hold steady in 2022 and 2023, rise to $18.5 million in 2024, and then to $18.75 million in 2025.
The increase was set in consultation with company leadership, who endorsed the adjustment, said city treasurer Linda Evans.
“The proposed increase… is a positive sign for Tbaytel’s continued growth and reaffirms our commitment to the City of Thunder Bay and its ratepayers,” said Tbaytel CEO Dan Topatigh in a statement to TBNewswatch.
The tweaks to the policy were approved unanimously with no questions or debate at Monday night’s city council meeting.
The fixed dividend makes up the lion’s share of Tbaytel’s contribution, but the city also receives a performance dividend when the company exceeds its financial targets. The city took in over $21 million in total from its ownership in the company this year, for example.
When Tbaytel outperforms its financial plan, the city receives 25 per cent of net income above projections. The performance dividend amounted to roughly $570,000 in 2020 and $2.6 million in 2021.
Tbaytel’s board of directors can also issue special dividends to the city following annual reviews of its retained earnings and free cash generated.
Money from the performance and special dividends is transferred to the city’s Renew Thunder Bay reserve fund.
Of the $18 million fixed dividend, $17.75 million goes into the city’s operating budget, while $250,000 is directed to the capital reserve fund. That amount, carved out to help address shortfalls in infrastructure funding, will increase to $500,000 beginning in 2024.
If needed in 2022 and 2023, council authorized the city to instead divert the $250,000 into its stabilization reserve. The clause will kick in if the rainy day fund, which currently sits around $12 million, dips below $10 million.
The city projects it will have to draw $7 million from the stabilization reserve to cover pandemic-related revenue shortfalls and additional spending in 2022, if it does not receive new COVID-19 supports from provincial or federal governments.
There’s no indication so far that support will be forthcoming, said Evans, though she said the city will continue to advocate for it.
The next review of the Tbaytel dividend policy is set to occur in conjunction with the company’s third quarter update in 2023.
Previously known as Thunder Bay Telephone, the utility operated as a city department until 2004, when it was restructured as an arms-length city-owned corporation. – tbnewswatch.com
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Over the years, the City of Thunder Bay has received well over $200 million in free cash from the telephone company. Look around you. Can you see where all that money was spent?
I have always said that the TbayTel dividend should have been used to buy things or fund projects that would be considered “nice to have’ instead of ‘must haves”. “Must haves” should be funded through taxes.
Think of all of the recreation projects $200 million could have funded. Soccer plex? Two years TbayTel dividends and its paid off. Rec trails? We could have a hundred kilometers of them by now. This city could be a recreational wonderland.
But no. None of that will happen. Opportunity missed in order for politicians to get reelected by keep property taxes artificially low.
I still do not know why senior governments continue to give this city cash for projects when it has this giant revenue stream of free cash? Hard to claim poverty, yet we do.