The City of St. Albert will be helping to kick-start the regional transit organization by guaranteeing a $1.7-million loan, and fronting them the cash until the loan kicks in.
On Monday, St. Albert City Council approved backing the line of credit for the Edmonton Metropolitan Transit Services Commission (EMTSC).
The interim cash is expected to be paid back to the city by July, when the financing kicks in. Once that takes place, the city will act as a guarantor until the new organization can take over the line of credit, which could take several years.
Diane McMordie, director of finance for the City of St. Albert, said the plan was to always have the participating communities get the commission started financially.
“This is intended to be very short-term in nature and St. Albert is anticipating the return of this advance in the summer,” McMordie said.
“While several options were explored, including having each municipality front their share of anticipated costs, it was ultimately determined that having the EMTSC pursue an operating line of credit will provide them with the funds that they needed without requiring cash from each municipality,” McMordie said.
In total, the commission will be financing up to $5 million with an operating line of credit from TD Canada Trust and St. Albert is guaranteeing 34 per cent of the loan, which works out to $1.7 million. Edmonton will guarantee the rest.
The operating line of credit will be paid back through the commission's operating revenues over the next several years.
At this point, though, the commission has no revenue or assets, and the lender is requiring a guarantee on the loan, McMordie said.
Since St. Albert and Edmonton are the two largest participating municipalities on the project, to ease administrative burden, it was decided they would provide the guarantee.
“St. Albert would remain as a personal guarantor of the loan until such time as the commission has adequate revenues and or assets to support the (line of credit) independently,” McMordie said.
Coun. Wes Brodhead, who is the co-chair of the transit commission, said he appreciates that St. Albert and Edmonton, the biggest participants on the commission, “stepped up to the plate” to back the loan.
“Once you start hiring employees and hiring lawyers to write bylaws and those sorts of things there is a cash flow that's required, in this particular case in advance of operations of the transit commission,” Brodhead said.
Brodhead said the business model was always intended to be debt-financed for the first three-and-a-half years of operation.
“Now this loan here is probably (for) two months … so hopefully this all comes back to us with interest by the end of July,” Brodhead said.
Coun. Sheena Hughes wondered how confident the city was that they were going to get the money back from the loan, given that the commission is new.
McMordie said the business case fully supports revenues coming in from the commission to manage the operating line of credit until they get up and running.
“I don't personally have any concerns after reviewing the business case,” McMordie said.
Council voted unanimously to pass the loan guarantee and fronting the money to the commission.
The EMTSC is a non-profit organization that was officially formed in January 2021 by the province with the goal of building a regional transit system in the capital. By 2022 the commission plans to begin to roll out an integrated system in the region, which would improve transit options, eliminate duplicate services, and create cost savings for all eight municipalities on board.
