The topic of selling City of London assets has come up quite often in the last few years. People have discussed what it would mean to sell Budweiser Gardens, downtown’s crown jewel, home of the London Knights and London Lightning. Selling London Hydro has also been discussed twice in the last year or so, and overall I don’t think that’s an idea worth pursuing. Here’s why.
Budweiser Gardens and London Hydro are both terrific, and profitable, assets. Budweiser Gardens is already partly owned by other entities; the City of London is not its only shareholder. So control is already split there, which helps when new capital expenses arise. It means the City isn’t on the hook for everything.
On the other hand, London Hydro is wholly owned by the City, which means only the City (and its citizens) benefit from the dividend it distributes. Last year that was over $7 million, which would mean the City would have had to find an additional $7M this year to avoid a massive property tax, user fee, or some other kind of fee hike.
That said, I’m not against looking what the City’s options are. Sure, let’s find out whether there are parties interesting in buying London Hydro. But let’s also:
- See if there are suitors interested in purchasing a minority stake
- Look at merging with another, likely smaller, utility
- Outright purchasing another utility
Having another company purchase a portion of London Hydro may give us the best of both worlds: the City gets a cash infusion, perhaps $100 million for 33% of London Hydro, but the City and its citizens retain majority control.
Merging with another utility would achieve cost savings in reducing any duplicate positions, infrastructure, etc. So expenses could be lower, while revenues increase, leaving majority control with the City assuming London Hydro merges with a smaller utility. Purchasing a smaller utility would also achieve the same, but 100% of ownership would stay in London, whereas that wouldn’t happen in a merger.
On the other hand, there is at least one type of asset the City should offload: its golf courses. This was first bandied about two years ago, and then again last winter during budget season. River Road in particular has not done well overall, and it’s no wonder. London and area is chock full of terrific golf courses, including some nearby in Delaware, Komoka, Melrose, and even Strathroy. Even the middle of the road options in this case could have turned out to be disastrous, potentially losing the city another $500,000 in a single year. How many small businesses lose $500K and survive? Not many, but when you’re subsidized by a large tax base it’s much easier. When it looked all but certain that the city-owned golf courses would be shut down after letting them have one more year to turn things around, last year there was terrific weather and people flocked to play, so they made a bit of money. Not enough, however, to warrant taking money away from local businesses, in my opinion. The City shouldn’t be in the golf course market when there is plenty of competition from cheap-afternoon-out to luxury-experience.
And so, my point is, every situation has to be looked at individually. Adapting a “sell it all” mentality doesn’t do anyone any good, and blinds us to what good some of the City’s assets do. And on the other side of the spectrum, adopting a “keep it all” mentality also blinds us to the money pits some City assets can be, and certainly are, and where the City shouldn’t be extending its reach. Arena, hydro? Good. We don’t compete with private businesses in those markets, and overall they do the City a great service. Golf courses? Bad. Lots of competition, no net benefit to the City or its citizens; sell them.