The City of North Vancouver has agreed to open its pockets to loan utility company Lonsdale Energy Corporation upwards of $12 million.
City council voted unanimously Dec. 16 to loan the money to the municipal heat utility, with $500,000 to be used as working capital.
Council also agreed to convert money LEC currently owes to the city into a five-year loan, but changing LEC's proposed 0.3 per cent interest rate to 2.1 percent.
"The loan that we are doing right now is regarding construction of the distribution system since 2009, so there is work I think maybe around $1 million, that was for 2009 and then there's work from 2010, 2011, 2012 (and) 2013," said Ben Themens, director of LEC.
"The $12 million loan also includes the construction program of 2014, so that money is not spent or is not loaned at this point."
The expectation was that money lent to the LEC in its early years would be quickly reimbursed to the city, said Themens.
"We were anticipating the loan of the FCM (Federation of Canadian Municipalities) to come in 2012. It did come in," he said. "However, by that time the pace of construction was so high that we realized that we couldn't pay it (the loan from the city) at that point because we needed the money to continue the pace of construction."
Themens said this is why the LEC is currently asking for a loan, but some councillors were not convinced.
Coun. Pam Bookham said she believed the LEC should function as a financially sustainable longterm entity.
"I recognize the fact that being a municipally-owned utility that it does not, in my view, have to function the way a private corporation would with responsibilities to shareholders whose main motive is profit," said Bookham.
"Our motivation is not profit but it is financial sustainability and environmental responsibility and that to me makes LEC different from other corporations."
According to its website, LEC "currently provides heat to 42 buildings, totaling more than 3.5 million square feet of building area, including 2,700 residential units, a 106-room hotel, numerous offices and commercial outlets and various municipal buildings."
Bookham added that although she was supportive of LEC, she was concerned about the corporation's financial future.
"I don't feel that the response about future rapid growth, which has clearly been the justification for the request for additional money, I don't see how this is going to end," she said.
Coun. Guy Heywood expressed a similar sentiment, stating his feelings for the LEC were "fundamentally neutral and somewhat indifferent.
"There are other capital investments that would serve the whole city - create a true public good as opposed to creating a specialized utility that has 40 customers," said Heywood.
Heywood said putting more efforts into things such as the reconstruction of the Harry Jerome Recreation Centre would serve the city's interests better.
"We are spending not just the money but a huge amount of city focus. To step into the utility business, we should be doing that if there's a failure in the market, if the service was not going to be provided otherwise or for compelling environmental reasons," he said. "We're doing it for compelling efficiency reasons, but they are not environmental reasons."
But Mayor Darrell disagreed, stating that the LEC was one of the great assets of the city and an accomplishment of his mayoral career.
"It is something that people come from all around the world to see how well we've been doing," said Mussatto. "Our costs for district energy are the lowest of all the ones compared in British Columbia, so we have a very low cost to our customer."
He said the LEC has been very successful, garnering attention from other utility companies.
"Let's not forget what we've done here, we've got a very high quality energy utility that has been seen as a white elephant," said Mussatto.
"Then you know what? I can tell you there's a huge market for white elephants out there because every energy utility around would love to buy and operate Lonsdale Energy Corporation. They see it as a great asset."
The LEC will provide an annual report on balance and payments of the principal and interest of the loan, as well as construction activities impacting borrowing and loan repayment.
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