Controlled Corporation Financial Viability Assessments

What is a Municipally Controlled Corporation (MCC)?

An MCC is a corporation that is “spun out” of one or more local government authorities. Typically theses corporations focus on the provision of one or more utility services, such as water or sanitary services. As shareholders of the corporation, the local government authorities remain “connected” to these corporation. As such, the creation of these corporations is government by Control of Corporation Regulation (AR 284/2003) under the Municipal Government Act, RSA 2000 c. M-26.

The Application

As part of the municipality’s application to the Minister, the municipality must include, among other things: (1) the costs related to establishing the corporation, (2) the proposed value of assets of the corporation, (3) recent financial statements, (4) operating and capital budgets, and (5) a business plan, including cash flow projections for 3 years.

Our Involvement

CORVUS either works with the municipality to create an application that will succeed, or with Alberta Municipal Affairs to complete an in-depth review of the application, in particular a review of the financial viability of the proposed corporation.
In either case, CORVUS will identify the financial issues (if any) and make recommendations for strengthening the application. In doing so, CORVUS addresses the following key questions:

  • What are the various revenue requirements of the operation as deemed by the various cost inputs (operations, capital plans, existing debt, future debt, etc.)?
  • Based on the revenue requirements, what is the proposed full cost of water and wastewater services and rates?
  • The full cost rate structure will provide for the cost of existing and future infrastructure including the building of reserves to front end finance major future capital additions. Are the proposed full cost rates realistic? How do these rates compare with the rate strategy proposed by the applicant?
  • Are the proposed capital plans realistic? Will the proposed cost/rate structure produce sufficient reserves to finance the proposed capital plan?

To assist in addressing these questions, we have developed a proprietary financial viability model, that is based in part on our utility rate model. The following is a snapshot of the model’s control panel.