Mechanisms, Entities, Districts, and Authorities

MSA Legislative Framework 1.Internal Mechanisms –Departments, business units, other 2.External Mechanisms –Municipal entity Company Co-operative Trust Fund Other corporate entity Service utility –Other municipality –Organ of state –CBO or NGO –Other institution, entity, or person 3.Internal Service Districts 4.Multi-Jurisdictional Service Districts

Additional legislation 1.The foregoing represents only the choices under MFM Bill and Municipal Systems Act 2.Other menus are available to municipalities: NLT Transportation Act provides for Transport Authorities with province and municipalities Only Councillors may be appointed to Governing Body Not a single TA formed as problematic governance arrangements EDI anticipates REDS Governance and ownership arrangements not finalised National Health Bill provides for District Health Authority, with Exco members of health

“Internal Mechanisms“ MSA section 76(a) / most of MFM Bill Department or other administrative unit Any business unit operating Within the administration And under the control of council “any other component” of municipal administration Municipality creates these, can freely change them These have no independent legal personality – they are part of the municipality Key issues are about good management and control systems

“External Mechanisms“ MSA section 76(b) / MFM Bill Ch 8A Municipal entity Another municipality Organ of state CBO or NGO Any other institution, entity or person Company Co-operative Trust Fund Other corporate entity Service utility Where wholly owned, key issues are: accountability, control, and responsibility Where co-owned, same issues as w/ other external mechanisms These are truly external. Key issues: contracting and managing contracts Public-public Public-private

Typical Rationale Need to ringfence business or specific finances or activities Facilitates outside expertise (eg on board) Cuts red tape –More operational autonomy –Easier procurement arrangements –Higher salaries Balance between political accountability and autonomy

Municipal Entities general issues Conceptually: To what extent are these to be controlled by the municipality? To what extent autonomous? Accountability, control, and responsibility are related. Where do we want the line drawn? We should be consistent: –We say a muni “must exercise its ownership control” to assure compliance with legislation and agreements, but –We also say that they are independent contractors and that municipality is generally not liable

Municipal Entities wholly owned Company Co-operative Trust Fund Other corporate entity Service utility Issues: Does a municipality need this much choice in “external” entities, in addition to internal mechanisms? Why? How to lay financial governance requirements on top of existing corporate and cooperative governance requirements, trust and fund fiduciary requirements, etc? National legislation and case law define these This is new with Municipal Systems Act

Municipal entities co-owned Company Co-operative Trust Fund Other corporate entity Service utility Issues: Does a municipality ever need to co-own an entity? What governance, accountability, and responsibility issues with co-owned entities? Does it matter if co-owners are public or private? These can be co-owned, and partnerships and joint ventures can play similar roles Can this be co-owned?

Internal service districts MSA section 85 et seq. Issues: So long as these are part of the municipality, and have no independent existence, no special concerns Internal service districts need not have separate: legal personality Governing board budget Accounting and charging mechanism for assigning costs and benefits, special tariffs, etc. Community committee is consultative and advisory

Multi-jurisdictional service districts MSA section 87 et seq. Issues: What parts of the MFM Bill apply? Those related to municipalities? Those related to municipal entities? Those related to external mechanisms? What do we need for effective financial governance? MJSDs are new with Municipal Systems Act MJSDs are created by agreement of municipalities MJSD is not a juristic person, but governing body is MSA: ‘municipal finance legislation’ will apply These do not appear to be “internal” or “external” mechanisms, rather quasi-municipalities

Public Private Partnerships This term is used for many things Can take many forms, including: –Concession, franchise, service or management agreement (external mechanism with private party, in terms of MSA) –Co-ownership of entity (should we really ever allow this?) –Joint ventures and partnerships (a JV is deal-specific, a partnership can cover a large area) Issues: Does a municipality ever need to co-own an entity in order to have a successful PPP? Why? If we allow co-ownership of an entity, where do we draw the line? “Ownership control?” Majority ownership?

Financial Problems in Municipal Entities Responsibility for financial condition relates to overall perspective on accountability Where the financial condition of an entity threatens municipal financial health, municipality must act But when entity failing, and municipality is healthy, what outcome do we want? –Intervention, for the sake of others dealing with the entity? –Must council decide to either fix or dissolve?

Entity Financial Problems Recommendations Municipalities must assure that entities act responsibly, pay their bills on time, etc. Threshold for municipal intervention in entity much lower than for provincial intervention in municipality - entities are not democratic institutions Financial problems should generate Council review, and explicit decision to fix or dissolve No multi-jurisdictional entities or districts without clear and adequate provisions for unwinding

BIG PICTURE Do we want to offer fewer choices? Which ones? Is key difference between wholly owned and co-owned? Should there be higher hurdles for co- owned? Where do we strike the balance between accountability and independence?

RECOMMENDATIONS Entities: only allow companies and service utilities. Prohibit: –co-operatives, –trusts, –funds, –section 21 companies, –partnerships, and –joint ventures High hurdles for co-owned companies and MJSDs Favour accountability and control over independence