Committee of the Whole
	TO:	Mayor and Members of Council
	FROM:	Andy Taylor, Commissioner, Corporate Services
	PREPARED BY:	Barb Cribbett, Treasurer
	DATE OF MEETING:	January 18, 2005
	SUBJECT:	Powerstream Promissory Note – Payment Intent

RECOMMENDATION:

THAT the attached letter stating that it is not the intent of the Corporation of the Town of Markham to demand accelerated payment of the PowerStream promissory note in accordance with section 3 of the “Amended and Restated Promissory Note” dated June 1, 2004 within a year of the date of the letter be approved by Council.

PURPOSE:

To confirm that it is not Council’s intention to accelerate payment of the promissory note from PowerStream Inc. within the next year, thereby allowing the $67.866 million owing to the Town of Markham to be classified as a long term liability , rather than a current liability on PowerStream’s 2004 Financial Statements.

BACKGROUND:

The Town of Markham currently holds promissory notes from PowerStream Inc. for $67.866 million. The terms of “Acceleration” for these promissory notes state that the Town of Markham can demand repayment of the notes within 90 days of written notice to PowerStream Inc.

Staff have been advised by John Glicksman, Executive Vice-President and Chief Financial Officer of PowerStream Inc. that Deloitte and Touche, auditors for Powerstream have indicated that the current wording in the promissory notes regarding accelerating repayment to the Town of Markham and the City of Vaughan would result in the total amount of the promissory notes being classified as a current liability. The auditors have requested a letter from both the Town of Markham and the City of Vaughan indicating that it is not the intent of the respective Councils to demand accelerated repayment within a one year period, thereby allowing the promissory notes to be classified as long term debt. The Town of Markham, in April 2003 amended the promissory notes from Markham Energy Corp. and Markham District Energy Inc. to reflect a 367 day demand period to achieve the same purpose, the classification of these promissory notes owed to the Town of Markham as long term debt, rather than a current liability payable within a one year period.

OPTIONS/DISCUSSION:

Classifying the promissory notes as current liabilities would give the impression to the public that the Town of Markham may intend to ask for repayment within a year. The working capital calculation would also be negatively affected, as deducting current liabilities that include the promissory notes from current assets would result in a negative ratio.

FINANCIAL CONSIDERATIONS:

This is primarily an issue of presentation on the financial statements. By issuing the proposed letter of intent, the promissory notes can be reflected as long term liabilities (not due in the current year), which will not negatively affect the working capital. The letter of intent is not binding, but will provide the auditors with some assurance of Council’s intent, allowing the classification of the promissory notes as long term debt.

Barb Cribbett, Treasurer

Andy Taylor, Commissioner, Corporate Services

Q:\Finance and Administration\Finance\SHARED\2005COW Council\0501 Powerstream Promissory Note - Payment Intent.doc