City of Powell River elected officials will be considering approving loans to two of its development corporations at upcoming council meetings.
One of the loans is for about $1.6 million to Powell River Waterfront Development Corporation (PRWDC) to purchase Catalyst Paper Corporation’s shares in PRSC Limited Partnership and PRSC Land Development Corporation.
The second loan is for $140,000 to the Powell River Power Development Corporation (PRPDC), for the Freda Creek run-of-river project.
PRWDC, established in 2003, entered into a limited liability partnership with Tla’amin (Sliammon) First Nation and Catalyst Paper Corporation in 2006 to form PRSC, which purchased 325 hectares (805 acres) from Catalyst in 2007, property not required for local mill operations.
Catalyst has agreed to sell 50 per cent of its shares to PRWDC and the other 50 per cent to Tees’Kwat Land Holdings Ltd., Tla’amin’s company in the partnership, for a nominal amount. Catalyst has also agreed to retire the $4.6 million mortgage for $3 million. The city and Tla’amin will split the cost of paying off the mortgage.
As well, PRSC has incurred costs over the last few years that have not been paid. It is expected that before the shares are purchased, the outstanding amount owed, $222,171, will be paid. Each partner would provide $74,058.
Dave Douglas, director of financial services, recommended at the March 21 committee-of-the-whole meeting that the $1.6 million come from the treatment plant membranes reserve, which totalled almost $2.4 million at the end of 2012. Douglas explained that it was an unrestricted reserve that was part of the sewer fund. “Many people would say why the sewer fund,” he said. “Some of those lands could be utilized potentially by the new sewer plant. That was the basis of where it started.”
Mac Fraser, the city’s chief administrative officer, pointed out the transaction was referred to in both the agreement-in-principle between the city and Catalyst and subsequently in the plan of arrangement under the Companies’ Creditors Arrangement Act. “The Community Charter allows the municipality to draw from one reserve to serve another usage, as long as there is repayment,” he said. “There will be some expense incurred on these lands to the benefit of sewer, but as other things occur, PRSC, or PRS as it’s about to become, will have an obligation to restore the sewer reserve and pay back the loan.”
The money must come from an unrestricted reserve or surplus, Douglas explained. It can’t come from a restricted reserve. “Restricted reserves, in the ministry’s eyes, are those reserves that have a bylaw attached to them,” he said. “Things like the equipment reserve, general reserve, the building maintenance reserve, community works reserve, those reserves are all what they would say are restricted. We do have reserves for surplus accumulation in what we call accounts, surplus accounts or reserve accounts. Those are all unrestricted. The other thing that is unrestricted is just general surplus or sewer surplus or water surplus. Those are unrestricted accumulation of surplus.”
Councillors and staff discussed the process in detail, in light of a letter by a Powell River resident, George Orchiston, challenging the legality of the loans. He wrote that the loans would violate the reserve fund statutory provisions contained in the Community Charter.
Douglas said he had been through the process with both the province and the city’s lawyers. “One of the interesting things about my job is I’m always learning. This is one of those weeks where I’ve learned a lot.”
Fraser explained the issue was complicated, but it should be because it was a function of accountability that reserve funds are not misused. “I can give you confidence that the director of finance has had extensive conversations with ministry and legal staff this week to make sure that we are not taking you somewhere you shouldn’t go. We can give you confidence that this is the correct procedure.”
The loan to PRPDC is to match a $132,000 grant Tla’amin received from the federal government. The funds must be approved by March 31 in order for Tla’amin to keep the federal funding. As well, $8,000 will be used for costs associated with regulatory and reporting requirements for PRPDC.
Both loans are to be paid back in one lump sum payment within five years, with interest at the current commercial rates, which is four per cent, with the interest calculated and compounded semi-annually.
The recommendation for the PRPDC loan was referred to a special council meeting scheduled for Thursday, March 28. The recommendation for the PRWDC loan was referred to the Thursday, April 4 council meeting.
The city also needs to enter into a partnering agreement with both corporations and those agreements were also referred to the respective council meetings.
