City of Powell River officials have halted plans to loan money to one of the city’s development corporations.
The April 4 council meeting agenda included a motion to lend 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. That motion was withdrawn at the beginning of the meeting before council adopted the agenda.
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.
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 PRSC, 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.
City staff recommended the city’s portion of the costs should come from the treatment plant membranes reserve, which totalled almost $2.4 million at the end of 2012. Staff assured council the funds were what they described as “unrestricted” and could be used for the loan.
George Orchiston, a Powell River resident, wrote a letter on April 1 which questioned whether the city could use money in the membrane reserves for the loan to PRWDC. He documented the fact that the membrane reserve is part of the sewer fund and the city has transferred funds to the reserve from 2003 to 2012. “Clearly the city’s sewer fund/membrane reserve is a clear example of a legitimate purpose of a reserve fund and one which the city chose some time ago was good policy to establish,” Orchiston wrote.
The Community Charter stipulates that money in a reserve fund “must only be used for the purposes for which the fund was established,” Orchiston also wrote. “There are no provisions in Sections 188 or 189 of the Community Charter that would permit the City of Powell River to use money in its sewer fund/membrane reserve to lend to the PRWDC.”
Orchiston suggested that council direct staff to do “any appropriate housekeeping necessary to ensure that city reserves are in compliance with the Community Charter.” He also suggested that council not adopt the loan authorization motion and that the city should borrow money from the Municipal Finance Authority to loan money to PRWDC.
During question period, the Peak asked why the loan authorization motion was withdrawn from the agenda. “We found it wasn’t quite ready for consideration for a decision, so staff respectfully withdrew it,” Mac Fraser, chief administrative officer, replied. “We did not have the correct terminology and it wasn’t worthy of council’s consideration.”
Councillor Chris McNaughton said he had an opportunity to review Orchiston’s letter with staff. “It became apparent that staff needed to revisit some of the comments and suggestions and bring to council with clarity a recommendation that could be supported,” he said.
Fraser said he expects the issue will be back in front of council in about a month.
During the meeting, council did pass a motion to enter into a partnership agreement with PRWDC, with Councillor Russell Brewer voting in opposition to it.
Brewer said he thought it would be appropriate to withdraw the motion about the partnering agreement as well as the loan authorization motion.
McNaughton said the two were separate matters. “Establishing the partnership agreement is something we can do, whether or not we provide funding at this time or at some point in the future to that partnership,” he said.
Fraser said in order to loan money to the development corporation, council needs to establish a partnership agreement, even though it is wholly owned by the city. “It in no way encumbers council to do any financial transfer in the future,” he said. “It’s simply a mechanism.”
Brewer asked if the partnership agreement should have been in place for previous loans to the corporation. Fraser explained that the corporation preceded some new requirements. “Now that we’re aware of those new requirements, in tune with them, we have to put in place the partnering agreement,” he said.
