The town responded to a resident’s concerns expressed about the new Town Hall.
As part of CAO Albert Flootman’s report to council at the Jan. 22 meeting was an update that provided answers to the many questions brought forward by resident Edwin Geuder in his presentation at the Jan. 8 meeting.
Flootman’s reply included noting the lease is consistent with what is outlined in the borrowing bylaw; that the town isn’t over its ‘borrowing limit’; that the building’s operational costs would be on the town’s bill regardless of whether it leased it or owned it; and, that council was within its authority to facilitate the development and decision to lease it.
More specifically, Flootman’s report noted the town’s actual monthly lease payment is correct at $58,333 — or $700,000 annually. The extra $40,536 — paid to landlord Thackeray Enterprises — is the town’s share of the building operations. This includes a three per cent capital reserve payment as well as related administrative costs, utilities, snow removal and maintenance.
A further breakdown of the $99,000 shows about $5,000 in GST is recoverable by the town, while just over $10,400 in a sublease payment — plus a proportionate amount for operational costs — is paid to the town by Campus Alberta Central. Meanwhile, the Ponoka Jubilee Library’s lease portion is just less than $16,000 plus slightly under $8,300 for operations.
The report also outlined that, as is normal practice with these kind of leases, the landlord provides the building, land and services while the tenant pays for operating costs and any work needed to occupy the structure.
As for the borrowing side of Geuder’s claims — such as the lack of detail and questions why the added costs aren’t included in the bylaw — Flootman’s report added the town’s borrowing bylaw is consistent with the terms of the Municipal Government Act (MGA) even though the legislation doesn’t specify what should be included when it comes to a lease. At the time, administration decided to include what details were available and the bylaw was approved in spring 2017.
“Administration is of the view that borrowing bylaws are not prescriptive, but permissive,” the report states.
That said, even though a petition against the bylaw — which is allowed under the MGA — was not submitted, the town faced a legal challenge over it. The court determined that while it lacked certain clarity, the bylaw remained valid and suggested the possibility having it updated in the future.
The report goes on to say that the lease only affects the town’s borrowing limit — which is legislated at 1.5 times revenue — on the basis of the present valuation (PV) of the building.
“In this case, the PV for our purposes is the actual market value of just over $9 million, based on a pre-construction appraisal prepared for the landlord. This matter is not beyond comprehension, as one individual has suggested,” stated the report.
It adds that Ponoka’s capacity on borrowing and debt servicing are set annually when the financial statement are presented, which are done in April.
As well, Geuder’s reference to the overall leasing cost when compared to owning the building plus the question of a previous proposed building that he noted amounted to residents being “swindled”, Flootman calls that misleading.
“There has been discussion of the total costs that will be paid out under the lease agreement — e.g. $39 million including operating costs — and an assertion that these payments amount to a ‘swindle’. In the absence of an analysis of the comparable cost of ownership and an assessment of the tangible and intangible costs and benefits of leasing vs. ownership, this assertion is, at best, misleading and obfuscates the facts,” the report stated.
“Administration is aware of a space analysis done for a new building a few years ago. However, we have no information on any cost estimate provided by the consultant at that time. We are unable to comment on the accuracy of the numbers provided, except to say that preliminary estimates and final costs often look very different.”