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Ponoka town council deemed not liable by judge

Town deemed to be in compliance with borrowing bylaw requirements
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A judge deemed that the town and councillors are not liable over the borrowing bylaw created to bring a lease for the new learning centre being constructed. Photo by Jeffrey Heyden-Kaye

Councillors for the Town of Ponoka are not liable over the learning centre borrowing bylaw.

That was the clear message from Justice Kevin Feehan in the Wetaskiwin Court of Queen’s Bench on Feb. 16. The decision came after Feehan heard from town resident and applicant Greg Nelson, and the town’s lawyer Peter Gibson, of Field Law.

Nelson originally served notice to the town last summer over concerns the bylaw did not take into account the long term costs of the lease.

At the time the bylaw was approved the town had a debt limit of $23.4 million with just over $7.4 million in debt servicing, leaving the town with $16 million left to borrow. The bylaw does have an error in that it states the town’s outstanding debt sat at $572,468, something the town acknowledges is a “typo.”

In attendance was CAO Albert Flootman, former Coun. Tim Falkiner, county resident Nick Kohlman was there to advise Nelson.

A request by Nelson to have Kohlman be his representative was turned down as Feehan pointed out that Nelson is able to speak on his own behalf or from a lawyer. As Kohlman is not a lawyer, that request was declined.

Nelson’s claim was that the town, Mayor Rick Bonnett and then councillors Tim Falkiner, Carla Prediger, Teri Underhill, Sandra Lyon and Marc Yaworski — then Coun. Loanna Gulka voted against the bylaw — were in violation of the Municipal Government Act’s (MGA) section 275 (1).

The act states that when a borrowing is made that exceeds the town’s limit, councillors who voted for the bylaw are personally liable.

Looking at the numbers

The answer to the question of whether the town exceeded its borrowing limits comes down to a simple math equation, explained Feehan.

He explained there are three facts to consider: what is the town’s debt limit (A), what is the town’s indebtedness (B) and what is the actual amount borrowed (C).

“If it’s greater than the difference between A and B, you’ve got a good argument,” he told Nelson.

“Given that bylaw, how much did they borrow?” Feehan asked Nelson.

For his part, Nelson pointed out that the term of the lease and terms within the lease are what he considered. He feels the 25 year term (it was originally stated at 35 years then adjusted) of the lease of 28,000 square feet, at $25 per square foot, puts the town’s borrowing at a much larger amount.

“The borrowing amount we will not know today or tomorrow,” he stated.

“If they had spelled it out in the bylaw originally we would not be here.”

He added concern that the town and the town’s auditor Gord Parker, of Rowland, Parker and Associates, provided biased numbers. For Nelson’s part, he feels the borrowing amount, based on the lease is closer to $24.5 million.

“I would hold them (councillors) accountable and have this corrected so we would truly know what the full amount would be,” said Nelson.

Nelson also stated concerns about the consumer price index costs for the 25 year term of the lease.

Gibson, speaking on the bylaw pointed out that the lease is not actually a borrowing such as a mortgage or a loan but that the MGA requires long term leases have a borrowing bylaw.

This specific requirement was a point of concern for Feehan who feels that the province needs to provide some clarity into the legislation. He suggests it is not transparent, especially for the general public.

“How does he (Nelson) know if he is above or beyond the borrowing capacity?” asked Feehan.

Parker does give a market value of the building at $14.7 million but also an actual cost of $9 million. The latter is the amount that the judge considered for the bylaw pointing out several accounting rules Parker had to follow to get to that point.

He said considering the $16 million available to borrow and the $9 million cost of the building, the difference still doesn’t put the town over the borrowing limit. “Town and council are wholly successful on the issues.”

Where Feehan took issue with is in section 251 (2) of the MGA

That section in the MGA states that the borrowing bylaw must state how much is being borrowed along with the purpose, the maximum rate of interest plus the terms and repayment of borrowing and it must identify the source of money to be used to pay the principal and interest.

“The legislation should be asked to revisit section 252 sub 2,” said Feehan,” adding that when it comes to leases, the MGA is unclear.

“It is my conclusion that the average ratepayer in the Town of Ponoka, or anywhere else in Alberta, would not be able to determine what the actual borrowing was.”

Despite this concern, the judge did not hold councillors liable and did not award costs to the town for being served.

He did advise, for clarity, that the town amend its bylaw to correct the amount of money owed, the actual cost of the $9 million building and to confirm the lease term of 25 years.