With the Town of Ponoka entered into a public private partnership to develop the new town hall, some residents are concerned with the long term payments and interest that comes with them. File photo

There are pros and cons to public private partnerships

With Ponoka entering into a lease with a private company, some residents are still concerned

With the Town of Ponoka’s new town hall under way, there are still some concerns around the terms of the agreement.

Council voted in favour of the lease agreement — which sees a public private partnership (P3) with developer Landrex — stating a focus on seeing new development in town. Where some took issue is the lease rates that would see the company receive about a 10 per cent return on investment.

That, compared to a two to three per cent interest rate with the Alberta Capital Finance Authority if the town constructed the building on its own, was part of the worry. Mayor Rick Bonnett, however, has been vocal about his support for the P3, stating other large capital projects such as a new RCMP building and a new field house will also have to be paid for.

The lease caused enough concern that resident Greg Nelson served the town notice, seeking to have councillors personally liable for the borrowing bylaw. It was determined that the building didn’t exceed the town’s borrowing due it being a lease with the town able to borrow $16 million and the building costing $9 million.

That’s where Ponoka County resident Nick Kohlman, and town resident Edwin Geuder voiced worry.

They have two major concerns. First, the long term cost of the lease to taxpayers should the town not exercise its buyout option; the second being that the length of the lease appears to show a much larger amount of money being spent.

“The cost of the learning centre lease according to the town’s auditor, with average inflation, is an estimated $22.8 million, plus a $2.4 million town cost for interior construction, for a total of about $25.2 million,” states a letter from Geuder and Kohlman.

They feel it’s an unresolved borrowing amount, it’s confusing for residents, and they would like to see the bylaw changed to clarify the lease amount against the cost of the building.

The value of the new town hall, at the time of the lease, was not indicated and was not included in the bylaw — which was something Justice Kevin Feehan in the court proceedings with the town was concerned about. Feehan even suggested the town amend its bylaw, which would create a public hearing process.

Council has not amended the bylaw, and that may not occur. This late into the construction of the new town hall, a successful petition against the amendments could cause a delay of construction and potentially legal issues.

“It is the borrowing bylaw that authorizes the expenditure for the lease. There is no indication in the bylaw to suggest that the borrowing is only $9 million,” states the letter.

Geuder and Kohlman argue that the lease exceeds the town’s borrowing, which makes councillors liable. That wasn’t the decision by Justice Feehan, however, he stated the law in the Municipal Government Act (MGA) regarding leases for capital projects in unclear.

Municipalities using PPPs

In an interview with Dr. Karim Jamal, department chairperson of University of Alberta’s accounting, operations and information systems, these P3s are usually done by municipalities looking to work with capital projects where they may not have enough to debenture.

“In this (Ponoka’s) case it appears more to be a foolish decision than anything else,” stated Jamal, who feels the town would have been better off doing the project on its own.

These types of long term leases are not new, and the MGA does not specifically address P3s. With international accounting standards, Jamal says leases such as these are not really part of determining debt. Municipalities and corporations have used this to some degree.

“It’s kind of a loophole effectively,” said Jamal.

“You kind of borrow in a way but it doesn’t get counted as a borrowing…you’re kind of relaxing the limit.”

The borrowing rate is unclear, something that Geuder and Kohlman point out in Ponoka’s case. Jamal calls it a legal manoeuvre.

“Once you sign the lease, effectively you’ve bought the building. You’re just not calling it a purchase, it’s just a lease,” explained Jamal.

Companies can move the debt within the same balance sheet because it’s a lease. But that’s changing.

“I think at the end of this year there’s a new lease standard change,” he explained.

One more project like the new town hall and Ponoka would have been over its borrowing limit, said Jamal, pointing out that the town is indeed within its borrowing limits.

When asked why the province allows P3s to occur, Jamal suggested planners may not have realized there was a loophole in accounting.

Just Posted

Students at St. Augustine honour fallen Ponoka soldiers

The school’s Remembrance Day ceremony recognized the sacrifices of past soldiers

Ponoka Legion commemorates 100th anniversary of Armistice Day

Ponoka residents pack Legion hall during Remembrance Day

Ponoka Secondary Campus alumni provides example of how to remember those who were lost

School’s annual Remembrance Day ceremony focuses on 100th anniversary of WWI armistace

No pumping into Gull Lake for 5 years due to carp concerns

Worries of carp in the Blindman River has put a hold on pumping water into Gull Lake

Rural crime task force results released at Agri-Trade luncheon

Report cites problems with police not being able to keep up with crime and justice system issues

WATCH: Remembrance Day in Lacombe fills LMC

2018 marked 100 years since the end of First World War

Fear of constitutional crisis escalates in U.S.; Canadians can relate

Some say President Donald Trump is leading the U.S. towards a crisis

Canada stands pat on Saudi arms sales, even after hearing Khashoggi tape

Khashoggi’s death at Saudi Arabia’s consulate in Istanbul further strained Riyadh’s already difficult relationship with Ottawa

Feds pledge money for young scientists, but funding for in-house research slips

Canada’s spending on science is up almost 10 per cent since the Liberals took office, but spending on in-house research is actually down

Carjacking sees 76 year old woman’s vehicle stolen

Wetaskiwin RCMP with Crime Reduction Unit charge robbery suspects

Disabled boy has ‘forgiven’ bullies who walked on him in stream, mom says

A Cape Breton teen who has cerebral palsy was told to lie in a stream as other kids walked over him

Remember When: Looking at Suzan Heriot Sturgeon’s artwork

A Ponoka and Lacombe artist is recognized and remembered

Reflections: A special tribute to Suzan Sturgeon

A self-taught artist who lived in the Lacombe and Ponoka area is recognized

Ponoka Food Bank gets a leg up from PES students

Ponoka Elementary School students show leadership in food fundraising campaign

Most Read