Terry Kruger
Northern News Services

Yellowknife (Apr 05/00) - City council is expected to vote Monday night on a resolution that could see it pay about $3 million to buy out its partners in the Niven Lake subdivision.

The partners in the multi-phase housing development have asked to meet with the city April 19 to consider invoking closure on the contract signed between the city, Reid Crowther and Partners Ltd., MM Dillon Ltd., and Volker Stevin Contracting Ltd. in 1995.

"As you can appreciate, the level of funds currently invested in the development hampers our ability to undertake other endeavours," says a March 28 letter to the city from the private companies.

Discussions about the possibility of closure goes back to 1998.

The 360-lot development began in 1995.

"When we went into Niven Lake, we had maybe a year's worth of land left," Mayor Dave Lovell told a Priorities, Planning and Budget Committee meeting Monday.

It was to be a hallmark of development, by covering costs of development -- paving, sidewalks, and recreation facilities -- with lot sales and through public-private partnership in which the city and its private partners would "share the rewards and risks of land development."

The 26-lot first phase was completed in 1995 and the work on the second 18 lots began in 1996.

The second phase lots need only a lift station to make them ready for homes.

So far, seven of the first phase lots have been sold, three of those in the past two months, said city administrator Max Hall.

Since the development began, market value of the lots has dropped by about 11.5 per cent, and to try to encourage sales, the city lowered lot prices by 11.5 per cent in May 1998.

Under closure, the city would have to pay the partners for the remaining unsold lots and outstanding development costs for all the remaining lots.

Total cost is expected to be about $3 million but is subject to negotiation with the partners.

Hall said buying out the partners presents the best deal for the city because it could borrow for less than the interest rate stipulated under the contract and would be buying a development that has undergone a substantial amount of work.

"There's more money in the ground than we would pay," he explained. Council members were philosophical about the whole deal.

"It was done with the best of intentions but it didn't develop to our expectations," said Coun. Blake Lyons Monday.

"It was a question of timing and fortune.

"We can recoup these expenses in the future."

Coun. Cheryl Best seemed to echo that sentiment at the committee meeting by saying the city will benefit from the deal in the long run.

"I would prefer to keep the profits. Let's go for closure," she said.

Administration is recommending the city seek closure and finance the buyout through borrowing.

Ratepayers would not be consulted, however.

"The city would need to request that the Minister (of Municipal and Community Affairs) exempt a borrowing bylaw from ratepayer approval," reads the recommended motion.

Spokespersons for the two engineering companies involved declined to comment and a call to the contractor was not returned by deadline.