NNSL (DEC 18/96) - Without a word of say in the matter, Yellowknife residents are about to take out a loan for $3,536,000 to purchase the space occupied by the Yellowknife Public Library.
Barring any major reversals, the bylaws to authorize the purchase will be approved at a special meeting of council today at noon.
Taking into consideration monthly $37,750 lease payments made under a lease-to-own agreement with Centre Square Developments, the total cost of the library will be just over $7.3 million.
No plebescite has ever been held to authorize the spending of any of that money.
The opportunity to buy the library arose when Clark Builders, the developer of Centre Square Mall, approached the city for permission to refinance the development.
The city said it would grant permission, for $40,000. Clark Builders got back half that amount in return for giving the city the right to purchase the property and terminate the lease agreement the city was locked into until 2010.
Administrator Doug Lagore said that to take advantage of the opportunity, the city had to act this week, before Clark arranged its refinancing.
Borrowing on this scale normally requires ratepayer approval. This time, however, the city asked the Department of Municipal and Community Affairs (MACA) for permission to proceed without a plebiscite.
"It was explained that because we had an existing debt in the lease, ratepayer approval was not required," said alderman Merlyn Williams.
The balance between expediency and process was the focus of a lively debate that preceded first reading of the bylaw to authorize the purchase.
"We are buying the library as it stands right now," said John Dalton. "That's what our current lease says; when the lease ends we buy it for $1.
"It just makes good economic sense," said Dalton, summarizing his support of the purchase.
Agreement, however, was not unanimous.
"If a plebiscite had been done on the original lease it would be a different matter," said Dick Peplow. "This is not just a simple flip of debt -- it's a subversion of the democratic process and I won't have any part of it."
Alderman Jo MacQuarrie was the only other member of council who spoke against the purchase.
After being informed that the city is considering "two or three" sources of financing, MacQuarrie noted they were being considered "without the ratepayer's knowledge or consent."
"I think there's absolute knowledge," interjected Mayor Dave Lovell. "Consent is another matter."
Lovell later said the democratic process had been skirted when the original lease had been signed. No ratepayer approval is required to enter into lease agreements.
Finance director Joe Kronstal, responding to questions from Alderman John Dalton, said Monday the deal could save the city more than $900,000 compared to the current arrangement.
Exact savings depend on the interest rate the city gets on the loan to finance the purchase and the length of time over which the payments are spread.
And, apparently, the accounting methods used to calculate the savings.
Alderman Dick Peplow questioned the figures used to support the purchase. He said the city took inflation into consideration to minimize the loss it suffered under a restructuring deal a year-and-a-half ago.
"When we calculate loss we use discounted dollars, and when we calculate gain we don't use discount dollars," noted Peplow.
Kronstal said the $900,000 in savings would shrink to roughly $500,000 if inflation were taken into account.
When Peplow asked what level of discounting was used to come up with that figure, Kronstal replied three per cent.
"Was that the same figure being used when calculating the loss a year-and-a-half ago?" asked Peplow.
"According to my recollection it was more in the range of seven per cent," said Kronstal.
An earlier staff report said the city stood to save $363,800 if the library was purchased for $3.6 million and seven-per-cent financing could be arranged.
City administrator Doug Lagore said the city is hoping to secure financing at a rate between 6.9 and 7.1 per cent.
Savings still a mystery
The lone justification for buying the library is the cost savings, but what those savings will be, nobody seems to know.