BARRHEAD - If the Barrhead Exhibition Association and Agricultural Society decide to purchase six residential lots near their rodeo grounds, it will have to be without municipal funding.
At their Oct. 17 meeting, County of Barrhead councillors defeated Bylaw 5-2023, which would have allowed the society to borrow the $875,000 over a 20-year term they needed to buy the property, on second reading on a 3-3 vote.
Councillors Bill Lane, Paul Properzi and Ron Kleinfeldt voted in favour, while reeve Doug Drozd, deputy reeve Marvin Schatz, and Walter Preugschas were opposed.
Coun. Jared Stoik was declared ineligible for any votes on the second or potential third reading due to a stipulation under Alberta's Municipal Government Act (MGA), which states that a councillor must have been in attendance at the subsequent public hearing for the bylaw. He was allowed to participate in the discussion.
Council moved to a second reading on a motion by Properzi.
Councillors gave first reading to the bylaw on Sep. 5 by a 5-2 vote, with reeve Doug Drozd and deputy reeve Marvin Schatz opposed.
Following an Oct. 3 public hearing, in which Stoik was absent, councillors unanimously opted to delay further readings of the bylaw until after the county's budget priority meeting.
In a letter to council, society president Jackie Miller stated they wanted to purchase the properties for future expansion, including such amenities but not limited to parking, campground facilities, livestock stalls or pens, and changing the access to their existing grounds for improved accessibility and safety.
If approved, the funding for the load would have come from the community organizational reserve fund. However, as the fund needed more to cover the amount, the municipality would have had to transfer the bulk of the funds, roughly $770,000, from its $2.5-million unrestricted reserves fund.
Finance director Tamara Molzahn reminded councillors that the municipality has the authority under the MGA to loan funds to not-for-profit organizations through a bylaw as long as the money is for the benefit of that municipality.
She also said that if councillors did approve the bylaw, they would need to reconsider the interest rate stated in the document, as the rate has increased.
Preugschas said while he understood that council had approved granting a loan request to other not-for-profits, most notably two loans to the Barrhead Golf and Recreation Area of $115,250 and $135,000, he was reluctant to do so again without a corresponding policy.
Drozd agreed, saying the difference between the golf course and the ag society, besides the monetary difference, was the latter was “much more complex".
Schatz was concerned about the precedent the county would be setting for other agricultural societies.
"If another ag society or a community hall comes to us asking for a similar loan, how do we say no?" he asked. "We have a lot of unforeseen things regarding money spending and discussion about service levels, and it certainly helps if we can self-finance some of these projects."
For instance, Schatz said he asked what would happen if GFR Pharma, the owner of GFR Ingredients, "pulls the trigger" and starts construction of its new plant at the county's Kiel Industrial Park and the municipality had to install an expensive sani-pretreatment system for the Town of Barrhead's lagoon wastewater system to handle the extra volumes of wastewater the plant will create.
"If we borrow money at 5.83 per cent and five years later, the [interest rate] drops to two per cent, we are stuck paying that higher rate," he said.
Unlike the county, Schatz added that the ag society could pay the loan early without penalty as part of the proposed loan agreement.
Lane argued that the other ag societies in the county were much smaller and had no large projects on the books.
"[By giving them a loan at what the county can borrow money], we would be saving them a lot," he said. "And they do not need all the parcels to carry out their plans, so they would likely put them up for sale."
At the public hearing, Miller stated the society was confident they could secure the loan through their financial institution. However, they had approached the county due to the better interest rate they would receive.
Drozd said he could not support the request, saying the community’s organizational reserve fund only had about $102,000, which would require the municipality to tap drastically into the unrestricted reserve.
"Losing our cash or ability to access cash is a real concern for me," he said. "That is money available to us for municipality-type projects — $875,000 would pay for two bridges, and we know our need for them."
Drozd also noted how quickly things can turn, adding that their unaccumulated surplus was a “rainy day fund” that protected the municipality and its ratepayers.
"Not long ago, it disappeared almost entirely due to the issue of unpaid taxes from energy companies, and we used the surplus to balance our budget to protect our residents from what would have been a significant increase to the mill rate," he said.
Kleinfeldt countered, saying the ag society is a major contributor to the community and that he wasn't concerned about setting a precedent.
“If another group comes, and we can afford it, then OK. And if we can't, then that's what we tell them,” he said, adding he was also uncomfortable with approving a loan without a policy.
Properzi agreed, saying it was a lot of money, and they were not a "lending company."
Stoik said he was also worried about the municipality loaning money without a policy. He also shared Schatz's concerns about setting a precedent for other ag societies, adding while none of them may currently have a similarly large project on the books that, a lot of things could change in 20 years.
Councillors then debated whether or not to change the terms or length of the loan, including a condition that if the ag society sold any of the parcels of land, the proceeds would have to go towards the loan. In the end, they decided they did not want to muddy the issue.
Barry Kerton, TownandCountryToday.com
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