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Auditor says county stands to lose on industrial park lot deal

According to its auditor, Westlock County won’t ever recoup the nearly $465,000 it spent to prepare an eight-acre industrial park lot for Horizon North.

According to its auditor, Westlock County won’t ever recoup the nearly $465,000 it spent to prepare an eight-acre industrial park lot for Horizon North.

During the presentation of the municipality’s consolidated financial statements on June 28, auditor Tina Viney of Shoemaker, Viney and Friesen said based on current market trends the county stands to lose over $200,000 on the Horizon North deal.

“At this point in time, with the value of the lots being what they are, you won’t recover those dollars if you happen to sell the lot,” Viney said.

At the same meeting, councillors also officially approved $375,863 worth of work to the eight-acre lot, which was completed in 2015, and rescinded a motion to enter into a three-year lease with Horizon North. County expenses on the site, including recent improvements and original development costs total $465,000. Current market value of the site was assessed at $263,000.

“The cost to develop that lot was more than what its market value is,” Viney said.

At the advice of the municipality’s lawyer, councillors voted 5-2 to approve the spending as part of a lease agreement with Horizon North. Councillors Dennis Primeau and Ray Marquette voted against the motion.

County crews completed the work in the spring of 2015, however former CAO Peter Kelly never brought the expenditure to council for approval. In failing to do so, he breached Section 248(2) of the Municipal Government Act, which requires council approval of any unbudgeted expenditure over $10,000.

By a 5-2 vote, councillors also rescinded Coun. Don Savage’s Dec. 16, 2015 motion to enter into a three-year lease agreement with Horizon North. CAO Duane Coleman explained the motions simply help protect council against potential litigation.

“It’s an unauthorized, out-of-budget expenditure, which the residents of the municipality could hold each and every one of you personally liable for,” Coleman said. “These are housekeeping resolutions that are recommended by legal counsel. It’s entirely up to council whether you wish to limit that liability or not.”

Some councillors, however, said they approved the deal without full disclosure.

“We didn’t have any idea of what was going on there. We were leasing a bare piece of ground to Horizon North,” said Primeau.

“It sounded like it was being leased with a clause in there to buy, that’s how I took it,” added Savage.

A third motion to allow administration to continue negotiations with Horizon North for a lease of the site was unanimously supported.

At their June 14 meeting, councillors were briefed on the file by assistant CAO Sue Oberg.

She told council that in September 2014, Muller Realty approached the county indicating that Horizon North was interested in leasing lots at the county industrial park. The company was interested in paying $5,500 monthly and doing the work to strip the site of clay themselves.

Kelly said that the county public works would do the work and director of engineering and infrastructure Bill Mills estimated the initial cost at $55,000 to $75,000.

In the spring of 2015, Kelly directed staff to focus on the Horizon project, which ended up delaying or the outright cancellation of other municipal projects.

As costs skyrocketed to more than $300,000 there is no indication that Kelly ever informed Horizon North of the overruns.

In November 2015 Kelly finally invoiced Horizon North for $190,000 to the company’s surprise. The deal was reworked for Horizon North to pay the county $56,000 up front with the remainder paid back over the three-year lease at an interest rate of 3.5 per cent. There was no option to purchase included in the deal.

In December 2015 council ratified a deal that would see Horizon North pay $2,500 per monthly over a three-year lease. Following Kelly’s departure, the Horizon North file was missing from the county office.