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HomeMy WebLinkAbout02 - Municipality of Bayham - Project Ojibwa Information Sheet Corporation of the Municipality of Bayham Project Ojibwa – Information Sheet 1) Why does the Municipality have to pay the six million dollars ($6,000,000)? On August 2, 2012 the Council of the Corporati on of the Municipality of Bayham passed By-law No. 2012-089 being a by-law to authorize an irrevocable standby letter of credit facility with the Royal Bank of Canada, to guarantee borrowing by the Elgin Military Museum to the maxi mum amount of six million dollars ($6,000,000.00). The Elgin Military Museum borrowed money through a credit facility with the Royal Bank of Canada, against the six million dollar letter of credit. The Elgin Military Museum failed to make payments on the loan and the Royal Bank of Canada called upon the Municipality of Bayham irrevocable letter of credit in the amount of six million dollars ($6,000,000.00). 2) Where will the money to pay the six million dollar ($6,000,000) letter of credit come from? Coun cil has approved a plan where the Municipality will debt finance the six million dollars ($6,000,000) from The Toronto-Dominion Bank for a ten (10) year term loan, twenty-five year (25) amortization period, in the amount of six million dollars ($6,000,000.00), at a rate of interest of 2.71% per annum*. This will require loan payments of $27,555.95/month. For the remaining ten (10) months in 2015 the Municipality will utilize reserves to pay the amount required ($275,559.50). In 2016, if the Municipality has not recouped funds from the Elgin Military Museum or obtained funding from upper levels of government, the Municipality will incorporate $330,671.40 into the tax levy. * Rate of 2.71% is subject to credit approval. The Toronto-Dominion Bank is not currently the Municipal Financial Institution. 3) Will this affect my taxes, and if yes, how much? In 2015, the Municipality will utilize reserves to pay the amount required ($275,559.50). In 2016, if the Municipality has not recouped funds from the Elgin Military Museum or obtained funding from upper levels of government, the Municipality will incorporate $330,671.40 into the tax levy. $330,671.40 represents a 10.3% total levy increase over 2014 notional dollar value. As taxes incorporate all expenses of the Municipality depending upon government funding and operational expenses the total levy impact in 2016 may be more or less than that amount. 4) Will this affect property values and the ability to sell property in the Municipality? A number of factors influence the real estate market and the Municipality cannot speculate on property values or real estate. The Council of the Corporation of the Municipality of Bayham intends to work to ensure the Municipality of Bayham tax rates continue to stay competitive within Elgin County and surrounding areas. 5) Will Municipal services be affected now and going forward? Every year the Municipality is tasked with reviewing service levels. The 2015 Budget service levels are not presently affected by the Project Ojibwa letter of credit. If the Municipality cannot find upper levels of government financial support, services going forward in 2016 may be affected. The Council of the Corporation of the Municipality of Bayham will work diligently in the interim to attempt to source upper levels of government financial support for the six million dollar letter of credit debt. 6) What happens to the ability for the Municipality to borrow money? The Municipality of Bayham debt capacity, or ability to borrow money , is determined by Ontario Regulation 403/02 – Debt and Financial Obligation Limits. The Ministry of Municipal Affairs and Housing calculates municipal debt capacity (Annual Repayment Limits - ARL) based on data contained in Municipal Financial Information Returns. The 2015 Municipality of Bayham Annual Repayment Limit is $1,249,960. Including the six million dollar ($6,000,000) letter of credit loan, and the Station 1-Fire Hall Loan, the Municipality will be utilizing 31.7% of its available debt capacity. The Municipality will still have 68.3% of its available debt capacity to borrow money. 7) How does this affect current issues with the facilities? The Council of the Corporation of the Municipality of Bayham was investigating and considering options to ensure Municipal facilities were safe, sustainable and viable before the requirement to pay the six million dollars ($6,000,000) was identified. The goal continues to be that facilities are safe, sustainable and viable within the financial realities of the Municipality. 8) Have upper levels of government been approached for financial assistance? During 2014, staff under the direction of Council made numerous requests of upper levels of government including: a. MP requested assistance to source an entity to hold the guarantee in place of the Municipality and/or pay out the same. b. MPP requested assistance to source an entity to hold the guarantee in place of the Municipality and/or pay out the same. c. Request of FedDev, Heritage Canada, National Defence and Public Works Canada to assume the Guarantor ship and/or pay out the same, as permitted under Federal Legislation via incorporation into the Federal Budgetary Estimates Further, the Municipality is currently engaged in a Senior Government Cash Strategy to aggressively lobby for the financial support of senior levels of government to pay out or assume the financial responsibility of Project Ojibwa. 9) Who is now responsible for the HMCS Ojibwa? The payment of the letter of credit by the Municipality to the Royal Bank of Canada results from the Guarantorship Agreement, which is between the Municipality and the Royal Bank of Canada. The payment has no direct impact upon ownership of Elgin Military Museum assets including the HMCS Ojibwa. The Municipality can demand payment by the Elgin Military Museum of the amount which the Municipality has been required to pay on behalf of the Elgin Military Museum and can commence litigation proceedings against the Elgin Military Museum for the recovery of money owing. 10) Does the Municipality paying the six million dollar letter of credit leave the Elgin Military Museum with no responsibility for its actions, specifically financial responsibility? The responsibilities of both the E lgin Military Museum and the Municipality are set out in the Guarantorship Agreement. In essence, the Municipality becomes a creditor of the Elgin Military Museum as a result of the letter of credit payment. 11) What becomes of the Elgin Military Museum? There are several possibilities, however, it seems likely that the E lgin Military Museum will be stripped of its assets by creditors through the legal system and will be unable to function. 12) Will the Municipality ever get the money for the six million dollar ($6,000,000) letter of credit back? On March 12, 2015 the Council of the Corporation of the Municipality of Bayham directed staff to pursue available legal remedies under the Guarantorship Agreement between the Elgin Military Museum and the Municipality. While it may be possible to recover judgment, it may not be possible to recover the sum owed under the judgment, because it is likely that the liabilities of the E lgin Military Museum will exceed the value of the assets of the Elgin Military Museum. 13) What does the Municipality get out of paying the six million dollar ($6,000,000) letter of credit? As a result of By-law No. 2012-089, passed on August 2, 2012, being a by-law to authorize an irrevocable standby letter of credit facility with the Royal Bank of Canada, to guarantee borrowing by the Elgin Military Museum to the maximum amount of six million dollars ($6,000,000.00) the Municipality of Bayham had a contractual requirement to the Royal Bank of Canada to pay the six million dollars ($6,000,000). The Municipality does not get anything tangible from paying the amount. The Municipality is paying its debt to the Royal Bank pursuant to By-law No. 2012-089. 14) How will this affect the image, pride, reputation and economic prospects of the Municipality of Bay ham? In 2012, the Council of the Corporation of the Municipality of Bayham supported a project with the potential to have a significant economic impact in the Municipality of Bayham with a July 2011 IBI Group report estimating the project had the potential to create a ‘$14.4 million in impact on Elgin County which was generated using the Ontario Ministry of Tourism's TREIM model’. The fact is that the project failed and did not generate the expected economic impact. T he Council of the Corporation of the Municipality of Bayham now intends to work harder than ever to ensure the Municipality of Bayham tax rates continue to stay competitive within Elgin County and surrounding areas. Council intends to work to ensure that the Municipality of Bayham is known firstly for its community, its people, its businesses and opportunities. 15) What efforts did the Elgin Military Museum put into fundraising? It is the understanding of the Municipality that the Elgin Military Museum hired two separate professional fundraiser s and both failed to generate any funds, citing that once the Project Ojibwa was placed in its final location, it was nearly impossible to raise funds to cover debt. 16) Why did the Elgin Military Museum fail to live up to its responsibilities to the Municipality? A number of subjective reasons can be developed as to why the Elgin Military Museum failed to succeed with Project Ojibwa, the main fact appears to be that the Elgin Military Museum did not generate enough attendance to generate enough revenue to fund all expenses, specifically debt obligations. 17) How much money does the Elgin Military Museum owe the Municipality of Bayham? The Elgin Military Museum owes the Municipality of Bayham the following monies: a. $6,000,000 – letter of credit b. $102,000 – Guarant orship fees c. +any and all future legal fees pertaining to Project Ojibwa and the Guarantorship agreement. The sub-total the Elgin Military Museum currently owes the Municipality is $6,102,000 + any and all future legal fees pertaining to Project Ojibwa and the Guarantorship Agreement. 18) What did the Municipality do to prevent the Municipality from being responsible for the six million dollar letter of credit? The Council of the Corporation of the Municipality of Bayham made multiple efforts to source information from the Elgin Military Museum including correspondence and meetings on the following dates: a. July 26, 2013; b. January 29, 2014; c. June 18, 2014; d. August 27, 2014; e. November 28, 2014 f. December 22, 2014 g. January 9, 2015 h. January 29, 2015 The general subject matter of the aforementi oned meetings pertained to the Guarantorship Agreement as authorized by By-law No 2012-037 and efforts of the Elgin Military Museum to comply with the c ontractual requirements of the Guarantorship Agreement. As a result of the December 22, 2014 direction of Council, staff also attempted to have an audit of the Elgin Military Museum conducted, however failure of the Elgin Military Museum to provide the appropriate documents to the auditors resulted i n the process being cancelled. 19) With a general knowledge that the Elgin Military Museum was not complying with the requirements of the Guarantorship Agreement, why didn’t the Municipality take action earlier against the Elgin Military Museum, pursuant to the Guarantorship Agreement? Beyond the efforts the Municipality and the Legal Counsel of the Municipality made as outlined in Section 18, of this information sheet, any action the Municipality would have taken, would have resulted in the Municipality being immediately responsible for the full six million dollar letter of credit. The Council of the Corporation of the Municipality of Bayham determined that it would be more financially beneficial to the Municipality for the Elgin Military Museum to be given the opportunity to succeed and generate a positive cash flow. Further, the Municipality is not responsible for Project Ojibwa failing. The failure rests solely on t he Elgin Military Museums inability to fund its financial requirements. 20) Why didn’t the Municipality make the loan payments to prevent the letter of credit from being called upon? On April 5th 2012, the Council of the Corporation of the Municipality of Bayham passed By-law No. 2012-037, a by-law pursuant to Section 107 of the Municipal Act, 2001, to authorize a municipal guarantee for borrowing by the Elgin Military Museum. Any payments made beyond the terms of the Guarantorship Agreement would have increased the Municipality’s total exposure to the Royal Bank of Canada. 21) What legal proceedings is the Municipality currently involved with pertaining to the Elgin Military Museum? a. On October 17th, 2014 the Municipality of Bayham was served with a Statement of Claim by Mammoet Canada Eastern Ltd. and Heddle Marine Service Inc. in which the Plaintiffs claim that they are owed a cumulative amount of one million, one hundred thirty one thousand, and eight dollars and ninety-two cents ($1,131,008.92) by the Elgin Military Museum and the Municipality. The action is in its "discovery" phase and the Municipality is defending this action on its own behalf. b. Pursuant to the Guarantorship Agreement, the Municipality will immediately commence litigation proceedings agai nst the Elgin Military Museum for the recovery of funds owing. 22) Does the Municipality have any plans to try and operate the HMCS Ojibwa as a successful tourist site? The Municipality does not have the right to operate or seize the property of the E lgin Military Museum , because the Municipality is not a secured creditor. The R oyal Bank of Canada is known to be a secured creditor and may appoint a receiver to manage the affairs of the E lgin Military Museum . The primary function of a receiver is to protect the interest of the creditor. It could be in the interest of whoever is responsible for managing the assets of the E lgin Military Museum to operate the HMCS Ojibwa as a tourist site, but this is entirely outside the Municipality's power.