A12- The Terrace Standard, Wednesday, March 6, 2002 Rupert council backs secret loan to buy Skeena Cellulose By JEFF NAGEL PRINCE RUPERT mayor Don Scott says he and his council secretly agreed ta back a $1.5 million loan to help NWEC Timber and Pulp buy Skeena Cellulose. The move to guarantee the 24-month loan issued by Northern Savings Credit Union puts Prince Rupert tax- payers on the hook for the $1 5 million if NWBC de- faults. Scott said it was an eleventh hour decision made only because the sale te NWBC would nat proceed without the money. “It was necessary to save Skeena,” Scolt said. “We believed there was no other choice and we did it in the best interests of the community. Our belief was that it was NWBC or bankruptcy.” Prince Rupert council made the decision on the night of Feb. 18 — the deadline set by enterprise minister Rick Thorpe for NWBC to raise money ahead of a Feb. 20 court appearance. Scott and Northern Savings CEO Mike Tarr say the evolving negotiations put NWEC in a position of raising more money than previously planned. “Because of the way the deal had been changed in the last day or so of negotiations they needed to raise some money and they needed to do it in a hurry,” Tarr said. Money owed to the province — much of it for unpaid Stumpage — had to be repaid, they say, in order to fulfil the province’s claims that the deal includes no business subsidies. That, says Tarr, left NWBC in 2 position of having to raise not just the $6 million purchase price and the $2 million for unsecured creditors, but rather a total of $16 to $18 million. From front Tarr said the credit union would not have lent the money had it not been guaranteed by the City of Prince Rupert. “We were not comfortable having to deal with this as quickly as we did,” Tarr added. NWBC president Daniel Veniez won't discuss the loan or whether it was needed to close the deal: It’s not clear whether a loan guarantee by a town is legal. Scott said he believes a referendum or other form of elector asset is required only if the city borrows money — not if it guarantees a loan. But other sections of the Local Government Act pro- hibit towns from aiding or becoming partners in busines- ses, Scott said the council did not get advice on the legal- ity of the move prior to passing the Feb. 18 resolution. “It all took place in a very short period of time,” Scolt said. Rupert council still had not sought a legal opinion as of March 1, he added. Scott also said council would not ever have revealed the existence of the loan guarantee to Prince Rupert tax- payers had it not been disclosed by NWBC, It wasn’t a deliberate plan to keep the loan secret, he said, but rather that city council could not disclose it without breaching the confidentiality of the sale. “We would not have been able to disclose it to the electorate,” he said, “It was something we considered very seriously,” Scalt said. “We knew what the potential consequences of the decision were.” “If Skeena’s property taxes are paid in June, as far as I’m concerned, that would justify the decision.” The vote passed by a 4-2 margin, city staff say. NWBC out looking for money Prince Rupert mayor Don Scott said his city plans to help NWBC raise the community investment money. The idea was first raised by Prince Rupert city offi- cials iast fall and was seized upon by Mercer Interna- tional, which made it a condition of its bid. Resistance from towns that would have had to risk taxpayers money led Mercer to drop the idea from its bid, which was eventually rejected by Victoria in favour of NWBC. Veniez last fall had said community investment was a commendable idea but not one upon which his plan depended. Now he says it’s a good idea and crucial to the suc- cess of the enterprise to have individuals, and particular- 5229 440 MONTH LEASE 5479 #48 MONTH LEASE ly employees, invest in the operations. “If people have an ownership stake in an enterprise through their hard-earned money, that has got to help the business,” Veniez said, “They’re going to be looking out for the profitability, efficiency and quality of the new enterprise.” “Ownership does weird and wonderful things to people,” he said. “It helps them work harder, work smar- ter in a more cost effective way. 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