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07 16 1996 SpCouncil Minutes I' W nB CORPORATION 01' nB !'OWNSHIP 01' ORO-1IBJ)()H1'B SPECIAL COUNCIL KBftING WBDNBSDAY~ JULY 1'~ 191' 7:00 P.M. - COUNCIL CRAKBBRS SBVB!ft'Y-NIIr.rH KBftING 1914-111' COUNCIL Council met this evening @ 7:00 p.m. with the following members present: Absent: Mayor Ian Beard Deputy Mayor Murray Martin Councillor Walter Dickie Councillor Neil Craig Councillor Don Bell Councillor Ron Sommers Councillor Larry Cotton e staff Present: Jennifer Zieleniewski, Treasurer/Administrator, Andria Leigh, Development Co-ordinator, Ron Kolbe, Director of Building/Planning, Fred Haughton, Director Public Works, Jeff Brydges, Deputy Treasurer Also Present: Lorne Borgal, Richard Andrews, Garth Dean, Graeme Clark, Gary Cunnington, Bob Onyschuk, Jim Cooper, Marilyn & John Reed, Nora Saso, June Beard, Elaine Smiley. This Special Meeting of Council was called in accordance with the Procedural By-law to discuss lines of communication with Horseshoe Resort Corporation. Mayor Beard assumed the chair and called the meeting to order. MOTION NO. 1 Moved by Craig, seconded by Martin Be it resolved that the Agenda for the special council Meeting dated Tuesday, July 16, 1996, be adopted as printed and circulated. Carried. e Mayor Beard asked of the deputation from Horseshoe, if tonight's meeting was being held without prejudice? Lorne Borgal from Horseshoe Resort corporation indicated yes it was. Mayor Beard asked Jennifer zieleniewski, C.A.O. if she wished to record the meeting and asked if Horseshoe had any objections to which they indicated they did not. 1. ADOPTION OF THE AGENDA: 2. DEPUTATIONS: (a) 7:00 p.m. Representatives from Horseshoe Resort Corporation addressed Ct:1.1rcil to d:iro:e; lirEs of - 2 - Lorne Borgal: Thank you very much for the opportunity to meet with you, w appreciate the consideration to be in a special Council Meeting. We think there are certainly some matters that are important tha we should try and resolve and that is why we are here. e We have prepared a handout which I would like to give you and m intent would be to just talk to the handout and it is not verbati what I am going to say, but it puts down on paper the areas w would like to table with you ana before doing that, I would jus like to offer that our purpose in being here is to see if we ca have a dialogue this evening because we would like to be able t discuss matters in a fairly open and candid manner and find out where the concerns are and try and identify common ground relevan~ to going forward with the projects that are before us. So if thaj would be appropriate, I would like to handout the material and wor my way through it. sitting beside me is Garth Dean, Senior vice President and Chie Financial Officer of Horseshoe Resort Corporation. Mr. Mayor, would you like me to introduce the whole representation? Mayor Beard: Yes, I think that would be actually of benefit. Lorne Borgal: e Perhaps, starting with the Three Wise Men here, Richard Andrews whq is the Managing Director of the company, and is sitting righ~ beside me here on my right. Jim Cooper who represents the Roya~ Bank and who has been involved with this, Bob Onyschuk who i~ counsel from Smith Lyons, Elaine and Nora, sitting behind wh helped us put the material together, most of you know Graeme Clar I and Kris Menzies and Gary cunnington, who are all in variou~ capacities with us. Ii 11 11 My approach in this meeting tonight was to bring everybody that hadl had any particular involvement with the Township from the point o~i view of answering questions and having a dialogue and also to brin~1 resources that might help to clarify particular matters if we ge~1 into them, particularly related to the proposal we operate unde~ which does limit our flexibility as a company and so with that i~ mind, Mr. Mayor and Councillors, we are certainly here to try an~. resolve the matters that we are having. Probably one matter that w I are having some difficulty with at the moment and certainly m recommendation to this is that if we could to resolve the concer~ of the OMB hearing prior to the OMB hearing because that leaves u~ in this room....... Otherwise we are all at the mercy of the OM~ ruling and overall incurring legal fees....... with the belief tha~1 negotiation begins with a dialogue and works towards ani understanding and resolution, what we have done is we have tried tql say, from our point of view, what has been very difficult for us i~i not getting particular feedback, so we don I t know where to go next,ll it is either no but there is no hope to go to the next step. w~1 think that the primary concern of the Township relates to th~1 property tax arrears and in particular the 1.3 million dollars .11 So, with that in mind, we are both sitting here with differentil needs, desires and wants out of this whole process, I believe. ~I believe also however, there are some very significant benefits t~i us if we can resolve the differences. I would like to draw your attention to page 4 of my handout and i~! that, I have done the best I can to represent honestly to you wha~1 the status quo scenario means. The status quo scenario, in ou~ view, is one which we are not able to proceed with the Carriag~ Hills project and I will come back to that in a minute. Fundamentally, if we are unable to resolve the matter that is the subject matter of the OMB hearing, then we are going to be as a - 3 - Lorne Borgal: e resort company in the status quo scenario and to the best of our knowledge right now we could expect resort operation to continue at Horseshoe. Now we can expect the debt and taxes will be maintained as specified in the proposal and I am referring to the proposal that I am sure you are aware of and if you are not, please tell me because I will elaborate on it but it is the Court document dated June, 1993 and subsequently processed through the appropriate Courts and again, ratified by the Court. I will certainly come back to that if anyone wants to talk about that or wants me to explain further, otherwise, I will assume that we are on the same understanding as to what I mean by proposal. I We would have as a company, no development activity and definitelyl no Carriage Hills, no SBR and no other projects. The reason fori that is that when we did the proposal we secured funds from the investors, both to satisfy the means of the proposal and to generate enough capital to create some development projects and we basically exhausted that capital. We don't have many investors to put their money in and I have canvassed and their is no interest in pursuing further. So, that is why I say no other projects, no second round of funds, we have come to the end of that cash flow ability. The consequence of status quo is approximately 20% reduction in the full time senior employment because we are staffed to ultimately bring some exciting development into the Township. The consequence of the status quo scenario, I will gladly take you through this in detail or a sub-committee, or whatever through this, that you want to understand this, but I am absolutely confident of the outcome of it. In the proposal, a significant renewal day is June in the year 2000, on the first mortgages and that is the benchmark date for us. We will get to that date, in all likelihood in the status quo scenario with the resort basically intact and will probably, to the best of my knowledge, still be owing the Township $1.3 million in taxes. We don't have any hope to hold that out, I am going to come back to that and explain why. e If I can draw your attention to page 5, I will go forward with this scenario. It has taken us three years to put together the Carriage Hills project and the key issue that has been the most critical issue in this whole project that it is financed to go forward, without presales. That is the biggest thing going because we are building buildings before we start selling. We are doing it with other peoples money and we have the potential to create an extremely exciting development within this Township. There is a reason that the development, even if an individual was for or against the development, I am going to take you to a reason why it is absolutely, I believe, in the Township's interest that the development works. carriage Hills project, absolutely, in the first year of its existence generates approximately, now we have had to estimate it, $50,000.00 in building permits fees, $271,000.00 in development charges and based on the current lodge building, approximately $120,000.00 in new annual property taxes and I think most of you know the timeshare project does not put a demand, by and large, not put a demand on municipal services anything like residential demands. There is no demand for a jump in schools.... We create 150 new jobs, we bring down the SBR into operation and of course, if we can't do Carriage Hills SBR then we have a plan that is in obeyance. The end of the process relative, is lack of tender documents, that are now relative to SBR and it gives a vehicle, a cash flow vehicle in which we can start repaying the property tax arrears for $1.3 million. None of us are bringing carriage Hills forward, it is just the first phase, I mean, our objective with carriage Hills is to take it to the full development of that site and the additional phases of carriage Hills bring in additional building permit and development charges which I have listed there, additional property taxes over and above the first round, additional employment and ultimately realize the cash flows - 4 - Lorna Borgal: e to reduce the taxes. I just wanted to take a minute on page 6 and give you an understanding of the deal that we are dealing with here. Horseshoe has created essentially, well Horseshoe has created a 50/50 venture to become a new company and Horseshoe has 50% and the Shell Group has 50%. Horseshoe has land and makes the resort and manageability. The Shell Group runs the money and the timeshare management and the timeshare sales for us. We create a new company, it has got a national name, but I have identified it there in the centre. It is created and the legal documents are done. I will say that Shell Group has approximately $400,000. - $500,000.00 invested already. They are a u.S. company and they sell over $100 Million in timeshare resorts from Hawaii to the Caribbean. This is their first venture into Canada and they are putting 1.7 million in equity capital for this project. Of the 150 people that we are hiring for the project, 3 come from the States, 147 come from hiring locally at Horseshoe. The big problem that everybody in ontario is running into in the timeshare business is financing. The Shell Group will bring in Finova which is a $8 billion capital company, specialized in timeshare financing and they have committed over $80 million portfolio of loans for Carriage Hills. So out of this, in the first phase, which is the phase we want to activate this summer, you can see there on the page there is $10.5 million construction and $12 million in sales and marketing over the next few years and if we succeed there, we get into phase 2. This is a classic situation where we have leveraged land assets and brought in other peoples money and expertise to bring a deal together. I think it will only bring benefits to this Township. On page 7, what I have tried to do here is deal with the issue of benefits. Our existing timeshare property has 40 units in it. I know that if you phone up sinton's Esso or Granny's at craighurst or the Foodtown or the Horseshoe Valley Trading Company and ask them, if they get business from the existing timeshare and certainly, I will guarantee you Horseshoe gets business from the timeshares. From our own surveys we know people who go to Mount st. Louis skiing, they go to Coulson General Store. I have had McCutcheon tell me that he sells a huge amount of maple syrup to the people who come specifically from the timeshare and we that they go to the other golf courses. I don't have a dollar amount but there is significant dollars dropped in this Township by those people. Horseshoe currently has, based on last year, 708 people who worked at Horseshoe at one time or another through the year, 209 of them live in Oro-Medonte at the time they worked for us. On a permanent full time employee base, there are 163 permanent full time year round jobs at Horseshoe, 58 of them live in Oro-Medonte, 58 of the employees live in Oro-Medonte. Roughly 30% of a $5 million payroll, goes into residents in this Township. The reason I raise that is that Horseshoe is in business in part because it has the existing timeshare and additionally, to be able to create a new timeshare. e On page 9 I would like to point out that of the 150 full time employees that Carriage Hills project will generate, these are not construction jobs. There would be another 200 construction jobs on top of this, 100 will be stationed in Oro-Medonte and working at the resort and 50 will be assigned to a building in Barrie and maybe at some point moved out to the resort when we get a chance, but that is the starting position. All the recruiting for these jobs will be done at Horseshoe. What I am trying to communicate on page 10 is that Carriage Hills in the end gives Horseshoe the vehicle, the methodology, the ability to deal with tax arrears. In the resort, if you go back to the proposal, the proposal is crystal clear in dividing Horseshoe between resort operations and development activity, there is a brick wall financially and structurally in our organization. Our current timeshare generates approximately $400.00 per unit/per week - 5 - Lorna Borgal: e of resort revenue. The new project, fully built out, 172 units, therefore will generate approximately $3.5 million of gross revenues for the resort. The proposal, that is gross, I mean you got to take the net but it is a huge amount of money, huge amount of money in our terms. The proposal stipulates that all excess resort net cash flow must go to reduce the property tax balance and hydro, it stipulates conditions and right now, today, you would never get to that line. We are willing to have the Township on an ongoing go forward basis, if you'Want to have your auditors inspect that, you are welcome to do it. It is part of the proposal and it is in there in the proposal and we follow that to the letter, we don't get down that far in the list of cash needs and that is why I say in the status quo, I don't see any chance in getting that. If you give us some vehicle to create revenue and you get between you and hydro pro rata the dollars of excess cash flow as defined. On the development side, the carriage Hills project has monies that are identified in that page there, page 10, the land discharges go to lenders but that pulls down our interest and principal payments to lenders which again creates additional capital and resort monies. The construction fees, the priority profit share and the profit share, the construction fees come early, the others come later. We are absolutely, and this is what we have tried to communicate in the past, willing to commit a portion of those cash flows to reduce the property tax and we are here tonight to talk about that. i i I On page 11, the reason for the urgency, I absolutely have spent II three years on this project getting our partners to this point andl I think anyone of you knows that when you are selling a house orl buying a business, the point of the time at which the money has tol be signed, everyone gets real nervous and real attentive and we are'l at the real nervous and real attentive stages. They are geared against this schedule that is summarized on page 11 and given thatl we haven't an ability to go forward, the construction of the salesll centre and maintenance building starts right away. Thel construction of the SBR is scheduled, the contracts are scheduledl for or to be signed on the 2nd of August, site service is to startl very early August and we are looking to be in construction of the: 1st phase of 52 units and the club house by mid-August. The budgetl depends oz: us doing that because otherwise we run into additionalll constructl.on costs and we start to go over budget. We see thel sales centre opens, the starting point is you get the buildingl permits and development fees sometime this summer, probably early I August. The SBR is completed from the schedule, it draws completion by the end of October and we have the first phase complete and occupied by February. That is the schedule. On page 12, I just want to put this in to remind us all here and actually I was a bit shocked by the numbers. Since we signed the proposal in June 1993, we have paid the taxes, we have paid the Township $1,939,815.95 in taxes, penalties and interest. $575,000.00 of that is penalties and interest. We fully realize, we still owe the Township $1.3 million, that is the way it is and we are working to try to solve this problem but we are at a point in time at which I don't have anything to offer relative to paying off that amount of money other than allowing us to follow the intent to structure the proposal from day one, which was direct access resort cash flows to the property tax arrears and do joint venture developments which you will find in the proposal and what we are doing is prescribed exactly to bring forward additional cash flows to this long standing problem. In my page 13 it shows how we approach negotiations and this may be right or wrong but we have put forward a position, we looked for a response in some form so that we can understand what is important and we can revise our position and we end up agreeing and that is what we are looking to do. That kind of underlines the informal picture of what we have tried to do here. e - 6 - Lorne Borgal: In page 14 we did put forward a proposal in June 17, relative to the tax to illustrate tied to the ability of going forward with Carriage Hills, I will say that we have not really received a reply to that other than being told that it is not satisfactory and there is no further negotiations. e Our request is that, go back to what we said on the 17th, even if we go forward, we already pay an amount equal to the annual taxes each year, approximately $380,O~0 and continue that, we offer to pay an additional $360,000 a year that is $30,000 a month until the tax balance is paid off. Now we have to have development in order to do this, we can't do this otherwise, we would be in contravention of our own proposal and in contravention of the Court Order if we did anything. Now, we asked in that letter for relief from future penalties and interest. We are paying approximately 15% a year to you so $180,000.00 right now a year goes just to pay penalty and interest and what we would like to do is to see if we can have a discussion tonight to go beyond this to talk about how we might make a deal that would work for you and for us. e I I guess, in sort of summary then, page 15, I have said a lot about! Carriage Hills and about wanting to go forward, we are asking youl! to let us satisfy the severance condition by prorating the taxes based on acreage, pay the taxes on the carriage Hills land or elsel negotiate something else tonight that allows us to resolve the severance matter ........ We do need the passing of the by-law regarding the Hold on thell zoning before August 4th and we are very conscious of your meetingl!1 schedule which is part of what is on everyones agenda and we need! third reading of the site plan by-law. I I Those actions , resolving our differences involved in the severance, I getting the by-law on Hold and getting the third reading on the! site plan, allows us to get going and get past the nervous stage of I, everybody twitching relative to carriage Hills and from the wayil your staff and consultants are processing everything else, and thell way you are processing everything else, we have every belief that~ the rest of the proj ect works, okay we know the process, we carryll on, we have ourselves a project ....... II I guess my last point, and I kind of opened with this, on page 16, II we don't have absolute control of.... that is here and we have al! commitment that it will be done but they also told us very clearlyl that by the end of the month if we haven't cleared these conditions then we have ourselves a problem and we can expect that. We believe absolutely that they will withdraw and go on to the next project. None of our partners need us to survive, we need them in order to have a project. I will guarantee you that there is funding in Canada available for this kind of development today, has there been for about two years and the Canadian market for this kind of project, most development, certainly this kind, is absolutely gone and for us to be able to bring in American capital and create this kind of job is pretty phenomenal step for this Township and the Province and we should be out there ..... Mr. Mayor, I appreciate you listening to us and Council, I appreciate you listening to us, as I have said several times, we would like discuss, we hope to have an open forum, relatively informal to extent we can have discussion and see if we can fundamental satisfy each other with an agreement that allows us to not leave oursel ves at the mercy of the OMB on Thursday and not tie up development. Mayor Beard: Are there any questions of Mr. Borgal, Councillor Dickie? - 7 - Councillor Dickie: You referred to this proposal, I have not seen that proposal and I wonder if our staff have a copy of it. You are talking about the proposal in 1993. (Changing of tape, inaudible) Mayor Beard: e Are there any further questions of council members, any further statements that you wish to make at this time, we will be going into committee of the Whole to discuss a legal matter,........... and then Mr. Borgal has requested, or is going to request ..... Are there any further statements you wish to make at this time Mr. Borgal? Lorne Borgal: Mr. Mayor, I am reminded that this is a public meeting and I was just trying to follow what we just said, am I to understand at this point, sorry, I am just trying to clarify what you just said. Is Council to adjourn briefly and then to reconvene perhaps In-Camera Mayor Beard: I would ask Council to reconvene to discuss the situation under a legal case ........ into Committee of Whole with yourself present, so in other words we have to discuss it first......... Lorne Borgal: This is all tonight we are talking about. Mayor Beard: Yes. Are there any further questions from Councillors or public or the delegation? MOTION NO. 2 Moved by Dickie, seconded by Martin Be it resolved that we do now go In-Camera @ 7:44 p.m. Carried. MOTION NO. 3 Moved by Martin" seconded by Craig e Be it resolved that we do now Rise and Report from In-Camera @ 9:02 p.m. carried. Mayor Beard: I must remind everybody that we are still under the same basis as it was before the meeting, now I will say a short statement. The reason this meeting was called was to discuss communications that was what Council members were advised of in the agenda, Horseshoe Resort Corporation, to discuss lines of communications under the deputations. That is what was requested in the fax requesting the public meeting. council in their debates found that there was a lack of proper notice to solicitors and others being present at various proposals. This is a problem because we can't make the - 8 - Mayor Beard: decisions on a specific proposal without going back to solicitors, I think that should be understood. e The proposal letter from Dale Martin on June 19th, this proposal referred to in the documents and it is the only proposal that ha been received and dealt with and acted upon and has not bee replied to by Horseshoe Valley at this point so, Mr. Borgal, comments on is that the only proposal received, it wasn't receive from Horseshoe directly, it was received from Dale Martin, solicitor, at which time we became aware of an OMB hearing bein scheduled on July 3rd, which we were not aware of up to that point, and we have never officially been advised of the OMB hearing. I that the proposal you are referring to in your documentation? Lorne Borgal: Mr. Mayor, we have to correct a couple of facts. The OMB hearing i not an issue at the time of that proposal. We were attempting t open lines of communication with the Township and we were bein continually told that there was no purpose in it unless we coul pay the whole $1.3 million and taxes. In an effort to try an bring forward some communication we availed ourselves of facilitator, Provincial facilitators office which is Mr. Dal Martin. In trying to bring forward negotiations the provincia facilitator requested us to put forward a proposal relative t paying the taxes. We have made other proposals prior to that whic I have, I don't actually know if I have them with me or not but w have made other proposals. So, we put together a proposal and ou letter is dated June 17th .....document directed to th facilitator's office and then I was subsequently advised by th facilitator it was forwarded to the Township and the answer wa that it was completely unacceptable and not for further discussion, and that is it, a loose phrasing but that is essentially th response we got and that is where it left and to my knowledge ther4 was no other reply, there was no written reply that I ever seen'l sort of thing and there was no invitation for us to make "t subsequent proposal, but within that context then, the proposal 0~1 the 17th, June, my ................. II and that was also, for the record, all prior to, correct me if I a wrong here but, that was all prior to any discussion or approach application to or appeal to the OMB. Mayor Beard: 01 I , I 1 I would amend that because the message on my machine from Dal~ Martin was that we could avoid a hearing on July 3rd, that was o~ Thursday night, and Friday morning I phone, or Thursday night ~ phoned our CAO, she was unaware, pardon me, that was the 1st or 2n9, time she had heard of that hearing and that was already at the OMB.li I was here on Friday talking to the OMB and yes, there had been ~I hearing scheduled, which we were unaware of. II. SO, that message from Dale Martin was on my answering machine an~i I have witnesses to that. So anyway. II Negotiations to begin a dialogue to have a understanding and hav~i a security, further to that, council is willing to look at th~1 proposals but we must have security that all taxes will be paid, ~' don't think that it is anything out of line, but just to the fac~i or comments on the last issue in this matter, you say one of you~1 things when you people talked to negotiating to this coming bac~1 and going forward and back and no negotiating between this party,11 we did our part that thing went back saying that there was no, tha~! it wasn't satisfactory and we received no reply from Horseshoe on that particular thing. So the ball is in your Court sir, that i~ where it stood at that time. e - 9 - Mayor Beard: Now other concerns need to be addressed, that is another thing that council has considered but we must have legal counsel before going any further. I mean, we can you know, we can do all sorts of things and number two, we have three councillors missing but we were you know, when you got the notice was looking at, and they would assume by reading the notice that Horseshoe might be..... e The next point and last point is if a Letter of Credit covering outstanding taxes on subject lands is provided to the Township, proposals will be considered? We have no problem considering proposals. It is in the interest of our taxpayers whom we represent that we must consider the proposal, that we must be consistent, somehow and the type of Letter of Credit, your banker is here I believe, a Corporate Letter of Credit but again we can't make any decisions without consulting our solicitors. If we had been advised two or three days ago, the solicitors would have been here. Again, communications, then we would have our solicitors here and open...about 2:00 o'clock this afternoon, I believe that we were going to meet, people other than senior staff members from Horseshoe, so, I respectfully state that the Township was not remiss in communications, I think that the facts that I just stated prove that we are not remiss in communications..... Lorne Borgal: Mr. Mayor, this whole conversation about prejudiced for the present ........ that is relative to what we are doing here. agreeing is rather an important point e If you come to the issue of communications. We put forward a proposal and the answer wasn't good. Well, then where do we go and if we went back and dug out a couple other letters that we sent on this issue of taxes, the answer is just not good. Well, so we are shooting in the dark when we don't get any hint as to where to go next, we just get no. So......... What I would like to suggest is that if it helps, this is a very vicious, complex relative to many factors. Particularly related to the proposal. Why keeping put forward something and then just get no, it doesn't let us ever find out what direction to go. In our opinion, to the issue of security, the Township has opened its security, you have first charge security on the lands. You have the best security that anybody in this province can have on anything relative to a debt. So where do we go. You have the ultimate security and to my knowledge and I have got no lawyer that has told me differently, there is no way to compromise that security and it is the issue of property taxes, unless I am the one misinformed, then you have got the absolute security. To go beyond that, you are now asking us for two things. One is you are asking us to go in contravention of the proposal and can then be held in contempt of the Court by other parties, other secured creditors who are in the proposal and we can't, we can't do that. And, you are also asking for the impossible. The Letter of Credit in this province, in Canada today, you cannot get a Letter of Credit unless you have dollar for dollar cash flows and to my knowledge, that extends up to very, very large companies.....in our range of a company, it is absolutely true. There is not a financial institution in this Country that will give a Letter of Credit without us having highly negotiable securities and maybe that is not even good enough or pure cash on deposit. You have cash, we pay the cash. So in the request for security, there is nothing that we are asking you to do there to lessen your security. You have the best security. In June of the year 2000, loans are due on the family resort, presumably we have to find a way to, at that point, to resolve any outstanding taxes in order to put any mortgages in place. So, we are hoping to be able to find out from you if there was a range in which we could come to some understanding and to work......is there something to add. - 10 - Jim Cooper: As you are talking about security, I am looking around and the C.A.O. is shaking her head disagreeing with the secured position of the municipality in terms of cash, as far as I am concerned, it is our business and I see it. My understanding is that..... I don't know how you could disagree with it. Can you explain to me why you disagree with that? e Mayor Beard: I don't think we are going to get into that because that is a legall matter I believe this gentleman is quite capable of discussing itl but unfortunately, none of us are quite capable of discussing it inl the sense of the legal issue. . Jim Cooper: e I understand, but I think it is quite important to your request, because what we are saying, I, as a banker, who supported this process, cannot support it further without security because of the proposal and the tying up of the project to all the lenders and there is no means of security from Horseshoe at this stage, there is none, absolutely none. The security that the Township has according to that proposal and any surplus payments to come out of that are directed first to the payment of back taxes before anybody else gets anything. So I think that is your security based on that proposal. Again, it is a legal matter but it is important that bel understood thoroughly because in my understanding of the legalitYI of it that is the way it is. : I I I Lorne Borgal: ! I Mr. Mayor, I appreciate fully that you don't have your Counsel herel ....I would like though to ask Bob, our Counsel to give us, if you wouldn't mind, our view, as Horseshoe, of how we see the proposal. I Contrary to discussion .....the affidavit of your C.A.O., does sayl you have copies of the proposal...... II II Mayor Beard: II II I think we may have a copy of the proposal but we are not entirelyl' sure of the copy of the amendments. We don't know, . . . . . that is thel I problem. . . . . . . I II Lorne Borgal: I I I Maybe I could ask Bob to address how you could verify that....butl there is some benefit in having him, perhaps he could talk aboutl! how, what we perceive as Horseshoe with the role the proposal is inll our conduct of our operations and that is really..... !I II II Bob onyschuk: I Your Worship, in terms of the proposal, your C.A.O. 's affidavitli talks about the proposal amended on May 17th. That is the proposallll.i document that everybody has. They are all dated May 17th. I don't! know why the Court document isn't in the Court file but this is thell document, as I understand it, was tabled at a meeting of Creditors, Ii your Township was represented. Your Township, I believe, I amll sorry this is Oro Township and Medonte Township, were both!! represented. There were minutes of the meetings of May 17th. Theil two municipalities were Class #5 and Medonte voted in favour. il Hydro voted in favour and Oro filed a letter voting in favour andi! the motion that was then passed was unanimously carried approving that proposal. So, if you, your staff have got the proposal dated May 17th and that is what your C.A.O. has in her affidavit. She says "it was further amended May 17th, attached here to and marked - 11 - Bob onyschuk: e as Exhibit "F" to my affidavit is a true copy of it" we ar working from the same document. Now under this document, there was a very clear restructuring proposed. The unsecured creditors ha to be paid off within a certain period of time and that was done within a two year period, in 1995. Basically, traditional injection of cash from investments. Thereafter the proposal says and the proposal carries on, the secured creditors, and that is the Township, at that time and beca~e one Township in 95, actually 94, and the mortgagee are bound to this document as is Horseshoe and if there is any default by any party, that under the Law, every bod goes back to their positions before the proposal and in your case" you could do a tax sale. That hasn't happened because paymentsl have been made on time and property, out of resort revenues. It is very clear in the proposal how taxes, back taxes were included and how taxes were to be paid. In the proposal, it says very clearly in two sections, 5.02 that resort revenues are to be applied first to pay an amount equal to current taxes, you get first priority, equal to current taxes, but then it is applied against arrears to sort of keep revolving, then to operating expenses, then to caPitall1 maintenance, then to the mortgagees, then there is an amount that was agreed to for a working capital fund and then, the last of thel revenue to be paid to tax arrears. That hasn't been whittled down, more than it is today which is a 1.3 million. Now also, the second part where it deals with the Classes which is where each class has a vote. In Class 5, section 13, it says very clearly. propertYI Taxes. All tax arrears against real property, including interest, will be paid in those years in which there are resort revenuesl available to pay such amounts. The resort revenues and I understand it, have not been, and that is a binding contract, al binding document approved by Court, by the Court. The revenues since those years haven't been there I guess since 1993. The~ haven't been there to reduce the taxes beyond what they are now. II That is because you need new development to be able to generate! additional revenues, this goes back to the original point as state~1 by Mr. Borgal. That is way you can significantly payoff the taxesl, without having to pay interest and penal ties, and current taxes .11 That was also partly because we all went through a recession and II guess we are still going through a recession. One that we havel never seen in the Province and I have practised municipal law fori many, many years, ......... but that opportunity allowed thosel arrears to be paid off a hell of a lot faster than they would anYI other....so I am not going to go beyond that. I Let me just deal with one other point which had to do with th~ point about security. II II The municipality under the Municipal Act had a first Charge and all Lien ahead of the mortgagees on any property. You are bound byll this proposal as are we. If there was a breach of it, you could doll a tax sale, but your are in a secure position and you are treatedll as a secured party. But to cut to the point about a Letter 0~1 Credit, there isn't any assets that Horseshoe can offer to a bank,l! whether it be Royal Bank or everybody else, as security to be able!1 to get a Letter of Credit for $1.3 million and why is that? Firs~1 of all, all of the assets of Horseshoe are covered by thisl! proposal, they are covered by the terms of it and by. the mortgagesll that are on them now. Anythl.ng you would have to ral.se would have!! to be raised on top of or give third or fourth position above (a>l: the municipality in the first position, the mortgagee, all thell other secured creditors in this proposal and then, only then, coul~1 a security be taken by a bank for $1. 3 million, in that position,11 fourth position. No bank, as you or I think all of us would know,11 and I am not telling you ..... from a practical business sense, I' would give you a third mortgage or even a second mortgage, neveri' mind a fourth. The point is, all of the present assets are covered. They are covered by this proposal and nobody can lend, on top of it, because he would have to read this and say, wai~ a minute, I am not going to get paid until everybody else under thl.s e - 12 - Bob onyschuk: e gets paid, this is not a very good risk, alright, so you may say but there is 18 acres that are going to get carved up, don't we get a mortgage on that? Good question. The answer that is on page 6 of the position as made by Mr. Borgal. That is, if this project of Carriage Hills is going to go ahead, it has to be secured by the finances that is being brought to that proj and that will have to stand in first.... therefore, again security is taken to the tune of $25 million, and a project hasn't been built and any financing that you ask of any bank, Letter of Credit, again would have to be in at least a position. If this financing takes out the existing mortgagees this, again, you haven't got security there to be able to cover $1.3 million. What you do have is a cash flow that is going to start coming to this project which can be applied against the arrears of taxes. That, I hope, I am not trying to do this leg~lly, but I will try to break it down sort of you know, a business man and that is what I am basically and try to understand it, which is why I said to Mr. Borgal and to Horseshoe, look, we can all go to the Board, we would all have a great fight, I have had great cases, the Municipal Board consistently said, municipal taxes are not added ...condition. I even have cases from...going back to 1973 saying we are not going to be a tax collection agency. That is not the issue. That has got to be a waste of time, your time, our time, your money, our money. This is a matter about trying to establish communication plus coming to an arrangement that will work and start to work between the Township and Horseshoe. You are looking at a long term tax payer and a long term business community. You have got to talk to each other...... Lorne Borgal: e Thanks. Mr. Mayor, all I would like to say with respect to what Bob was saying, is that in the course of the time since we have done the proposal I have had five independent different legal firms tell me the same thing as Bob just told us about the proposal, as it pertains to the ....., the only reason I am saying that is that if you are concerned about the issues that the proposal brings to the table, then I would ask you, please to ask your counsel to inform themselves, to have the bankruptcy specialists in their firm, inform themselves of the proposal and speak to you directly about that because when I had five different law firms tell me the same thing, eventually have to give in and I believe what they sit there telling me and I am talking about major firms. The other thing that I would offer here is that we are all sitting here and chewing up $250. hours of lawyers and, no disrespect to present company, and what we are talking about is 18 acres of dirt and weeds out of a 500 acre parcel that includes a hotel, timeshare, most of the ski hills and most the golf course and the chalet building, I mean we are talking about 18 acres of weeds and that is what it is and I would gladly go stand on it tomorrow with you and show you the land I am talking about, if there is any doubt in your mind as to what we are talking about. I don't have any way in the world of as Bob says, creating a Letter of Credit relative to that but, I also believe that we are not asking you to do anything to compromise your security and you have got the best security and the parcel of land we are trying to sever off for Carriage Hills has no, and I totally absolutely believe this, no intrinsic, or direct or related value to the asset base that forms the bulk of the tax bill and so, that is our story. (end of tape) Mayor Beard: (inaudible) " ,. e e Be it resolved that a By-law to confirm the proceedings of council, be introduced and read a first and second time and numbered No. 96-81(a). - 13 - MOTION NO. 4 Moved by Dickie, seconded by craig carried. That By-law 96-S1(a) be read a third time and finallY passed, be engrossed by the Clerk, signed and sealed by the Mayor. MOTION NO. 5 Moved by Dickie, seconded by Martin Be it resolved that we do noW adjourn @ 9:30 p.m. L,./- /J'J MAYOR IAN BEAR carried. carried.