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By Alessia Proietti

Almost 20 years

Red Deer city council considers forgiving “unusual” $1.5 million loan to River Bend Society

Apr 3, 2023 | 10:09 PM

The City of Red Deer is considering forgiveness for a $1.5 million loan made to the River Bend Golf and Recreation Society (RBGRS) that hasn’t been paid for almost 20 years.

At their meeting on Monday, city council gave first reading to repeal a loan bylaw to the Society.

The River Bend Recreation Site is a city-owned recreation and golf amenity that is operated through an agreement by the Society as a third party not-for-profit.

The Operating Agreement requires the Society to pay the city a percentage of golf revenue as a License Fee and a distribution of their annual surplus. The City pays the Society a Fee for Service to operate their recreation amenities, among other responsibilities.

In 2004, council approved a request for a $1.7 million loan by the Society for a clubhouse renovation and expansion project, to be repaid in annual increments of $140,000 over a 20 year period. Council approved the loan bylaw in 2007.

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As of today, only one payment has been made, with the outstanding balance remaining at $1,544,519.

READ: In-Depth: Why hasn’t River Bend’s $1.7 million loan been repaid to the City in 20 years?

“For future payments, the best predictors are past performances. With a single payment over the last 16 years, the expectations are very unlikely on a full repayment on the loan,” said Ray MacIntosh, the city’s Chief Financial Officer.

“This is an unusual circumstance, where this loan was provided by the City to upgrade a City-owned asset and therefore is not a financial liability for the City.”

Councillor Vesna Higham compared the situation to a landlord asking a tenant to pay for fixing the roof of a property.

At the time, a city archive states the Society and City claimed they were “confident” the loan would be repaid in full and on time.

Sarah Tittemore, General Manager of Community Services for the city, said that while it is difficult to ask those council members why this loan was given in the first place, RBGRS has faced various obstacles since, including road construction making access to River Bend difficult for residents and issues in the Operating Agreement, that caused council to continue to defer the loan payments.

“This is the first time that the River Bend Society has asked us to consider forgiving the loan formally,” she said.

In 2020, the city hired Deloitte to conduct an assessment. They recommended that RBGRS’s financial sustainability would only be achieved if the City forgave the outstanding loan as they could not afford to both repay the loan under the current requirements and invest in golf capital.

However, the pandemic caused an uptick in golf among the public, increasing revenues at River Bend.

Summary of License Fees and Annual Surplus Distribution by the Society to the City of Red Deer. (City of Red Deer council agenda April 3 p. 1150)

The City and RBGRS say they have not identified new or increased sources of revenue that would allow loan payments. As well, the Fee for Service, Licence Fees and Profit Sharing have not been used by the City as an avenue for loan payments, they say.

The City says the Society is also required to pay annual taxes to the City outside the agreement and paid $79,362.84 in 2022.

When asked if the golf course could be sustainable on its own, as other private golf courses in the city, Tittemore said she could not respond as the City has placed barriers on River Bend to make it affordable for the public as a municipal amenity.

The City says the loan does not appear in their annual financial statements because the RBGRS is a controlled and consolidated entity by the city and, therefore, it is as if they provided a loan, interest free, to themselves.

This is also the reason why MacIntosh says he has confidence that other organizations will pay off their loans to the city as they have more freedom to control their own fees and operations. Some outstanding loans are currently with the Humane Society and the Westerner Exposition Association.

READ: Red Deer city council helps Westerner Exposition Association towards financial sustainability

The City and the RBGRS are currently in negotiations to renew the operating agreement from 2017 by the end of the year, with modifications.

With the River Bend Golf and Recreation Area Master Plan proposing over $5 million in renovations to the golf area, Tittemore says the funds will go towards maintaining the irrigation system and improving playability for women and youth, who are increasingly interested in the sport.

Council will consider second and third reading of repealing the River Bend loan bylaw in May.