Napanee councillors clash on allocation of property proceeds

The sale of the property at 45 Commercial Court and the purchase of the new municipal headquarters at 99 Advance Avenue were once again hot topics for Greater Napanee Town Council at their meeting held Tuesday, Sep. 12, 2023.

Deputy Treasurer Nathan Murphy gave his financial service report, asking that Council approve a staff recommendation of a split of the proceeds from the property sale, with one-third going to Town reserves to pay for the purchase of 99 Advance Avenue, and the other two-thirds going to the Utilities Capital Reserves for the construction of the maintenance garage at the water pollution control plant. 

At the August 29, 2023, Council meeting, staff brought forward a report that outlined the proceeds of the sale of 45 Commercial Court to determine the appropriate allocation of proceeds between Town and utilities reserves. At that meeting, there was some confusion, as the sale of the property was $1,500,000, yet the proceeds to be distributed were under $1,000,000. Rather than a verbal explanation, Council requested a detailed report to explain the process of determining this balance.

In their new report to Council, Town staff explained that the balance of reserves and reserve funds is composed of equity (which is made up of surplus balances and predetermined contributions from budget processes). Therefore, current reserve balances are not solely cash values; they have been built through surpluses year over year by the municipality.  

The report states that this is a result of revenues that are greater than expenses, but are not in the form of cash; revenue is recognized based on an accrual basis. The difference in the proceeds of disposition and sale price can be identified through the differences between cash and accrual accounting.

Councillor Dave Pinnell addressed Murphy, saying, “I just wanted to bring this up for clarification: in the staff report… the sale of the property [at 45 Commercial Court] was $1.5 million, and… after we do our calculations, we have $965,000 left to divvy up between utilities or to the purchase of 99 Advance Ave, [the new town municipal office building].”

“There seemed to be… $470,000 that didn’t appear on this… The assessed value of that building was $730,000 and the accumulative appreciation was $260,000, so, therefore, if you take the 260 away from 730, that’s the 470. You assured me that that $470,000 will be going into our general ledger and our general account?” Pinnell posed.

Murphy confirmed that the Town does receive all those funds into its general bank account: “It is a disbursement through accrual accounting… So ‘yes,’ in short.”

Then councillors got into a debate about the fairness of how those funds should be split between the Town and utilities Reserves.

Pinnell continued, “I was led to believe that the proceeds from the sale of buildings would be going towards the purchase of 99 [Advance Avenue]… [But] when we sell 45 Commercial Court, it’s determined that this building’s sale proceeds must go to utilities, or a major portion of it, because it was bought with utilities funds.” 

The councillor stated that, had he known this was the case, he might not have voted to purchase 99 Advance Avenue, “because this $965,000 would have made a good repayment towards that building. As a matter of fact, $1.3 million would have even been better.”

Pinnell went on to suggest alternatives to the division of funds: “We can have either all of it go to the purchase of 99 [Advance Avenue, though] I know I’m going to lose that [vote] — or one third going to 99 [Advance Ave] and two thirds going to utilities. But I think… the only thing that would be fair is maybe we did a 50/50 split.”

He confirmed that he knew that all of the money would go to Town bank accounts, but explained he thought the 50/50 split was a fair compromise given that he was led to believe the money was supposed to go toward the purchase of 99 Advance Ave.

Pinnell continued, noting “there is an issue with the rent that’s being back paid” to the new owners of 45 Commercial Court for use of the garage there until a new garage is built at the new site, “estimated to be around $80,000.” A report from Aug. 29, 2023, suggested that the $80,000 would be taken off the $965,000 proceeds leaving $885,000 to be split up, he said. The councillor suggested that, since utilities will be using that space, the rent should come out of their portion after the split.

At this point, Councillor Bill Martin took the floor.

“I’m not going to apologize for looking after the interests of utility customers in Napanee,” he began, noting that 45 Commercial Court was originally purchased using funds from the Utilities Capital Budget, “and we, as utility customers, pay our water and sewer bills every two months. That is where that money came from.”

Martin said he didn’t object to a one-third/two-third split — “It’s more than fair” — but he emphasized that “rural ratepayers did not pay a penny” toward the purchase of 45 Commercial Court and therefore should not see the benefit of the sale.

“So that’s where I stand on that. And yeah, you’re going to get an argument from me every time you bring that up,” he stated bluntly.

Pinnell responded, “If we were going to consider your stance on this, Councillor Martin, then I would have thought maybe you should go for the $470,000… the depreciated value of that property, as well, and those monies are just going into the general accounts… If we’re going to use that argument, then you should be going for the extra money, as well.”

“If you want to give me the extra $470,000, sure, we’ll take it,” Martin retorted. “That doesn’t make any sense to me… I’m trying to give one-third of the money to help pay out 99 Advance Avenue. I think that’s being more than fair, and I don’t see any reason why we shouldn’t be able to settle on that amount. I don’t understand where you’re coming up with the 50/50 split.”

Councillor Mike Schenk pointed out that the hamlet of Sandhurst pays for water and sewer, so “everybody paid towards that. The way it was split, one third and two thirds: I feel it was fair… It’s palatable for everybody.” Martin agreed.

Pinnell again advocated that the $80,000 come out of the utilities coffers. Martin disagreed, saying it should come out of the total before it is “divvied up.”

Mayor Terry Richardson clarified that the staff recommendation was that the funds be split one-third and two-thirds, without the rent involved.

Deputy Mayor Brian Calver moved that the staff recommendation be accepted, seconded by Schenk.

Pinnell asked for a recorded vote, and the motion passed with only Pinnell opposed.

As always, Town Council meetings can be viewed virtually on the Town’s YouTube channel, and meeting agendas are available on the Greater Napanee Meeting Information Portal.