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Councillors for the Cape Breton Regional Municipality are calling in the Mounties over the controversial sale of one of their own properties in Sydney harbour.
The move comes after councillors found out staff had completed a lease-to-own deal last month for the wharf in Sydport industrial park without them knowing about it.
CBRM staff say the agreement was approved by council in 2015 and the municipality had no choice but to allow the sale to go through under the terms of the lease.
Coun. Gordon MacDonald said he still has questions and the RCMP can get answers.
“Council is not making any finding of wrongdoing, but recognizes that certain irregularities may warrant an independent review,” he said during Tuesday’s council meeting.
“We’ve identified concerns with the process around the Sydport transaction. We have questions about authorization, transparency and whether procedures were followed under the [Municipal Government Act].
“We’re not alleging wrongdoing, but where there are process gaps, there can also be risk.”
Coun. Earlene MacMullin says Point Edward Marine was subletting at least part of the property to another company, which was only allowed under the lease with CBRM’s permission. (Tom Ayers/CBC)
Councillors were especially upset when they found out afterwards that the deed to the property was signed over to Point Edward Marine by Mayor Cecil Clarke two days before budget talks had concluded.
Several councillors want the sale stopped, saying the tenant broke various aspects of the lease.
Coun. Earlene MacMullin said the tenant was subletting at least part of the property to another company, which was only allowed under the lease with CBRM’s permission.
“In this case, it’s not really a technicality,” she said. “From what I’ve looked up and what I can figure out, that would actually — if we would have caught it — been a material breach of the lease.”
Coun. Steve Parsons says he told CBRM’s solicitor several years ago the site’s operations building, which was functional in 2015, had become derelict, breaching one of the lease conditions. (Tom Ayers/CBC)
MacMullin said the RCMP might be able to help straighten things out.
“Am I 100 per cent sure that’s who it should start with? No, but I’m glad that it’s going there because if it’s not there, they’re going to tell us where to take it.”
Coun. Steve Parsons said he told CBRM’s solicitor several years ago the site’s operations building that was functional in 2015 had become derelict, which breaches a lease condition.
He also said council should never have agreed to the deal, which allowed a private company to buy a piece of land at a 10-year-old price without a recent appraisal.
Chief administrative officer Demetri Kachafanas says if someone rented an apartment and broke a ceiling tile or chipped the paint, it might affect a maintenance clause, but wouldn’t terminate a lease. (Tom Ayers/CBC)
Chief administrative officer Demetri Kachafanas, who was CBRM’s solicitor in 2015, told council CBRM was bound to sell by the terms of the lease.
He said if the tenant broke some aspects of it, they are minor and do not nullify the agreement.
“They’re what we call boilerplate clauses. They’re in most standard leases.”
Kachafanas said if someone rented an apartment and broke a ceiling tile or chipped the paint, it might affect a maintenance clause, but wouldn’t terminate a lease.
‘We’re not good landlords’
He also said CBRM didn’t check on the condition of the property during the lease, partly because staff were not set up to do that.
“We’re not good landlords. We don’t have the resources to go and monitor properties,” Kachafanas said.
He also said he doubts the Mounties can reverse the sale.
Kachafanas admitted council should have been told about the sale, saying staff simply treated it like a routine matter and didn’t think it was necessary to mention it.
Coun. Steve Gillespie says CBRM should not be in the leasing business. He says it should sell its land and collect tax revenues, which would avoid difficulties with lease agreements. (Tom Ayers/CBC)
Coun. Steve Gillespie said CBRM should get out of that business altogether.
“I don’t think we should be in the lease business. I don’t think we should be in the building-owning business.
“I don’t think we should own property. I think we should sell it and do what municipalities do best: sell it, get that revenue and collect taxes, because issues like this come up.”
Kachafanas said the deal was struck in order to spark economic development and said council could debate whether the deal had worked.
At the time, council minutes said the tenant was expected to invest millions of dollars in the property, spend millions more buying local supplies and create more than 100 jobs.
Coun. Kim Sheppard-Campbell says CBRM has not received any profit from the Sydport land deal and has only got a big headache. (Tom Ayers/CBC)
Coun. Kim Sheppard-Campbell said the deal was not good for CBRM.
“I don’t see any profit that we made over this property,” she said. “The only thing it’s really actually given us is this big headache right now.”
CBRM bought the property for $1.2 million in 2015 with the intention of leasing it to Point Edward Marine.
Under the agreement, the tenant paid $90,000 a year for 10 years and could buy the land for $1.2 million, less a lease payment credit of $60,000 a year.
Staff said the final sale price was $564,600.
Chief financial officer Nancy Dove told council she is still working on an analysis of the deal, but said CBRM probably made up to $300,000 profit.
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