Delay in letter of credit policy upsets councillor
Finance committee receives a report instead of draft policy
| Posted: Wednesday, Sep 11, 2013 06:00 am
A lengthy delay in getting a policy written has raised the ire of an outgoing councillor.
Coun. Roger Lemieux, who is not running for re-election, said he was “deeply disappointed” at the time it’s taking to get a letter of credit policy before council during the standing committee on finance meeting Monday night. A letter of credit is a security provided by a developer, acting as a deposit to ensure engineering and landscaping parts of a project are completed to the city’s standards.
Lemieux said he’s been asking for a policy to be considered since 2009, and was told to wait until after the 2010 election, which he did. He said an information request was made in 2010, and thanks to information from earlier this year he was expecting to see a draft policy during Monday’s meeting. Instead, council received a report on the letter of credit management practices and the information a policy would be presented in the first quarter of 2014.
Lemieux said he’s done research and most communities have such a policy and said it appeared to him to be a simple one to put together.
“I cannot understand why it’s not been taken seriously,” he said. “This was supposed to be in our hands, completed, for us to vote on.”
It’s tough for businesses, especially small businesses, to lose access to funds like that and have to wait so long to get them back, Lemieux said. Funds are supposed to be released once the work is deemed complete and to standards, and can be reduced as different stages are met. Developers have to request a reduction or release of the letter of credit.
Lemieux was hesitant to point fingers at staff, since many are newer additions, but asked if there’s a policy in place to handle information requests from council to make sure nothing ends up in limbo.
City manager Patrick Draper said there is a process in place to manage such requests. As for the delay in getting the policy in front of council, he said he took responsibility but said in terms of workload, the planning and engineering department is getting “maxed out.”
“We’ve been trying to advance this. This is not an excuse but it is a reality in terms of the workload in our engineering department,” Draper said.
Coun. Wes Brodhead noted the report said there’s a lot of outstanding letters of credit – $24.4 million on the register, and asked at what point the city can say “enough is enough” and cash it in to complete the project to city standards.
“Do people actually just abandon the money?” he asked.
Director of engineering Tracy Allen said they are currently working with legal right now to address the issue of claiming the money, and said sometimes people do not apply to get their letter of credit back, while sometimes it’s just a delay.
Coun. Cam MacKay said he thinks the onus falling on developers to request the letter of credit back “seems like a bad policy to begin with” that could deter smaller developers from working in St. Albert.
MacKay suggested a business case be brought forward to “clean-up” the backlog of letters of credit that goes back years.
David Hales, general manager of planning and engineering for the city, said in 20 years of his experience he’s only had to draw on a letter of credit twice.
“The drawing of the letters of credit is the last resort,” Hales said. “It’s just a mechanism to look out for the city’s interest.”
Coun. Malcolm Parker asked how long it would take to get the policy, wondering if this council could see it before the end of their term. Allen said it couldn’t be completed in two weeks, which is when the last scheduled council meeting is before the election.
Parker suggested a policy of tailoring the letter of credit requirements so that developers known to perform well can be considered a lower risk.
“I certainly think there might be some incentive by having them be in a lower risk category,” Parker said.
The council’s standing committee on finance voted unanimously to accept the report as information and to receive a policy back by April 1, 2014.