Council supports Marigold financially

By Miriam Ostermann, Associate Editor

Forging ahead with an anticipated win-win solution, Strathmore’s elected officials pledged their support – financial and emotional – to the Marigold Library system by instructing administration to complete a draft loan agreement between the two parties.
The not-for-profit municipal collaborative, which provides services and support to 37 public library members in 44 municipalities, approached town council on Sept. 6 about acquiring a loan of $2 million.
The additional funds, together with a $3 million capital infrastructure grant and the organization’s own capital reserve funding of $2.5 million, would top up Marigold’s capital funding for a new headquarters building located in Strathmore.
Marigold and the Western Irrigation District (WID) entered into a joint venture to share and co-own a 40,000 sq. ft. building to be housed on WID-owned land. The library system budgeted $8 million to own $20,000 sq. ft. of the proposed facility – space deemed necessary by a two-year feasibility study.
However, without securing a loan from the town, Marigold was left at a standstill. Then during last week’s regular council meeting, council unanimously agreed for a draft loan agreement to be completed between Marigold and the Town of Strathmore.
“Marigold library sustains its operation in such a manner that success with public audits have shown the health of the organization and the diligence of its financial operation,” said Councillor Denise Peterson, who made the motion. “Our town is striving to establish a community that promotes social and relational capital to collective learning, collaboration and cooperation. This partnership with WID exemplifies this to a huge degree. It is the kind of community that we want to build and I think that Marigold and WID together give us an amazing opportunity to set a template into the future.”
The Municipal Government Act (MGA) contains provisions to allow a municipality to provide a loan to a non-profit organization but must be authorized by bylaw. The regulation contains the purpose and amount of the loan, repayment terms, the term of the loan, the minimum rate of interest and the source of the loan.
Currently, the town has limited resources from which to draw funds. According to administration, the loan would be included in calculating the utilization of the town’s debt limit. The limit is expected to rise by 2.7 per cent for every $1 million loaned. At the moment, the town’s utilization of debt is at approximately 37 per cent.
“We are anticipating that we would use existing cash available within the town, and it may require the authority of some of our investments from bonds currently being held to this point,” said Mel Tiede, director of corporate services for the Town of Strathmore. “We would receive an interest rate that would be advantageous to the town and yet affordable to the library system. There’s no question that the Marigold system does assist in the local economy. They employ quite a few people in the town, they have published financial statements which are audited annually and they represent an organization that’s a benefit to the community.”
Over the past year, Alberta capital finance interest rates have increased by roughly one per cent, as a result of the Bank of Canada’s increase in the overnight interest rate and general market place increases to the interest rate.
Tiede informed council to loan an amount with an interest rate as posted by the Alberta Capital Finance Authority as well as an additional one per cent. The interest rate would be adjusted, based on the interest rate of the original term, every three years.
Seven years ago, the debt percentage ratio was in the 60 per cent vicinity. Since then, the percentage dropped to 23 per cent, and rose to 36 per cent as a result of the borrowing bylaw this year. With the proposed loan, that percentage would reach 43 per cent. Every year, Strathmore contributes $3 million in debt repayment.
While council was concerned about the town’s utilized debt limit, council members were reassured of Marigold’s strong financial position, and of acquiring an asset by turning the loan into a mortgage.
“Does this loan have an overall impact on our total borrowing capacity? The answer is yes it does,” said James Thackray, Town of Strathmore chief administrative officer. “We are just shifting some of our financial position to try and make it beneficial for both parties, and we believe this is a win-win for Marigold and ourselves. But certainly the MGA will require a financial statement and they will reflect it even though we’re borrowing from ourselves. There are some other cities that do that and in certain amounts it can be very advantageous.”
The Marigold Library System has called Strathmore home for 37 years, and 80 per cent of their 33-member staff resides in the town. As time went on and members and patronage soared, Marigold quickly turned from one of the smallest regional library systems into the largest, and has thus outgrown the 9,600 sq. ft. building that is plagued with space limitations and deterioration.
In securing financial support with the Town of Strathmore, Marigold now has the opportunity to forge ahead with the necessary measures and approvals for the creation of their new headquarters facility, expected to have a three-year timeline.
With the absence of Councillor Brad Walls, council voted unanimously to accept the letter of intent and instructed administration to complete a draft agreement with the Marigold Library System.