In a deal that on the surface may have some shaking their heads but which Town staff and councillors have decided is the best option, Muskoka Montessori School may purchase Brunel Hall, the building the school has been a long-term lessee of, for $55,698.20.
In April 2016, staff presented a report to council outlining an offer from Muskoka Montessori School: they would assume ownership of the property through a reversionary agreement and a payment of two dollars.
Council elected to hear community feedback before making a decision on that offer and staff scheduled a public meeting in May. Only 39 people attended and the sentiment of the group landed firmly in support of the school. (See a link to that story at the bottom of this post.)
Since that meeting, school officials have revised their offer to the Town: Muskoka Montessori School would purchase the property from the Town for $55,698.20 and they requested the option to make monthly payments of $400 (interest would be applied); if the school wanted to sell the property in the future the Town would have first right of refusal to buy it at fair market value. The purchase price proposed by the school is equivalent to the negative balance in the Town’s Capital Reserve Account for the property, which was incurred due to work required; ownership would transfer immediately and the school would have to pay all costs associated with maintaining the property.
Other options presented to council by staff were to decline the offer and advertise the property for sale, or to decline the offer and continue with the current lease agreement which has the school paying $22,248 annually or $1,854 monthly for use of the building. Those lease payments cover the costs associated with required Town maintenance of the property and any balance remaining from the lease payments (budgeted at $7,003 for 2016) is used to pay down the reserve account negative balance.
What council thought of the offer
Several councillors were incredulous that the Town would be required to pay the full market value of the property if it wanted it back – Councillor Bob Stone said the deal looked like a bad business decision while Councillor Jonathan Wiebe wanted to know what fair market value for the property is and whether improvements made by school should be taken into consideration. They should meet somewhere in the middle, Wiebe suggested.
The Town’s Executive Director of Community Services, Kari Lambe, couldn’t provide the current market value for the property but said that its MPAC assessment is about $238,000. She noted that the school has been creative in doing repairs – utilizing volunteers where possible to keep costs down – and that it would be impossible to put an exact value on those improvements.
The deal as it was presented didn’t sit well with Deputy Mayor Karin Terziano, in particular that the payout period, at approximately 11 years, is too long and the buy back shouldn’t be at market value.
I like the idea of Montessori buying the building, but if somebody is here representing the taxpayer of Huntsville, it’s not a great deal… I could agree to sell it for what the debt is on the building as opposed to fair market value but not with the provision that we would have first right of refusal to buy it back at fair market value. I understand they put a lot of work and effort into the building and will probably continue to do that but the town has a lot invested in it prior to the $55,000 deficit too.
Deputy Mayor Karin Terziano
Why sell it at all?
Council, under the direction of Mayor Scott Aitchison, has been pushing to get rid of physical assets that it doesn’t need to keep.
It makes sense to me that we don’t necessarily need to own physical assets to provide services. The Corporation of the Town of Huntsville doesn’t exist to own real estate; we exist to provide services to the community. This facility provides no services to our constituents. It hasn’t for years… I see this as an opportunity to get the debt cleared up, get the asset off our books, and stop weighing down the taxpayer with cost of that.
Mayor Scott Aitchison
Given that the school have been good tenants and great community members, Councillor Dan Armour expressed a desire to work with them to come to an agreement, a sentiment that Councillor Nancy Alcock supported.
After further debate, the motion was amended to support the sale of the property to Muskoka Montessori School for a lump sum of $55,698.20 and should the school wish to dispose of the property that the Town would have the right of first refusal to purchase it back at the sale price plus the value of any capital improvements to the property from the date of sale. The motion was carried with only Councillor Det Schumacher in opposition and will return to Council for ratification. Muskoka Montessori School will be required to obtain the funds to pay the sum in full.
Related stories:
Muskoka Montessori School would like to buy Brunel Hall for two dollars
Not much interest from Brunel residents on fate of their community hall
Don’t miss out on Doppler! Sign up for our free, twice-weekly newsletter here.
“This facility provides no services to our constituents.” Are students not constituents? Or are services not services unless a fee-for service is paid to the Town?
That being said (and considering the approximately $7,000 per annum mortgage payments that the school has been paying for some years), this is a fair deal. Of course, it also begs the question: What has the Town been supplying in the way of maintenance for $15,000 annually? Snow plowing? Roof replacement (re-shingling)? Vinyl siding? New flooring? On top of this, to require payment in full, is patently unfair.
The building is in good shape; it is set up as a school (with considerable costs associated with using it otherwise); and the parents are doing all medium-cost maintenance. Surely a fair length of mortgage, in the five-to-ten-year range, would be more equitable.
Thank you Det for representing the taxpayers here. Really hope this isn’t the slippery slope that leads to the disposal of community assets. Reminds you of The Provincial gov’t selling taxpayer-owned assets to pay for debt. The town continues its course of poor real estate activity. I know, because I was part of it. Congrats to Montessori. You got a steal of a deal !
It is probably none of my business since I do not pay taxes to the town of Hunstsville. But why would the town not list the property on the open market through a Real Estate firm and see if they could get value for the property now?
Kind Regards
M. A. Stickland