In a move that would change the way accounting is done in municipal books, the Yukon government and the Association of Yukon Communities (AYC) hammered out a well-drilling deal last Thursday.

AYC president Coun. Doug Graham said the deal was struck at a Thursday meeting. It will see changes to the Municipal Act that will likely 'have a long-term impact' on municipal infrastructure projects in the territory.

'They've (the YTG) agreed to a couple of things. They've gone out of their way,' he said.

The deal, according to Graham, will involve legislative changes in which money borrowed from municipalities and lent to residents for well-drilling projects will not be counted as debt on municipal books.

He said the deal, which would still need approval in the legislature, would also likely be extended to other municipal infrastructure projects. That means Yukon municipalities would have fewer financial restraints placed on them by legislation.

Graham said the changes were proposed since the well debts were scheduled to be paid back on property taxes, so it was assumed the loans to residents were low-risk and would eventually come back to the municipality.

'One of the problems was the difficulty municipalities would face if money was lent to them, it would show up as community debt, that would have really impacted smaller communities.

'Those kinds of things wouldn't be included in the debt load any longer,' Graham said.

In an interview this morning, Community Services Minister Glenn Hart said he had agreed to look at some changes to the act.

'We agreed to bring it up and it will go to the Municipal Act Review Committee,' he said.

He said it could be a long process and any changes as well as any effects legislative changes would have on other municipal infrastructure projects would become clearer after it had been looked at by the review committee.

After being offered the original deal by Hart, which would see the YTG bankroll municipalities for country-residential well drilling, the AYC declared the proposal to be unworkable and requested an alternative funding arrangement.

The original deal proposed by Hart would see the funds lent to municipalities at an interest rate of 2.75 per cent.

The funds would then be lent to country-residential residents to drill wells, which costs between $20,000 and $30,000, and would be paid back to municipalities in the form of property taxes.

The AYC rejected the proposal, stating smaller municipalities could not handle that kind of debt and in some cases could end up borrowing more money than was legally allowed under the Yukon Municipal Act.

According to section 252(1) of the act, the total amount of debt a municipality can incur cannot exceed 'three per cent' of land within municipal boundaries that is subject to property taxes unless otherwise authorized by the minister.

Last week, Tom Paterson, the AYC's executive director, said even if the territory's smaller municipalities were legally able to borrow $20,000 to $30,000 per resident for the well-drilling program, the debt would prohibit those municipalities from borrowing for other projects.

'If three or four wanted it (the program), it would limit the borrowing capacity of the (smaller) municipality,' Paterson said.

Under the existing act, smaller municipalities such as Carmacks, Haines Junction, Mayo and Teslin, can only borrow $407,556, $969,379, $485,148 and $472,322 respectively.