According to the government's supervisor of Dawson City, the town council could have been tossed out of office four months ago.

Andre Carrel, the supervisor appointed by Community Services Minister Glenn Hart to look into Dawson City's finances, indicated in his report the council could have been removed in October.

'On Oct. 3, 2003, council failed to make an interest and principal payment in the amount of $101,700 due to the government of Yukon under the terms of a debenture (loan) agreement. The minister had the authority to suspend the council and appoint a trustee since Oct. 3, 2003,' Carrel wrote in his final report.

Dawson City Mayor Glen Everitt said Carrel's assertion was part of a lengthy dispute between the town and the territorial government.

Everitt said the town requested as early as July that the territorial government give Dawson City the remaining $930,000 on a $4.46 million loan. The loan had been worked out with the previous Liberal government.

The town council told the government to remove the $101,700 payment from the money it would be receiving.

However, the money never came, putting Dawson City in the situation where the government could have removed the council.

'He's saying that we didn't pay that bill,' Everitt said.

Technically, the town hadn't paid the bill because Hart refused to hand out the remaining amount of the loan.

Both Everitt and former supervisor Ken Hodgins thought the loan had been set up so that whenever the town asked for part of it, the money would be handed over.

At the time, Hart's decision to withhold money the community was expecting upset the town council.

'We were expecting our monies since July,' said Everitt.

But Hart said he wanted to hold onto the money until Carrel had finished his report on the town's financial situation.

Carrel was appointed to replace Hodgins on Oct. 3, the same day the territorial government was in the position to take over council.

Carrel's report does set out how council can be removed because of the town's financial position.

Currently, Dawson City council is going through arbitration to end a dispute between the town and the company hired to build a new recreation centre.

In the final draft version of his report, Carrel said the arbitrator could order the town to pay the contractor as much as $4 million.

The financial plan sets out a contingency fund of up to $1.35 million for Dawson City to pay off the arbitrator's ruling.

The town council may be looking at the end of the road if the arbitrator awards the company more than $1.35 million, according to the report.

Carrel's report states 'if the award exceeds $1.35 million, the government of Yukon will have to give serious consideration to placing the city under trusteeship.'

He also recommends Dawson City council 'consider requesting that the minister appoint a trustee if the arbitration award exceeds $1.35 million.'

Everitt said today the council is working on 12 bylaws and three policy statements to implement most of the 10 recommendations Carrel made.

However, Everitt said council will not deal with the recommendation until the arbitrator's ruling comes forward.

According to Carrel's report, that ruling is expected to come before spring.

'I think, really, the arbitrator issue is one of the bigger issues. I think that's the trigger,' Hart said of possibly bringing in a trustee.

Earlier this week, Hart said he will look at the suggestion the government should hold an inquiry into how Dawson City got into its financial quagmire. According to the report, the town was $4.4 million in debt as of Dec. 31, 2003.

In his final draft, Carrel's recommended the territorial government hold 'a full public inquiry' into the funding arrangement between the Yukon and Dawson City. The territorial government agreed to fund three projects for the community: the construction of a new swimming pool, a new recreation centre and a new sewage treatment facility.

The inquiry would explore what happened to these projects and how the money was spent.

In an interview earlier this week, Hart said he will wait for the final report and discuss the matter with cabinet before deciding on how to proceed with Carrel's recommendation.

The report released by the territorial government earlier this week is not the polished, final version. However, Carrel said today he is currently working on the final version and the main difference between it and the final draft that has been released is the new edition will have more footnotes.

In the version made public, Carrel wrote: 'A full public inquiry of Dawson's (three capital) projects is beyond the mandate of the official supervisor for the City of Dawson, but such an inquiry is warranted.

'It is in the interest of taxpayers of Dawson City and the Yukon alike, and it is my recommendation that such an inquiry proceed before a second agreement for sewage treatment project for Dawson is drafted.'

Everitt said the town would welcome the open inquiry.

'A full public inquiry is not something the Dawson council would want to shy away from,' said Everitt.

'That final document will show everything.'

The mayor said he would want the inquiry to not just look at the numbers but everything concerning the deal between the two governments.

Before he approves a public inquiry, Hart will wait until the arbitrator rules on the recreation centre issue.

However, Hart did say on Monday the town may have taken on too many projects.

The town is obligated by a court ruling to build a new sewage treatment facility by Sept. 2004.

One recommendation to the town about that court ruling on building a new sewage treatment plant may be difficult for Dawson City to abide by, according to Everitt.

The city is appealing the court ruling.

Carrel recommended the town ask the court to extend the facility's completion date.

But Everitt said the Yukon government had already asked the town to appeal the decision that it had to build the plant at all. The territory government is paying for the appeal.

The mayor said it 'would be silly' to ask the court for extension on when it must abide by a ruling that it is being appealed altogether.

Another recommendation called on Dawson City to stop its legal action against the territory for not handing out the final $930,000 of the loan.

Everitt said the letter has been written to discontinue that legal action.