Accepting the Yukon government's well-drilling proposal would leave many of the territory's municipalities in a precarious financial position and restrict urban development due to loan restraints outlined in the Municipal Act.

Those are the views of Whitehorse city councillor Doug Graham and Tom Paterson, the Association of Yukon Communities' (AYC's) executive director.

Graham said the proposed YTG program would particularly burden smaller communities.

Municipalities are restrained by how much money they can borrow under the territorial Municipal Act.

'If you had 10 or 15 people each borrowing $10,000 or $15,000 each, it would really restrain their (smaller municipalities') borrowing capacity,' Graham said in an interview.

The YTG proposes to lend municipalities money. They would in turn lend it to property owners and it would be paid back to the municipality in the form of property taxes.

The YTG runs a similar program in the territory's rural areas where, unlike municipal areas, the YTG has the mandate to collect property taxes.

Wells typically cost between $20,000 and $30,000 to drill.

The AYC is advocating the government bring the scheme under its umbrella using a a loan program to avoid administrative cost duplications and ease the burden on municipal governments.

Earlier this week, Doug Caldwell, a Department of Community Services spokesperson, said the government would not be accepting the AYC's recommendations.

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

According to Gerry Gerein, the YTG's manager of property assessment and taxation, the value of Carmacks' taxable property is $13,585,210; Dawson City's is $101,752,390; Faro's is $40,444,890; Haines Junction's is $32,312,640; Mayo's is $16,171,630; Teslin's is $15,744,070; Watson Lake's is $69,473,150; and taxable property within the city of Whitehorse has a total value of $1,391,551,000.

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

Paterson said he'd like to see the government run the program under its own umbrella using tools such as the Yukon Housing Corp. to issue second mortgages to people living in country residential areas.

He said if municipalities were burdened under debt incurred under the well-drilling program, they would not be able to borrow for other municipal infrastructure projects.

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

He added in light of the financial ruin suffered by Dawson City, which went into millions of dollars in debt after fiscal mismanagement, the financial concerns felt by the municipalities were not unrealistic.

Graham agreed, saying he'd like to know why the YTG kept lending millions of dollars to Dawson even through the former mayor and town council were acting improperly.

'The YTG broke the Municipal Act themselves lending (too much) money to Dawson.

'To put it in perspective, the City of Whitehorse would have to borrow another $50 million to be on par. We really have to take a look at why that happened,' he said.

According to a forensic audit performed on Dawson by Doddington Advisors Inc., Dawson and YTG officials signed the Capital Funding Agreement in 1999.

Under it, the YTG agreed to loan Dawson $10.4 million toward a recreation centre as well as a sewage infrastructure project.

The report also states while in 1999 Dawson had reserves of more than $3 million, it was nearly $600,000 in debt by the end of 2003.

Caldwell said because the loans were made under the watch of a different government, he couldn't comment as to why the YTG kept lending money to Dawson while its council was being financially irresponsible and borrowing more money than was permitted under the Municipal Act.

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