• on December 17, City Council met and agreed to the concept of creating a consortium with local timber industry partners.
    
• on December 29, representatives from the provincial government, Westar Timber, Evans Forest Products Ltd. and the City met to seek a mutually agreeable resolution. Dan Miller, the then Minister of Forests, allowed the City until January 21, 1993 to demonstrate progress on a proposal.

The City recognized the need to bring in knowledgeable and innovative advisors to develop their proposal. Advisors with three areas of expertise were retained:

• operations and financial advice was provided by Garth Langford, an experienced timber industry financial advisor and past manager of Downie Timber Ltd.;
    
• an assessment of the timber resources and liabilities was provided by Micheal Stewart, an internationally experienced forest resource consultant; and
    
• legal advice was secured from Susan Lloyd of Lidstone, Young and Anderson for the incorporation and from Jim MacLean of Sutherland, Johnston and MacLean for the industry partnership agreement.

Although these services cost the City approximately $200,000 at a time when some risk existed that the proposal might not be successful, this expertise was critical to the success of the venture.

During this period, three local milling operations proposed a unique partnership which provided financing, industry expertise and some sharing of risk with the City in return for a secure timber supply.

Based on the work of the advisors, and with the support of local timber companies, the City was able to show substantial progress by January 21 and the Minister of Forests agreed to consider a proposal from the City. On February 1, 1993, the following terms of acquisition were reached between Westar Timber, Evans Forests Products Ltd., the City and the provincial government:

• to secure support from Evans Forest Products Ltd., the allowable annual cut (less five per cent automatically reallocated to the Small Business Forest Enterprise Program administered by the BC Forest Service) and the land area of the existing TFL 55 would be equally divided between the City and Evans Forest Products Ltd., creating two separate tree farm licenses. Evans Forest Products Ltd. would purchase the northernmost portion; leaving the southern portion of the Goldstream and the Downie Creek drainage for the community forest (Figure 2).
    
• each would secure cutting rights of approximately 98,500 cubic metres per year from an area of approximately 100,000 hectares (250,000 acres).
    
• the City’s portion would be purchased and managed by an independent corporation with representatives from the City and the community on its board and an advisory committee which included the industry partners.
    
• the new corporation would be required to sell 50 per cent of the timber harvested to its industry partners at the average annual cost per cubic metre of timber delivered to the mill yard; the remainder would be sold on the open market through sealed tenders to the highest bidder, with the income accruing to the corporation.
    
• financing for the purchase would come from the industry partners, a bank loan, and an investment by the City from a long-standing fund created through the sale of a City-owned electric project.

 
Figure 2. Map of the new Tree Farm License area

On February 8, City Council passed a resolution authorizing a referendum to secure citizen approval of the investment. An extensive public information program was necessary to ensure the citizens received accurate information and they understood the nature of the venture. This program included:

• a meeting of community leaders
   
• 11 presentations to community groups and agencies
   
• workshops with specific groups
   
• an open house
   
• a public meeting
   
• a pamphlet addressing common questions and misconceptions which was distributed to every mailbox in the community
   
• a radio open-line program
   
• newspaper articles and advertisements by the City and its industry partners including statements of support from leading citizens
   
• cable television coverage of the public meeting in conjunction with an open-line program

Revelstokians voted with as much commitment to their principle of local control of local resources as they had shown at the previous public meetings: over 60 per cent of the eligible voters turned out for the referendum vote on February 20, 1993 and 78 per cent voted yes.
  

The $3.5 million purchase price paid to Westar Timber by the corporation was financed as follows:

• $1 million investment from the City funded by the City’s Electrical Utilities Reserve Fund. This investment currently receives a dividend of the average of prime for the fiscal year plus 1 per cent on the amount invested, subject to Board approval at the end of each fiscal year.
   
• $1 million cash paid up front from the three local forest industry partners ($600,000 from Downie Timber Ltd., $200,000 from Joe Kozek Sawmills Ltd., and $200,000 from Cascade Cedar Products Ltd.) as well as $500,000 to be repaid through debt retirement of the long-term loan incorporated in the cost of logs delivered to the industry partners (prorated at the same percentages as the cash paid up front).
   
• $1 million long-term loan borrowed by the corporation from the Royal Bank at an interest rate of 9.04 per cent until July, 1998, secured by a registered general security agreement and repayable monthly. This loan has a five year term beginning in July, 1993 with a 15 year amortization period.
   
• $1 million short-term loan borrowed by the corporation for start-up and initial operating funds. Three separate agreements were required to legally implement the corporation’s operations:
   
• an agreement to purchase harvesting rights from Westar Timber
   
• an ‘equalization’ agreement with Evans Forest Products Ltd. to divide the existing TFL and to account for the necessary adjustments for material differences in road and other developments, and outstanding silviculture obligations on the two portions of the area
   
• a Timber Removal Agreement including the arrangements for the industry partners to receive 50 per cent of the timber harvested from the new TFL at a price based on the six month average operating cost for the corporation. The average operating cost includes all business expenses such as road development, harvesting, silviculture obligations, debt retirement and administration. Timber species and quality sold to industry partners are to be consistent with the distribution harvested from the new TFL area, with the exception that, until May, 1996, all pulplogs will be sold to another buyer under an agreement existing at the time of the sale. The proportion of the harvest to be provided to each partner is based on the proportion of the total original investment financed by each firm:
    
  • 30 per cent of total harvest (24,353 cubic metres) to Downie Timber Ltd.
     
  • 10 per cent of total harvest (8,117 cubic metres) to Joe Kozek Sawmills Ltd.
     
  • 10 per cent of total harvest (8,117 cubic metres) to Cascade Cedar Products Ltd.

An additional condition of the agreement is that if this timber is traded to processors outside the community an equivalent amount of wood must be processed in the community. Should the TFL ever be sold, the agreement stipulates the industry partners are to receive 50 per cent of any proceeds from the sale in excess of the net book value.

With the corporation, financing and agreements in place, the transfer of cutting rights to RCFC could be finalized and was completed on June 11, 1993, creating a new Tree Farm License 56.
  

• opportunity
   
• leaders with vision
   
• a community that was willing to take some risk
   
• local forest industry participation and support
   
• community readiness and support
   
• financial resource
   
• professional advisors and consultants
   
• extensive communications
   
• perseverance
   
• credibility and trust
  
• confidence
   
• timing and luck

  
[Table of Contents] [Introduction] [Background] 
[Opportunity is Created] [From Opportunity to Reality] 
[First Two Years of Operations] [Current Challenges] 
[Further Information] [Appendix]