Former Mayor Graeme Outerbridge has defended the “balanced budgets” during his time in office — although he accepted that the Par-la-Ville loan had put the city in a challenging position.

A financial audit, released on Tuesday, cast doubt on the future of the municipality because of the $18 million owed to Mexico Infrastructure Finance over the Par-la-Ville hotel project.

That came after newly elected Mayor Charles Gosling said the grim financial situation left by Mr Outerbridge’s Team Hamilton administration would place restrictions on his administration.

Giving his side of the story to The Royal Gazette, Mr Outerbridge said: “I know the city is stressed and until Par-la-Ville is resolved it’s going to be an albatross around the city’s neck. We in the council knew the risk if things didn’t work out, but I’m hoping for good outcomes.

“We were trying to build a hotel and create jobs for the country at a time when it was apparent that that’s what we needed, and I think everybody else nationally felt the same way.”

Mr Outerbridge said that during his time in office the municipality had balanced budgets, which were all approved by Home Affairs Minister Michael Fahy.

“There’s a misconception that the council can spend money as it sees fit,” he said. “The council has to agree on a budget and both this year’s budget and last year’s budget were approved by the minister.

“The minister had a remit to look at them and he approved both of them. They were balanced budgets. The first year I was in it was the previous administration’s budget that ran until the end of that year and we basically didn’t deviate from it.

“When I left, the financial state was good. We were basically on budget for the projects we were working on, our capital projects.”

He said the greatest impact on budgets that he experienced was a massive reduction of wharfage fees being paid by government, saying: “I think they paid only about $1.5 million when we would usually get $5.5 million, so there’s in the region of $4 million less to work with.

“That was a big impediment on cash flow this year and adjustments were made based on that and cutbacks were made. We still found room to do a number of capital projects but it was severely curtailed by that adjustment.”

He also said the longstanding issue of the Hamilton Fire Department had also caused challenges, saying that the Government owes the corporation around $6 million in back rent for the property. The Government had leased the corporation-owned property for a “peppercorn” of $1, but that lease expired in 2008.

While no new lease has been signed, Mr Outerbridge had argued that the annual rent for the King Street property should be around $700,000.

“It’s very important that either the government buy it or be a good tenant,” he said. “It’s gone on long enough. The big problem is the government have no money so they are basically squatting and not paying.”

While Mr Outerbridge acknowledged that his administration had spent a good deal of money on legal fees, he said it was the result of the municipality responding to threats from outside.

“The legal costs for my specific administration were expensive, but I think Mr Gosling’s administration also had high costs because of the government’s attempt to take over. I think we were twin administrations. We both had the same issues of government interfering in the process of local government.

“We had to either defend ourselves or roll over, and we chose to defend some things. I think we all tried to do the best that we could.”

Regarding the issue of the $18 million guarantee on the Par-la-Ville loan, which defaulted earlier this year, he said that the council felt that it was an important project for the entire Island.

“At the time that we came into office the economics in the country were dire, the new government hadn’t really engaged yet, and certain members of the council thought it was a very good idea to keep on pursuing it, along with the waterfront,” he said.

“We went through a process with all of the other parties, but ultimately I take responsibility basically for putting this in place in terms of the resolutions, giving permission to do that. I think that’s where we are right now, it’s in a process and we’re seeing when we can get back to stage one with Mexico Infrastructure Finance. It certainly had a very detrimental impact on Par-la-Ville Hotel and Residences.”

Asked about government’s involvement in the loan, he said government had changed legislation at the corporation’s request to allow the loan guarantee and that Sen Fahy was “in the loop” throughout the process. We wrote to the minister to get the changes because we went to the silks in London to clarify,” he said.

“People talk about legal costs, but we did our due diligence and very carefully looked at what the parameters of our legislation was. In that process we realised that in order to even do it we would basically need to change the legislation. Government would have been updated more by the developer [than the corporation]. There were some verbal updates with the minister but he was more than aware of the process to the point where we signed the escrow agreement.

“It happened that when I was travelling we were on the same plane and we talked about what I was going to do. A lot of times my updates were under the obligation of the new commitment to give monthly updates to the Minister. He was certainly in the loop.”