The Corporation of Hamilton, left liable for a “misappropriated” $18 million loan for a hotel on Par-la-Ville car park, has come a crucial step closer to refinancing its bad debt.

Charles Gosling, Hamilton’s mayor, said his administration had been saddled with the guarantee plus interest on the deal, made under the city’s previous administration, that it was obligated to pay back.

Mr Gosling would not speculate on what had become of the missing millions from Mexico Infrastructure Finance, signed over as part of a funding deal for a luxury hotel and residences.

The mayor was speaking in the aftermath of a crucial reprieve, after Wednesday’s marathon session in the House of Assembly included the tabling of legislation enabling the Corporation to use properties as collateral for a loan of roughly $28 million with a local bank, identified on the order sheet as Clarien.

That loan, which effectively links the hotel development debt with another loan for the Corporation’s works depot, would enable the Corporation to pay off its creditor.

Both the Corporation and the developers, Par-la-Ville Hotel and Residences Ltd, were sued last year by MIF after defaulting on the loan.

“We got in this situation because we have people who obligated the Corporation to an $18 million debt without contemplating how to pay it back,” Mr Gosling told The Royal Gazette.

The matter has since come under police investigation, with authorities announcing on January 26 that a 41-year-old Smith’s man had been arrested in connection with the missing funds.

On February 3, police said that the man had been released on bail, and that their inquiry was ongoing.

Mr Gosling acknowledged the situation was far from rosy, but said that the best step for now was to pay off the creditor for MIF.

“We would like to have the ability to say ‘bon voyage’,” he added.

The legislation that went before MPs in the early hours of yesterday is subject to negative resolution, meaning it will have to wait 30 days before getting approved.

If no objections are raised in Parliament or in the Senate, “it is deemed as having passed — if not, then they will debate issues”, Mr Gosling said.

Mr Gosling said the new deal for the city was a step up, beginning with interest-only payments, and 15 years to pay it back.

“One of the requirements in the terms of the loan is that the ratio between collateral and the loan is 65 per cent. For a loan just under $28 million means about $40 million in terms of collateral. That’s more than one piece of property.”

The Corporation had to bring car parks, some residential buildings and properties such as the former Lemon Tree premises to the table.

The mayor said his administration had been working on an “ever-changing list of corporation real estate as the various players have changed”.

The Bermuda Government assumed stewardship over the municipalities in December 2013, effectively putting Michael Fahy, the Minister of Home Affairs, in charge of the city’s purse strings.

That move came shortly after Arlene Brock, the then Ombudsman, issued a damning report on the handling of City Hall under the “Team Hamilton” administration of the former mayor, Graeme Outerbridge.

Yesterday Mr Gosling said he had received “very strong assurances” from the minister and “support” from Michael Dunkley in getting legislation enacted for the City to pay off its obligations. Today’s orders for the House of Assembly include the second reading of the Hamilton Sewerage Amendment Act 2016, aimed at raising funds, plus further consideration of agreements between the Corporation and Clarien Bank.

The Corporation is also seeking revenues via traffic ordinances and parking charges.

“The minister and the permanent secretary have worked particularly hard to get us what we are asking for,” Mr Gosling said.

However, internal communications shared with this newspaper give some measure of the anxiety within City Hall over the pace of legislative affairs.

In a letter to Premier Michael Dunkley dated February 19, Mr Gosling writes that the Corporation “has never been so fiscally challenged as it is now due to this unfortunate series of events”.

E-mails to Derrick Binns, the Secretary of Cabinet, questioned whether Cabinet appreciated the deadlines faced by the Corporation, while Mr Dunkley was told that the “continuous patience of MIF is clearly at its limit”. “The current Council, in seeking election, took this on to fix the issue but as has been explained numerous times the restored and improved revenue stream must be there to service the debt of the loan.”

Telling the Premier that the “travesty” had to be fixed, the mayor said the island’s financial reputation risked being tarnished, adding: “I refuse to have the alternative be my legacy.”

However, in his response, dated February 24, Mr Dunkley noted that the Corporation was in regular dialogue with Senator Fahy, who also briefed Cabinet on the issue each week.

“I would, therefore, encourage you to continue this dialogue with the minister,” Mr Dunkley added.

Yesterday, Mr Gosling said the Corporation had known with the start of February that “the Government and the Opposition were going to be fixated on the Budget”.

“The fact is that we have had a somewhat impatient creditor who wants to get his money and leave the island,” he added.