The City of Toronto’s claim a $200-million provincial loan never had to be repaid is dead wrong, according to documents obtained by the Star.

Last month, the Ontario government said the long-standing loan would be forgiven to blunt the impact of phasing out a different compensation fund.

But Mayor Rob Ford and city manager Joe Pennachetti complained that wouldn’t save any money because the loan payments stopped years ago and Toronto never expected to pay it off.

“We thought the loan was gone and over and done with,” Pennachetti said four weeks ago.

Not so fast, said Municipal Affairs Minister Linda Jeffrey.

“I think we all would like somebody to forget our credit-card debt occasionally,” Jeffrey said in an interview Wednesday.

“There was lots of correspondence that went back and forth — a reminder probably every year as to the status of the principal and the interest — to Toronto.

“You have a fiduciary responsibility whether you’re the province or the city of Toronto to keep track of debt.

“The city of Toronto likely hoped that that debt was going to be forgiven, but it was certainly on our books and it was on theirs.”

Although Queen’s Park finally forgave loan in June, that is not a moot point since Ford maintains the winding down the Toronto Pooling Compensation fund will leave a $50-million hole in the city’s annual budget.

The mayor claimed the province “blindsided” him with the amended funding arrangements.

“This is on the backs of the most vulnerable people in the city,” he said last month, warning the shortfall would come out of city hostels, the Toronto Community Housing repair backlog funds, and other programs.

But documents suggest city hall was well aware of what the province calls the “Toronto Debenture Loan” — $200 million lent to ease the 1998 amalgamation of Toronto, North York, Scarborough, York, East York, and Etobicoke.

A 2011 PricewaterhouseCoopers report prepared for the city’s audit committee noted Toronto last paid one of two scheduled annual payments of $10 million in 2005.

“We understand from management that the city continues to negotiate forgiveness of the outstanding loan with the province; however, to date no formal agreement has been reached,” the report said.

“The loan balance outstanding at Dec. 31, 2010 is approximately $170 million plus accrued interest of $28 million. In the absence of formal forgiveness of the debt, the city continues to record both the principal and the accrued interest on the loan in order to reflect the current amount legally owing to the province.”

Other documents suggest city official knew that $10-million loan payments were expected every Jan. 15 and July 15 for the past eight years, though none were made over that time period.

As well, on May 14, 2007, then-deputy finance minister Colin Andersen wrote to then-city manager Shirley Hoy stressing the province “does not forgive the loan” despite Toronto missing payments from July 15, 2005 through January 15, 2007.

“The province will continue to work with the city to resolve the issue of the outstanding amount of the loan.”

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Jeffrey said that underscores the significance of the decision to waive the loan and pointed out that Ford “expressed gratitude” to her and Finance Minister Charles Sousa in a private Queen’s Park meeting at on June 24.

“We certainly heard in the meeting from Mayor Ford that he was grateful. It didn’t come out in the course of the conversation (with the media afterward) that day,” she said.

“It was a huge decision on our part to assist the city of Toronto with their finances and to take it off their books.”

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