A committee has raised $207,000 to help Mayor Naheed Nenshi pay his legal bill from a settled defamation lawsuit.

City council voted in March 2016 to have the city cover the $300,000 in legal bills racked up by Nenshi.

He hired a lawyer to defend himself against a lawsuit filed by businessman Cal Wenzel. The homebuilder sued Nenshi for remarks made by the mayor in the 2013 election campaign.

Nenshi and Wenzel settled the suit out of court in December 2015.

While the city paid the mayor's legal bill, council voted to require him to repay the city the same amount.

Volunteers run fundraising committee

Businessman Dean Koeller stepped forward last November to chair the volunteer committee to raise the money because he didn't think it was fair Nenshi be stuck with paying back the city.

"It was important for we, as Calgarians, to support our politicians and to give them the space in order to have a voice and not feel that they're going to be held personally responsible for their opinions," said Koeller.

Koeller and Colin Jackson, the former president of Calgary's performing arts centre (now Arts Commons) and several other committee members are raising money by tapping their personal and professional networks for donations.

Donors get tax receipts from city

Koeller tells CBC News they are giving money to the city as they receive it. Donors are given charitable tax receipts by the city as the money is used to support municipal programs and services.

Dean Koeller chairs a committe fundraising on behalf of Mayor Naheed Nenshi to repay a $300,000 legal bill. (Scott Dippel/CBC) He rejects any suggestion that the tax receipt is a big motivator for donors.

"The individuals that we've located in our network that are interested in supporting this issue believe in the reasons why we're supporting the issue as opposed to the benefit that you receive from a taxable donation," said Koeller.

He said they thought it would be easy to raise $300,000 but he's surprised it's proving to be more difficult than expected in meeting their target.

The maximum allowable donation is $10,000. CBC News has learned that at least six donors have given that maximum amount.

Ethics advisor set the rules

Nenshi ran his fundraising plan past council's ethics advisor, Alice Woolley.

She set out some broad rules for the effort:

Nenshi should not take part in the fundraising campaign.

The fundraising committee shouldn't include his family, any council members or city employees.

Donations would be limited to a $10,000 maximum (twice what municipal election candidates are legally allowed to accept annually).

The names of donors giving more than $100 must be publicly disclosed.

If the committee doesn't raise the entire $300,000, then Nenshi must pay the balance himself but can rely on contributions from family members and personal friends.

In a letter to Nenshi dated May 19, 2016, Woolley advised Nenshi that "while donations will be made to the City of Calgary, they provide a benefit to you."

Chabot says issuing receipts 'kind of weird'

Coun. Andre Chabot, who has announced he will run against Nenshi for the mayor's chair this fall, calls it "strange" that charitable tax receipts are being issued.

"Anytime that we fundraise municipally, that's the one big hurdle for us is that we can't issue tax deductible receipts so, yeah it's kind of weird," said Chabot.

He's also concerned that the committee is accepting donations up to $10,000.

"Are there expectations that go along with that? That would be the question for me," said Chabot.

Nenshi has said he doesn't want to know who the contributors are until the fundraising effort is done.

In her letter to Nenshi, Woolley wrote that a deadline of the end of 2016 sounded reasonable to her.

Koeller said the fundraising committee wasn't even formed until November 2016 when he got involved.

He adds the work of the committee will continue until it reaches its target.