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RFD- 4161 Bylaws   Item #   10. b.    
Regular Council Meeting Agenda   
Meeting Date: 03/22/2021  
Title:    C-1144-21 - Operating Line of Credit Borrowing Bylaw - First Reading - Frostad
Department: Corporate Services  
Strategic Vision Element: This topic relates to all three of the City’s strategic vision elements contained in Council’s Strategic Plan Related Goal: n/a

Information
Request for Decision Summary
Proposed Bylaw C-1144-21 seeks to reduce the limit of the City's existing operating line of credit from $30.0 million to $5.0 million.  This reduction is in accordance with the signed credit agreement with Canadian Imperial Bank of Commerce, which states the operating line limit will be reduced to $5.0 million on March 31, 2021.  The limit was increased to $30.0 million in May 2020 to support operating cash flows when penalty deferral decisions were made in relation to COVID-19.

Proposed Motion
That first reading be given to Bylaw C-1144-21 - Operating Line of Credit Borrowing Bylaw.
 
Background/Analysis
The City signed Bylaw C-1058-18 Operating Line of Credit Borrowing Bylaw on December 18, 2018 for a $5.0 million revolving demand operating line of credit with Canadian Imperial Bank of Commerce.  The City's $5.0 million revolving demand operating line of credit with Canadian Imperial Bank of Commerce was increased to $30.0 million under an agreement signed and dated May 20, 2020.  Amending Bylaw C-1118-20 Operating Line of Credit Borrowing Bylaw Amendment was approved and signed on May 20, 2020 to support the increase in the limit.  The increase was seen necessary to be prepared to supplement the City's cash flow while property taxes and utility penalty deferrals were being offered to residents and businesses in an effort to reduce the economic impact of COVID-19 on the community.  The property tax deferral program ended September 30, 2020 and the utility penalty deferral program ended May 31, 2020.  During the time the revolving demand operating line of credit was increased to $30.0 million the City did not have to draw on it as anticipated, as the City reduced spending and the financial impact of the deferral programs were not drawn upon to the degree as originally thought.  Bylaw C-1144-21 repeals and replaces Bylaw C-1058-18 Operating Line of Credit Borrowing Bylaw due to a change in the borrowing amount and borrowing period from amending bylaw C-1118-20 Operating Line of Credit Borrowing Bylaw Amendment.   
Options/Alternatives
Council could choose not to approve this bylaw to decrease the limit on the City's revolving demand operating line of credit with Canadian Imperial Bank of Commerce.  This would require Administration to go back to the bank and make suitable arrangements to extend or modify the terms and conditions of the agreement. 
Consultation/Engagement
The Municipal Government Act sets out parameters for temporary borrowing, as follows:

Operating expenditures
 
256(1) This section applies to a borrowing made for the purpose of financing operating expenditures.
 
(2) The amount to be borrowed, together with the unpaid principal of other borrowings made for the purpose of financing operating expenditures, must not exceed the amount the municipality estimates will be raised in taxes in the year the borrowing is made.
 
(3) A borrowing bylaw that authorizes the borrowing does not have to be advertised if the term of the borrowing does not exceed 3 years.

Temporary borrowing is outside of the Debt Management Policy which deals with long-term debt. The demand operating line of credit is reported separately from the debt limit calculations as defined by provincial legislation. The terms and interest rates of the demand operating line of credit are disclosed annually in the audited financial statements.
 
Implementation/Communication
Statutory advertising normally required for borrowing bylaws is not required for borrowing that is to be used for operating expenditures provided the term of the temporary borrowing bylaw does not exceed three years.
Impacts
A temporary borrowing bylaw has a maximum term of three years. To ensure that a temporary borrowing bylaw is always in effect a new bylaw will be presented to Council prior to December 31, 2023.

Fiscal Impact
Financial Implications:
Any monies borrowed under this borrowing bylaw will incur costs at prime rate on the date of borrowing less 0.25% for the duration of borrowing.  Prime rate at the time of writing is 2.45%.
Attachments
C-1144-21 Operating Line of Credit Borrowing Bylaw

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