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RFD- 3953 Bylaws   Item #   10. b.    
Regular Council Meeting Agenda
Meeting Date: 05/11/2020  
Title:    C-1118-20 - Operating Line of Credit Borrowing Bylaw Amendment - Second and Third Reading - Boje
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
Second and third reading of Bylaw C-1118-20 - Operating Line of Credit Borrowing Bylaw Amendment are being brought forward for Council's consideration. This bylaw seeks to increase the limit of the City's existing operating line of credit from $5,000,000 to $30,000,000.  This increase is attributed to penalty deferral decisions related to COVID-19.

Proposed Motion
That second reading be given to Bylaw C-1118-20 - Operating Line of Credit Borrowing Bylaw Amendment.
 
That third reading be given to Bylaw C-1118-20 - Operating Line of Credit Borrowing Bylaw Amendment.
Background/Analysis
A $5 million revolving demand operating line of credit was secured with CIBC under an agreement signed and dated November 4, 2019.  The funds were secured to temporarily meet the City's operating expenditure requirements and were to be typically repaid as taxes are levied and collected over the borrowing period.  The borrowing period of the original operating line of credit borrowing bylaw (C-1058-18) was January 1, 2019 to December 31, 2021.  Under normal operating circumstances, the line of credit is not used by the City and is in place for emergency circumstances.  This line of credit has not been accessed since being put in place in November of 2019.

This bylaw is proposing to increase the revolving demand operating line of credit to $30 million.  This increase is necessary to supplement the City's cash flow while property taxes and utility penalty deferrals have been offered to residents and businesses in an effort to reduce the economic impact of COVID-19 on the community.  The City typically levies $30 - $40 million in property taxes (net of requisition payments) on an annual basis and also bills approximately $1.7 million per month in utility billings.   
Options/Alternatives
Council could choose not to approve this amending bylaw to increase the limit on the City's revolving demand operating line of credit with CIBC.  This would potentially result in a severe cash shortage since penalty deferrals have been enacted.  Without the ability to borrow the City may also need to liquidate some of its investments during a time that would be detrimental in terms of their financial value.
Consultation/Engagement
The Municipal Government Act, RSA 2000 cM-26 sets out parameters for temporary borrowing, as follows:

256 Operating Expenditures

(1) This section applies to 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.


As per the provincial Debt Limit Regulation, all borrowing factors into the calculation of debt limit and would be included in the debt limit disclosure on the City's audited financial statements,

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 prior to December 31, 2021.

Fiscal Impact
Financial Implications:
Any monies borrowed under this borrowing bylaw will incur costs at prime rate on the date of borrowing for the duration of borrowing. Prime rate at time of writing is 2.45%.

If this borrowing is fully accessed, the City will still be well within the Provincial Debt Limit ($128,643,000 - December 2019) but would likely exceed the 50% internal debt limit by $8,000,000 as borrowing at December 2019 totaled $42,122,000.  
Attachments
Proposed C-1118-20 - Operating Line of Credit Borrowing Bylaw Amendment
Operating Line of Credit Borrowing Bylaw - Redline Copy

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