HomeMy WebLinkAboutFIN 32/98
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REPORT TO COUNCIL
FROM:
Gillis A. Paterson
Director of Finance & Treasurer
DATE: November 17,1998
REPORT NUMBER: FIN 32-98
SUl3JECT:
1998 Capital Budget - Debt Financing
RECOMMENDATION:
That Report FIN 32-98 be received for information.
OR lOIN:
Director of Finance & Treasurer
AUTHORITY:
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1998 Capital Budget
FINANCIAL IMPLICATIONS:
Debt issued as a rcsult of Council approval of projccts or undcrtakings will rcsult in dcbt chargcs
neing includcd in thc annual currcnt budget until the dent is retired.
EXECUTIVE SUMMARY:
The 1998 Capital Budget contained a gcneral provIsIon for debt financing in the amount of
$1,698,498. Subsequcnt to the adoption of the budget Council also approved debt financing for
the EastShore Community Centre in the amount of $700,000 thereby increasing the total to
$2,398,498. Of this total, Council has approvcd debt financing for specific projects totalling
$2,073,000 including the EastShore Centre. If debt were issued for this amollnt for a 15 year
term, will result in estimated debt charges of $73,000 in 1999 and $228,000 thereafter until to
2014.
BACKGROUND:
The 1998 Capital Budget as approved by Council in its final form on September 8, 1998 included
debt financing in the amount of $1,698,498. On November 2, 1998 Council also approved the
EastShore Community Ccntre dcbt in thc amount of $700,000 for a reviscd total of $2,398,498.
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This amount was paid out of current rcvcnucs and/or reserve funds in prior years however for
1998 debt financing was deemed necessary as thc only other alternative available in thc absence
of the aforemcntioncd sourccs of funds.
Report to Council FIN 32-98
Date: November 17, 1998
Subject: 1997 Capital Budget - Debt Financing
Page2
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To date Council has specifically approvcd debt financing for the following undertakings:
EastShore Community Centre $700,000
Radom Street Repairs 79,000
Wixon Street 290,000
Rosebank Road 826,000
Vehicle Leases 178,000
$2,073,000
The present approvals, if debt financed in the amount of $2,073,000 in mid 1999 for a 15 year
term will result in estimated debt charges of$73,000 in 1999 and $228,000 thereafter until 2014.
Council approval for debt financing is being sought in light of the Town's current financial
situation in order to maintain the maximum flexibility. Council always has the option to not
issue the debt should other forms of financing become available. While the total projected
maximum debt that could be issued under these approvals is $2,073,000, it is anticipated that the
actual amount issued will be somewhat less. For example, the Rosebank Road reconstruction
project included financing from dcvelopment charges in the amount of $420,500. Should these
funds be available for up front financing, the amount of debt to be issued will be correspondingly
reduced. Furthermore, funds may be available from the 1998 provision for capital financing
from current revenues; any 1998 surplus in the current operating accounts; the 1999 Current
Budget; or, other as yet unidentified sources. These possibilities will he examined further in
the first half of 1999.
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While a 20 year term is included in the request for Council approval, 15 years is used in the
analysis. Twenty years provides the maximum flexibility while it is hoped that the actual term
will not exceed 15. The difference in annual debt charges is approximately $25,000 more per
annum for the shorter term of 15 years. The total increased cost 01'$375,000 would be offset by
over $1 million avoided in the finalS years.
In future years it is anticipated that the budget process will accommodate approval of debt
financing at the time the budget is passed. Moreover, it is also hoped the new financial systems
will provide more information and in a more timely fashion so that the actual amount of debt
financing can be determined at any given time, thereby, hopefully, maximizing the amount of
funding from other sources and minimizing the amount of debt issued.
ATTACHMENTS:
Not applicable
Approved I Endorsed By:
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Gillis A. Paterson
Director of Finance & Treasurer
GAP:vw
Copy: General Manager
Recommended for the consideration of
Pickering Towl\. 'Oll cil
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