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Home My WebLink AboutFIN 25-17elegy Report to DICKERING Executive Committee Report Number: FIN 25-17 Date: December 4, 2017 From: Stan Karwowski Director, Finance & Treasurer Subject: 2018 Temporary Borrowing By-law Recommendation: 1. That the temporary borrowing limit of $45 million be established to meet 2018 current expenditures pending receipt of taxes and other revenues for the period of January 1, 2018 to September 30, 2018 inclusive, and $22 million thereafter until December 31, 2018; 2. That the temporary borrowing limit for capital purposes for 2018 be established at $34 million; 3. That the attached draft by-law providing for the temporary borrowing of monies be enacted; and 4. That the appropriate City of Pickering officials be authorized to take the necessary actions as indicated in this report. Executive Summary: Staff recommend that Council approve temporary 2018 borrowing limits as set out in the above recommendations. Council approval is required to undertake temporary borrowings, if necessary, for current operations and capital projects in order to meet the expenses of the City for 2018, until the taxes are collected and other revenues are received. Approval is always sought at the end of the City's fiscal (calendar) year in order to be prepared, in the event that loans are necessary, as we proceed into the new year. The approval of this report and the attached By-law will provide the City with financial flexibility to deal with unanticipated negative events. Put another way, this report provides the City with a financial safety net. Report FIN 25-17 December 4, 2017 Subject: 2018 Temporary Borrowing By-law Page 2 Financial Implications: At this time, it is difficult to estimate the interest costs as it is uncertain how much temporary financing may be required and for how long. With internal borrowings being limited, the City must undertake external borrowing from the Regional Municipality of Durham (the "Region") in 2018 for approved capital expenditures. For current purposes, the $43 million limit for January 1 to September 30, 2017 has been increased to $45 million for January 1 to September 30, 2018 and the $21.5 million limit for October 1 to December 31, 2017 has been increased to $22 million for October 1 to December 31, 2018. The limit for capital purposes for 2018 has been established at $34 million based on the draft 2018 Capital Budget dated November 8, 2017. The actual amount to borrow may have to be adjusted once the 2018 Capital Budget has been approved by Council. Discussion: The borrowing of funds for current and capital purposes may become necessary in the normal course of operations during 2018. Under Section.407 of the Municipal Act, 2001, as amended (the "Act"), Council may pass a by-law to provide for the temporary borrowing of funds to meet current operating expenditures pending receipt of taxes and other revenues of the City. Under the Act, the Corporation may also undertake temporary borrowings under individual project approvals, and for capital projects, pending permanent financing. Current Budget Financing The amount of such temporary borrowing outstanding at any one time is limited by the Act, unless otherwise approved by the Ontario Municipal Board, to 50% of the estimated annual revenues from January 1 to September 30 and to 25% thereafter. Until the current year's estimates are adopted, the limitation may be calculated upon the revenues set forth in the estimates adopted for the preceding year. Based upon the 2017 estimates of the Corporation, the allowable level of temporary borrowing outstanding under the Act is estimated at $45 million from January 1 to September 30 and $22 million thereafter. The requested $45 million should be sufficient to meet the current expenditures of the City until the levies for 2018 are received. It is expected that this amount will provide a sufficient level of temporary borrowings, taking into account the potential effects of taxation legislation and its impact on cash flows. Report FIN 25-17 December 4, 2017 Subject: 2018 Temporary Borrowing By-law Page 3 Capital Budget Financing Borrowing for capital purposes under the Act can only be undertaken on projects approved by Council and will only be undertaken in the event that sufficient funds are not available at the time they are required. Recommendation 3 provides the authority for staff to obtain additional temporary interim financing (internal or external) for capital projects approved by Council. The $34 million capital borrowing limit should provide sufficient funds to cover the estimated 2018 capital expenditures. Attachments: 1. By-law to Authorize the Temporary Borrowing of Monies to Meet the Current and Capital Expenditures of the City of Pickering for the Year 2018 Prepared By: ,f2 Caryn Kong, CPA, CGA Senior Financial Analyst — Capital & Debt Management Approved/Endorsed By: Stan Karwowski, MBA, CPA, CMA Director, Finance & Treasurer Recommended for the consideration of Pickering City Council Tony Prevedel, P.Eng. Chief Administrative Officer ,7 ATTACHMENT #JL TO REPORT t _. The Corporation of the City of Pickering By-law No. Being a by-law to authorize the temporary borrowing of monies to meet the current and capital expenditures of the City of Pickering for the year 2018. Whereas Section 407(1) of the Municipal Act, 2001, provides that the Council of the City of Pickering may by by-law authorize the Mayor and Treasurer of the City to borrow from time to time by way of promissory note such sums as the Council may deem necessary to meet, until the taxes for the current year are collected and other revenues are received, the current expenditures of the City for the year, including the amounts required for principal and interest falling due within the year upon any debt of the City, and the sums required by law to be provided by the .Council for any local board of the City; Whereas Section 407(2) limits the total of such borrowings to not exceed 50% of the estimated annual revenues from January 1 to September 30, 2018 and 25% thereafter; Whereas it is deemed necessary by the said Council to borrow the sum of forty-five million dollars ($45,000,000) to meet, until the taxes for the current year are received, the current expenditures of the City for the year 2018, including the amounts and sums aforesaid; Whereas the said sum of forty-five million dollars ($45,000,000) plus any similar borrowings that have not been repaid, is less than 50% of the total amount of the estimated revenues of the City from January 1 to September 30 as set forth in the estimates adopted by the Council for the year 2017 exclusive of revenues derivable from the sale of assets, borrowings or issues of debentures or from a surplus including arrears of levies, and twenty-two million dollars ($22,000,000) is less than 25% of the estimated revenues thereafter; Whereas the Municipal Act, 2001, provides that if a municipality has by by-law approved an undertaking to be financed in whole or in part by incurring long-term debt, the Council may by by-law authorize temporary borrowing to meet expenditures made in connection with the undertaking; and, Whereas it is deemed necessary by the Council to borrow the sum of thirty-four million dollars ($34,000,000) to meet the capital expenditures approved by Council. By-law No. Page 2 Now therefore the Council of the Corporation of the City of Pickering hereby enacts as follows: 1. The Mayor and Director, Finance & Treasurer of the City of Pickering are hereby authorized to borrow from time to time by way of promissory notes a sum or sums not exceeding forty-five million dollars ($45,000,000) to meet, until the levies for the year 2018 are received, the current expenditures of the City for such year, including the amounts required for principal and interest falling due within the year upon any debt of the City for the period January 1 to September 30, 2018 inclusive and twenty-two million dollars ($22,000,000) thereafter until December 31, 2018. 2. The Mayor and Director, Finance & Treasurer of the City of Pickering are hereby authorized to borrow from time to time by way of promissory notes a. sum or sums not exceeding thirty-four million dollars ($34,000,000) to meet the capital expenditures as approved by Council of the City including the amounts required for principal and interest. 3. Any promissory notes made under the authority of this by-law shall be sealed and signed in accordance with the provisions of the Municipal Act, 2001, and may be countersigned in writing by the Manager, Accounting Services of the Corporation in accordance with the provisions of the said Act. 4. This By-law shall come into effect on the first day of January, 2018. By-law passed this 11th day of December, 2017. David Ryan, Mayor Debbie Shields, City Clerk