HomeMy WebLinkAboutFIN 21-19Cly of
DICKERING
Report to
Executive Committee
Report Number: FIN 21-19
Date: December 2, 2019
From: Stan Karwowski
Director, Finance & Treasurer
Subject: 2020 Temporary Borrowing By-law
Recommendation:
1. That the temporary borrowing limit of $53 million be established to meet 2020
current expenditures pending receipt of taxes and other revenues for the period of
January 1, 2020 to September 30, 2020 inclusive, and $26 million thereafter until
December 31, 2020;
2. That the temporary borrowing limit for capital purposes for 2020 be established at
$49 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 2020
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 2020, 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 it
another way, this report provides the City with a financial safety net.
Report FIN 21-19 December 2, 2019
Subject: 2020 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 2020 for approved capital
expenditures. For current purposes, the $56 million limit for January 1 to September 30,
2019 has been reduced to $53 million for January 1 to September 30, 2020 and the $28
million limit for October 1 to December 31, 2019 has been reduced to $26 million for
October 1 to December 31, 2020. The City's 2018 budget included funding for Pickering
Innovation Corridor land sales in the amount of $19.3 million and this amount was
reduced to $7.5 million for 2019. This reduced spending level is now reflected in the
dollar amount of the Temporary Borrowing By-law.
The limit for capital purposes for 2020 has been established at $49 million based on the
draft 2020 Capital Budget dated November 5, 2019. The actual amount to borrow may
have to be adjusted once the 2020 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 2020. 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 per cent of the
estimated annual revenues from January 1 to September 30 and to 25 per cent
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
2019 estimates of the Corporation, the allowable level of temporary borrowing
outstanding under the Act is estimated at $53 million from January 1 to September 30
and $26 million thereafter.
The requested $53 million should be sufficient to meet the current expenditures of the
City until the levies for 2020 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 21-19 December 2, 2019
Subject: 2020 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 $49 million capital borrowing limit should provide
sufficient funds to cover the estimated 2020 capital expenditures.
Attachment:
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 2020
Prepared By:
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
Attachment #1 to Report #FIN 21-19
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 2020.
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 per cent of
the estimated annual revenues from January 1 to September 30, 2020 and 25 per cent
thereafter;
Whereas it is deemed necessary by the said Council to borrow the sum of fifty-three
million dollars ($53,000,000) to meet, until the taxes for the current year are received,
the current expenditures of the City for the year 2020, including the amounts and sums
aforesaid;
Whereas the said sum of fifty-three million dollars ($53,000,000) plus any similar
borrowings that have not been repaid, is less than 50 per cent 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 2019 exclusive of revenues derivable
from the sale of assets, borrowings or issues of debentures or from a surplus including
arrears of levies, and twenty-six million dollars ($26,000,000) is less than 25 per cent 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 forty-nine million
dollars ($49,000,000) to meet the capital expenditures approved by Council.
By-law No. Page 5
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 fifty-three
million dollars ($53,000,000) to meet, until the levies for the year 2020 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, 2020 inclusive and twenty-six million dollars ($26,000,000) thereafter until
December 31, 2020.
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 forty-nine
million dollars ($49,000,000) 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, 2020.
By-law passed this 16th day of December, 2019.
David Ryan, Mayor
Susan Cassel, City Clerk