HomeMy WebLinkAboutCS 45-08
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REPORT TO
EXECUTIVE COMMITTEE
62
Report Number: CS 45-08
Date: November 10,2008
, .t .
From:
Gillis A. Paterson
Director, Corporate Services & Treasurer
Subject:
2008 Internal Loan and External Debentures
Recommendation:
1. That Report CS 45-08 from the Director, Corporate Services & Treasurer be
approved;
2. That Council approve an internal loan in the amount of $200,000 for a maximum
term of ten (10) years, to be borrowed from the Development Charges Reserve
Funds, for the External Subdivision Works-Roads: Brock Road, Third Concession
Road to Taunton Road and furthermore, that the Director, Corporate Services &
Treasurer be authorized and directed to take whatever actions necessary; and,
3. That the appropriate officials of the City of Pickering be given authority to give
effect thereto.
Executive Summary: In 2007, a project budgeted to be debt-financed proceeded
without any formal tendering process by the City due work undertaken by the Region.
As the work has proceeded, we are unable to borrow externally. As an alternative,
internal borrowing will be undertaken to finance this project. Council approval is
required to undertake the internal loan of $200,000 in 2008.
For auditing purposes, a summary of the previously approved 2008 debentures
requests is also included in this report.
Financial Implications:
Internal Loans
In the 2007 Capital Budget, this project was to be financed $200,000 debt and $200,000
development charges. The current internal loan request is merely a change in the
method of financing due to the inability to borrow externally as the project has
commenced by the Region before debt financing had been approved by Pickering
Council. Therefore, debt financing is no longer an option. This loan will be borrowed
Report CS 45-08
November 10, 2008
Subject: 2008 Internal Loan & External Debentures
63
Page 2
from the Development Charges Reserve Fund in the amount of $200,000 on December
31, 2008 and repaid through an allocation in the annual current budget commencing in
2009. The annual repayment will be budgeted under the current budgets. A further
detail on this loan is as follows:
Description Project Terms Loan Dev. Charges Total
No. Amount Reserve Financing
Fund
Ext.Subdivision 5321.0707 10-Year $200,000 $200,000 $400,000
Works-Brock
Rd, 3rd Cone.
Rd to Taunton
Rd
The internal borrowing rate is normally determined by using the Ontario Strategic
Infrastructure Financing Authority's (OSIFA)'s rates and other comparable municipal
borrowing as a guideline or benchmark. The table below provides a comparison of what
is available in the market at this time.
Terms Region's Last OSIFA-As of Sept. 22, Other Municipal
Issue-Feb. 2007 2008 Serial Debentures Benchmark- Averages
Sept. 2008
10-Year 4.50% 4.56% 4.58%
At the time of writing, the financing market is going through uncertain times due to the
financial crisis occurring in the United States. The current state of credit market would
suggest that the rates for the internal loans not be officially determined at this time. The
official rates will be determined based on either any forthcoming fall debenture issue by
the Region or market rates at the time of official borrowing in December 2008.
External Debt
For auditing purposes, previous approved 2008 debt financed projects are being
summarized here. Attached 1 provides the detailed breakdown of all projects approved
by Council with specific reference to the report to Council authorizing the debenture
issue.
The total of all external debentures identified and required for 2008 is $5,727,000, of
which we have officially requested the Region to borrow on our behalf in the amount of
$4,096,000. Due to timing issue, the City's is unable to include the balance of
$1,631,000 with the Region's fall 2008 issue. It may be necessary for the City to resort
to Infrastructure Ontario or a financial institution to finance the remaining $1,631,000.
Formal documents are in place for the $1,631,000 debentures request. The external
borrowing rate will be determined by the capital markets at the time of the issuance of
the debentures.
Report CS 45-08
November 10,2008
Subject: 2008 Internal Loan & External Debentures
Page 3
64
In 2007 we requested the Region to borrow on our behalf the debentures in the amount
of $4,410,000. These requests have been reported to Council in 2007 under reports to
Council CS 08-07 and CS 44-07. The Region has not had an official issue during this
time period, however is anticipated to proceed with a debenture issue in the fall of 2008.
The annual charges for the 2007 debentures requests have been included in the 2008
Current Budget -General Government. The combined anticipated fall 2008 issue will be
$8,506,000 ($4,410,000 + $4,096,000).
Financial Burden
The annual loan and debt repayment charges are funded through the general property
tax levy in the annual Current Budgets.
The projected total of internal loans and debentures outstanding for December 31, 2008
is $20,963,948. Please refer to Attachment 2.
Sustainability Implications: This financing is necessary to provide the financial
means to sustain the City's capital investments in infrastructure.
Background: Continuous growth has created a need for capital infrastructure to
maintain the level of services provided to residents and businesses. Funding sources
for capital projects are identified and approved by Council in the annual capital budget
prior to the comr:nencement of the projects. The continuous growth coupled with aging
capital infrastructure calls for expansion to new facilities, repairs, and increased
replacement. This prompted the need for more borrowing to fund the capital projects.
Total borrowings from the reserve funds to finance 2008 and prior years' capital projects
are projected at $3,221,585 for the year end 2008. Such internal borrowings require
appropriate approvals and documentation in accordance with the Municipal Act 2001,
S401 (1) and the Development Charges Act 1997, S36 OReg. 82/98 s.12 (2) 3,4,5.
Corporate Services will complete the necessary documentation including Promissory
Note indicating the amount, term, interest rate and other relevant information relating to
the internal loan and its repayment.
Under Pursuant to Resolution 144/99 the Mayor and Treasurer has the authority to sign
the Promissory Notes.
In the past we have always provided an annual formal report to Council on the capital
projects requiring debt financing, together with the required debenture by-laws to be
enacted with terms and conditions being specified in detail. In order to ensure that all
proper documentation is ready and available whenever the Region proceeds with any
debenture issue, effective 2008, the City has incorporated the debenture by-law with the
report to Council when reporting on the results of the tendering process. For auditing
purposes, this annual report to Council also serves as a report for information; providing
Report CS 45-08
November 10, 2008
Subject: 2008 Internal Loan & External Debentures
". r:
b....
Page 4
a summary of all 2008 debentures approved by Council with details indicated on
Attachment 1.
Attachments:
1. 2008 External Debentures through The Regional Municipality of Durham
2. Total Projected Internal Loans & External Debentures Outstanding as at
December 31 , 2008
Prepared By:
Approved I Endorsed By:
Q~
Caryn Kong
Senior Financial Analyst
"~~~?
-Gillis A. Paterson -....
Director, Corporate SeNices & Treasurer
GAP:ck
Copy: Chief Administrative Officer
Recommended for the considerati
i.
Pickering Cit ncil \
Proiects awaitina Reaion's fall 2008 debenture issue:
Roads Roads-Supply & Delivery of a 4-Ton
2008 5320.0801. 5-Year OES 22-08 Dump Truck
Ext.Subdiv
2008 5321.0812. to-Year
Storm Water-City Road Reconstruction
& Storm Water Sewer Works-Sheppard
OES 19-08 Av/Altona to Rosebank Rd
Don Beer
Arena
2008 5715.0805. 15-Year
Don Beer Arena-Ice Rink 2
OES 10-08 Renovations
Rec
Complex
2008
Pickering Rec Complex Doubles
5731.0808. 15-Year OES 24-08 Squash Courts & Aerobics Studios
Proiects unfinanced as at October 31, 2008:
Roads
2008 5321.0801. 10-Year OES 27-08 Sideline 4/Conc.5
Rec.Complex
2007 5731.0706. 5-Year
2008 5731.0816. 5-Year
OES 25-08 Tennis Court Roof Replacement
OES 25-08 Tennis Court Roof Replacement
Dunbarton Pool
2008 5713.0804. 15-Year
OES 37-08 Dunbarton Indoor Pool Renovation
2008 5780.0817.5-Year OES 23-08 Kinsmen Park Artificial Turf Field
Notes
a Development Charges Reserve Fund
b Financial contribution from the Pickering Soccer Club
C Portion reimbursed by the Region
d Federal Gas Tax Reserve Fund
e Combination of Pickering Squash Club & funds in Squash Courts Reserve Fund
CS.45ck A#1
$ 171,000
514 $ 171,514
1,295,000
279,000 a
2,557,083
882,467 c
100,000
616
630,000
3,200
633,200
2,000,000
800,000 d
4,000,950
200,000 e 1,000,000
950
$ 427,000 $ 122,650 a 350 $ 550,000
100,000 100,000
105,000 243 105,243
500,000 1,200,000 d - 200,000 - 1,900,000
499,000 200,000 b 783 699,783
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67
City of Pickering
Total Projected Internal Loans & External Debentures Outstanding
As at December 31, 2008
2001-2004 2005 2006 2007 2008 Dec. 31,2008
Original Principal Principal Principal Principal Principal Outstanding
Amount Repayment Repayment Repayment Repayment Repayment Balance
Internal Loans
2001 Issue $7,677,000 ($2,907,406) ($857,543) ($861,392) ($746,111 ) ($758,027) $1,546,521
2002 Issue 1,224,000 (202,016) (195,095) (120,236) ( 125,427) (123,509) 457,717
2003 Issue 349,071 (27,495) (29,963) (31,233) (189,906) (10,526) 59,948
2004 Issue 267,000 (28,125) (29,245) (30,442) (52,500) 126,688
2005 Issue 287,000 (53,275) (55,262) (57,323) 121,140
2006 Issue 352,000 (78,801 ) (82,183) 191,016
2007 Issue 597,000 (78,445) 518,555
2008 Issue 200,000 0 200,000
Total Internal
Loans $10,953,071 ($3,136,917) ($1,110,726) ($1,095,381) ($1,225,949) ($1,162,513) $3,221,585
External Debentures
2002 Issue $4,278,000 ($518,000) ($280,000) ($294,000) ($311,000) ($328,000) $2,547,000
2003 Issue 3,494,000 (351,000) (369,000) (387,000) (408,000) 1,979,000
2004 Issue 1,537,000 (176,000) (184,000) (192,000) (200,000) 785,000
2006 Issue 2,792,000 (242,989) (254,648) 2,294,363
2008 Issue' 4,410,000 0 0 4,410,000
2008 Issue" 4,096,000 0 0 4,096,000
2008 Unfinanced ^ 1,631,000 0 0 1,631,000
Total Ext.
Debentures $22,238,000 ($518,000) ($807,000) ($847,000) ($1,132,989) ($1,190,648) $17,742,363
Total Projected
Loans &
Debentures $33,191,071 ($3,654,917) ($1,917,726) ($1,942,381) ($2,358,938) ($2,353,161) $20,963,948
. Requested in 2007
.. Requested in 2008
^ Await Region's next debenture issue
CS 45ck A#2
CS 45-08 A#2