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Home My WebLink AboutCST 43-11 ear Report To - Executive Committel 18 PICKERITNG Report Number: CST 43-11 Date: December 5, 2011 From: Gillis A. Paterson Director, Corporate Services & Treasurer Subject: 2012 Temporary Borrowing By-law Recommendation: 1. That Report CST 43-11 from the Director, Corporate Services & Treasurer be received; 2. That the temporary borrowing limit to meet 2012 current expenditures pending receipt of taxes and other revenues be established at $36,000,000 for the period January 1, 2012 to September 30, 2012 inclusive, and $18,000,000 thereafter until December 31, 2012; 3. That the temporary borrowing limit for capital purposes for 2012 be established at $32,000,000; 4. That the attached draft by-law providing for the temporary borrowing of monies, be enacted; and, 5. That the appropriate officials of the City of Pickering be authorized to take the necessary actions to give effect thereto. Executive Summary: 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 2012 until the taxes are collected and other revenues are received. Approval is always sought at the end of the fiscal year (calendar) in order to be prepared, in the event that loans are necessary as we proceed into the New Year. 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, we will be undertaking external borrowing from the Regional Municipality of Durham (Region) in 2012 for approved capital expenditures. For current purposes, the $34 million limit for 2011 has been increased to $36 million for 2012 and the $17.3 million has been increased to $18 million. The limit for capital purposes for 2012 has been established at $32 million based on the first draft (dated Report CST 43-11 December 5, 2011 1 Sub ect: 2012 Temporary Borrowing By-law Page 2 November 2, 2011) of the 2012 Capital Budget. This may have to be adjusted once the 2012 Capital Budget has been approved. Sustainability Implications: Council approval to undertake temporary borrowings, if necessary, for current operations and capital projects is necessary in order to financially sustain the City's operations. To date, it has not been necessary for the City to undertake such temporary financing measures. Background: The borrowing of funds for current and capital purposes may become necessary during the normal course of operations during 2012. Under the provisions of Section 407 of the Municipal Act, 2001, (the Act), the Council of the City of Pickering 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 generally 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 2011 estimates of the Corporation, the allowable level of temporary borrowing outstanding under legislation is estimated at $36 million from January 1 to September 30 and $18 million thereafter. The requested $36 million should be sufficient to meet the current expenditures of the City until the levies for 2012 are received. It is hoped 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. 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 the Treasurer to obtain additional temporary interim financing (internal or external) for capital projects approved by Council. The $32 million capital borrowing limit would provide sufficient funds to cover the estimated 2012 capital expenditures. Report CST 43-11 December 5, 2011 120 Subject: 2012 Temporary Borrowing By-law Page 3 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 2012 Prepared By: Approved / Endorsed By: Caryn Kong, CGA Gillis A. Paterson, Senior Financial Analyst - Capital & Director, Corporate Services & Treasurer Debt Management GAP:ck Copy: Chief Administrative Officer Recommended for the consideration of Pickering CI Council ;~O, 201/ Tony Prevedel, P.Eng. Chief Administrative Officer ATTACHMENT#=TO REPORT# `i-I 121 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 2012. 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 Municipality 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 Municipality for the year, including the amounts required for principal and interest falling due within the year upon any debt of the Municipality, and the sums required by law to be provided by the Council for any local board of the Municipality; Whereas Section 407(2) limits the total of such borrowings to not exceed 50% of the estimated annual revenues from January 1, 2012 to September 30, 2012 and 25% thereafter; Whereas it is deemed necessary by the said Council to borrow the sum of thirty-six million ($36,000,000) to meet, until the taxes for the current year are received, the current expenditures of the Municipality for the year 2012, including the amounts and sums aforesaid; Whereas the said sum of thirty-six million ($36,000,000) plus any similar borrowings that have not been repaid, is less than 50% of the total amount of the estimated revenues of the Municipality from January 1 to September 30 as set forth in the estimates adopted by the said Council for the year 2011 exclusive of revenues derivable from the sale of assets, borrowings or issues of debentures or from a surplus including arrears of levies and eighteen million dollars ($18,000,000) is less than 25% 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 said Council to borrow the sum of thirty-two million ($32,000,000) to meet the capital expenditures approved by Council. T - - 122 By-law No. Page 2 Now therefore the Council of the Corporation of the City of Pickering hereby enacts as follows: The Mayor and 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-six million ($36,000,000) to meet, until the levies for the year 2012 are received, the current expenditures of the Municipality for such year, including the amounts required for principal and interest falling due within the year upon any debt of the Municipality for the period January 1, 2012 to September 30, 2012 inclusive and eighteen million dollars ($18,000,000) thereafter until December 31, 2012. 1. The Mayor and 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- two million ($32,000,000) to meet the capital expenditures as approved by Council, of the Municipality 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, 2012. By-law read a first, second and third time and finally passed this 12th day of December, 2011. David Ryan, Mayor Debbie Shields, City Clerk