The URL can be used to link to this page

Home My WebLink AboutCS 36-03 Ciú/ 0# REPORT TO COMMITTEE OF THE WHOLE Report Number: CS 36-03 Date: October 1,2003 From: Gillis A. Paterson Director, Corporate Services & Treasurer Subject: Final Approval for Financing of Council Approved Capital Projects - Internal Loans and External Borrowing Through the Issuance of Debt Recommendation: 1. 2. 3. That Report CS 36-03 from the Director, Corporate Services & Treasurer be approved; and that: Council approve the internal borrowing of $317,071 for projects approved in the 2003 Capital Budget to be temporary financed from the Development Charges Reserve Funds based on the purposes, terms & conditions as specified in Attachment 1 and furthermore, that the Director, Corporate Services & Treasurer be authorized and directed to take whatever actions necessary, including the recommendations below, to give effect thereto; and, the Director, Corporate Services & Treasurer be authorized to: a) undertake long term financing through the issuance of debt up to a total amount of $3,240,000 for the projects listed on Attachment 2 in the indicated amounts up to a maximum term of 10 years, through the Region of Durham or the Ontario Municipal Economic Infrastructure Financing Authority (OMEIFA) for the following purposes, as indicated in Attachment 2: Roads Parks Storm Water Culture and Recreation Total $1,700,000 845,000 250,000 445 000 $3,240.000 and the funding for remaining balances in these accounts be provided from the annual Current Budget; b) undertake the financing of any projects or portions thereof that cannot be accommodated through the foregoing through a financial institution offering long term financing under similar terms and conditions; Report CS 36-03 Date: October 1 , 2003 Subject: Final Approval for Financing of Council Approved Capital Projects - Internal Loans & External Borrowing Through the Issuance of Debt Page 2 c) finance any capital expenditures currently financed through internal loans, should the need for funds arise, through the Region of Durham or through a financial institution; d) make any changes, adjustments, revisions to amounts, terms and conditions or any other actions necessary in order to effect the above directions of Council; 4. the costs of undertaking the financing, currently estimated at up to approximately $24,300, be charged to the 2004 Current Budget, General Government Loan Repayment; 5. the Director, Corporate SeNices & Treasurer be directed and authorized to finance any capital projects, the financing for which is not specifically approved by Council, through the issuance of debt or long term financing arrangements, through the Region of Durham, a financial institution, internal loans or whatever means necessary at the discretion of the Treasurer; 6. the Director, Corporate SeNices & Treasurer be authorized to engage the seNices of any individual or firm, legal or otherwise, necessary to assist in the preparation of documentation, completion of an undertaking and any other aspects in regards to the financing of capital projects; 7. the Director, Corporate SeNices & Treasurer be authorized to apply any excess proceeds raised on external and internal loans to other capital projects for which long-term financing is required, or to reduce the promissory notes for internal loans as is permitted under the Municipal Act; 8. the Director, Corporate Services & Treasurer be directed to prepare the requisite by-laws for presentation to and adoption by Council at its meeting of October 14, 2003; 9. the appropriate officials of the City of Pickering be given authority to give effect thereto. Executive Summary: While long term financing (internal and external) was always generally approved by Council during the annual capital budgeting process and/or through specific reports, there has never been a specific formal approval by the Council for capital projects requiring such financing with the terms and conditions being specified in detail. This Report to Council seNes as that final formal approval and Corporate SeNices will complete all the necessary documentation. The 2003 approved debt financed capital projects will be funded by a combination of issuance of internal Report CS 36-03 Date: October 1,2003 Subject: Final Approval for Financing of Council Approved Capital Projects - Internal Loans & External Borrowing Through the Issuance of Debt Page 3 loafls and external loans through the Region of Durham or a financial institution as per Attachment 2. Council has to formally approve the request to undertake the long term financing most likely through the issuance of debentures through the Region of Durham at the terms and conditions as arranged in the capital markets. The Director, Corporate Services & Treasurer has certified that this loan and the repayment thereof falls within the City's Debt and Financial Obligations approved Annual Repayment Limit for debt and other financial obligations for 2003 as established by the Province for municipalities in Ontario. Financial Implications: Internal Loans The 2003 Capital Budget included financing through internal loans for the following projects: Roads Libraries Total $ 76,000 $241,071 $317.071 The combined principal and interest payment for the above internal loans will be $41,462 and payment will commence in 2004. These internal loans will be temporary financed by the Development Charges Reserve Funds and repay through an allocation in the annual current budget commencing in 2004. The internal borrowing rate was determined by taking the average annual yield of six other municipals' 10-year bonds. The annual yield of these municipal bonds varies from a low of 5.085% for Vancouver Municipal Bond to a high of 5.346% for Edmonton Municipal Bond. Thus, the calculated interest rate set forth for our 10-year internal loans is 5.2%. External Debt The remaining unfinanced projects from 2001 and 2002 amount is $1,420,000 out of which the actual amount expended and requested is $450,000. With this financing, there remains three unfinanced projects from 2002 and prior. These projects are the construction of the new Fire Hall, Sidewalk-Asphalt Safety Request and Western Waterfront Parks Improvements. The combined total for these unfinanced projects is $814,000, which will be financed at a future date. Report CS 36-03 Date: October 1 , 2003 Subject: Final Approval for Financing of Council Approved Capital Projects - Internal Loans & External Borrowing Through the Issuance of Debt Page 3 loans and external loans through the Region of Durham or a financial institution as per Attachment 2. Council has to formally approve the request to undertake the long term financing most likely through the issuance of debentures through the Region of Durham at the terms and conditions as arranged in the capital markets. The Director, Corporate Services & Treasurer has certified that this loan and the repayment thereof falls within the City's Debt and Financial Obligations approved Annual Repayment Limit for debt and other financial obligations for 2003 as established by the Province for municipalities in Ontario. Financial Implications: Internal Loans The 2003 Capital Budget included financing through internal loans for the following projects: Roads Libraries Total $ 76,000 $241,071 $317.071 The combined principal and interest payment for the above internal loans will be $41,462 and payment will commence in 2004. These internal loans will be temporary financed by the Development Charges Reserve Funds and repay through an allocation in the annual current budget commencing in 2004. The internal borrowing rate was determined by taking the average annual yield of six other municipals' 10-year bonds. The annual yield of these municipal bonds varies from a low of 5.085% for Vancouver Municipal Bond to a high of 5.346% for Edmonton Municipal Bond. Thus, the calculated interest rate set forth for our 10-year internal loans is 5.2%. External Debt The remaining unfinanced projects from 2001 and 2002 amount is $1,420,000 out of which the actual amount expended and requested is $450,000. With this financing, there remains three unfinanced projects from 2002 and prior. These projects are the construction of the new Fire Hall, Sidewalk-Asphalt Safety Request and Western Waterfront Parks Improvements. The combined total for these unfinanced projects is $814,000, which will be financed at a future date. Report CS 36-03 Date: October 1, 2003 Subject: Final Approval for Financing of Council Approved Capital Projects - Internal Loans & External Borrowing Through the Issuance of Debt Page 4 The total debt financing approved in 2003 Capital Budgets by Council is $3,771,971. The combined total of all external debt requested as of August 31,2003 is $3,240,000. Attachment 2 provides a detail breakdown of all projects funded by external debt. The external borrowing rate will be determined by the capital markets at the time of the issuance of the debt. 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 debt outstanding for December 31, 2003 is $14,490,288 net of principal repayments to date. Please refer to Attachment 3. Background: Continuous growth has created a need for capital infrastructure to maintain the level of seNices provided to residents and businesses. Funding sources for capital projects are identified and approved by Council prior to the commencement of the projects. The continuous growth coupled with aging capital infrastructure calls for expansion to new facilities, replacement and repairs. This prompted the need for more borrowing to fund the capital projects. Total borrowings from the reseNe funds to finance 2002 and prior years capital projects amounted to $8,901,000 and has almost maximized the amount that the reseNe funds could lend out. Thus a very minimum amount of only $317,071 was designated for internal borrowing during the 2003 budgeting process. Such internal borrowings require appropriate approvals and documentation in accordance with both the Municipal Act 2001, 8142 and the Development Charges Act R80 1990, Regulation 12(3)(4)(5). Corporate SeNices will complete the necessary documentation including Promissory Notes indicating the amount, term, interest rate and other relevant information relating to the internal loans and their repayment. Normally, all external debt requested by an Area Municipality is issued through the Region of Durham. However, given recent announcements by the Province there may be other, perhaps more cost effective, means of financing available. While I have discussed this with provincial staff, details are not known at this time, and may not for some time. Furthermore, alternate financing may be desirable or necessary for some portions of the City's requirements. The Recommendations allow for the best course of action to take place. The recommendations also provide a limited degree of flexibility in the event that the documentation for projects or portions thereof is insufficient to meet the legal requirements for a debenture issue in that the project can then be financed through other means. They also provide for some flexibility with the treatment of excess Report CS 36-03 Date: October 1,2003 Subject: Final Approval for Financing of Council Approved Capital Projects - Internal Loans & External Borrowing Through the Issuance of Debt Page 5 proceeds that may be raised as a result of the market conditions (i.e. issued as a premium) or excess funds resulting once project costs are complete and final. The costs of financing of approximately $24,300 will be included in the 2004 Current Budget for the 2003 capital projects. This cost represents commissions, legal fees, registration for debentures with the Canadian Depository for Securities (C.D.S.) and any discount upon sale. Under Resolution 144/99 the Mayor and Treasurer has the authority to sign the Promissory Notes. Attachments: 1. 2. 3. Internal Loans Funded by Reserve Funds as at January 1,2003 External Debt, Through Region of Durham or a Financial Institution Total Projected Debt Outstanding at December 31, 2003 Prepared By: -° "'i:A1t ~ Caryn Kon Senior Financial Analyst Approved I Endorsed By: ~>~ -~ -> ~ Gillis A. Paterson Director, Corporate Services & Treasurer GAP:vw Attachments Copy: Chief Administrative Officer Recommended for the consideration of Pickering City Council ;'1 ATT I REPORT # (5.3" ~ ð -3 Budget Year Project Number Terms Rates Decsription Amount of Loan 2003 Roads 03-2320-010-02 10-Year 5.20% Road Rehab-Pickering Parkway 76,000 2003 2003 2003 Library 03-2745-005-02 03-2745-005-04 03-2745-005-05 10-Year 10- Year 10- Year 5.20% Checkpoint RFID System-Central Library 5.20% Construction of Central Library Lobby Redesign 5.20% Flooring for Central Library Lobby redesign 130,000 73,371 37,700 241,071 Total Internal Loans - 2003 317,071 Note: Internal Loans to be funded from Development Charges Reserve Fund Principal and interest payments to commence in 2004 2003 Council Approved Debt Loans.xls Int. Loans-sort RTC (1) 02/10/2003 ATTACHMENT#L TO REPORT#~}&- 03 Budget Year Project Number Terms Roads 2003 03-2320-004-01 5-Year Roads 2001 Granite Court Brid~ 10-Year 2002 02-2320-009-00 10-Year 2003 03-2320-010-01 10-Year 2003 03-2320-008-00 10-Year 2003 03-2320-008-01 10-Year 2003 03-2320-008-02 10-Year Total-Roads -10-Year Total-Roads Parks 2003 03-2718-001-00 5-Year 2003 03-2718-001-07 10-Year Total -Parks Decsription Amount of Loan 1990 Champion 740VHP Road Grader 160,000 160,000 Remove, replace ,repair damaged structure Petticoat Creek -Culvert Rehabilitation Road Rehab.-Amberlea Blvd. Road Const.-Rougemount Dr-Phs II Road Const.-Audley Rd., H#7 southern limit Road Const.-Liverpool Rd- Mill. Sq/Wharf St 100,000 200,000 48,000 818,000 274,000 100,000 1,540,000 1,700,000 Soccer Fields-Lighting & Improvem. Progress Frenchman's Bay East Park 230,000 615,000 845,000 2003 2002 Storm Water Mana~ement 03-2410-005-05 5-Year Amberlea Creek Erosion Control 02-2410-005-00 10-Year Amberlea Creek Stabilization-Phase 2 Total Storm Water Management 100,000 150,000 250,000 2003 2003 Culture & Recreation 03-2731-005-04 5-Year 03-2735-005-01 10- Year Total Culture & Recreation Total External Debt - 2003 2003 Council Approved Debt Loans.xls Overlay asphalt for Parking Lot -Rec.Centre Delaney Roof Replacement-Rec. Centre 75,000 370,000 445,000 3,240,000 Ext. Debt-Supported by RTC (2) 02/10/2003 ATTACHMENT #3- TO REPORT # Cs)fc - ð 3 2001 2002 2003 Original Principal Principal Principal Outstanding Amount Repayment Repayment Repayment Balance Internal Loans As at Januray 1, 2001 7,677,000 (604,837) (624,089) (667,677) 5,780,397 2001 Capital Projects 853,000 0 0 (65,325) 787,675 2002 Capital Projects 371,000 0 0 (32,855) 338,145 2003 Capital Projects 317,071 0 0 0 317,071 Total Internal Loans 9,218,071 (604,837) (624,089) (765,857) 7,223,288 External Debt 2002 Capital Projects 4,279,000 0 0 (252,000) 4,027,000 2003 Capital Projects 3,240,000 0 0 0 3,240,000 Total External Debt 7,519,000 0 0 (252,000) 7,267,000 Total Projected Debt 16,737,071 (604,837) (624,089) (1,017,857) 14,490,288 2003 Council Approved Debt Loans.xls Total debt-RTC (3) 02/10/2003