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Home My WebLink AboutCS 45-08 Citq c~ 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 0"- 0\ ""!.;> n :c ~ m /' :::j ~ d ;;x:J m ~ ~ ~ ~ ~ # -2- TO REPORT # f.S...!:}G; 0 f 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