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Infrastructure &
Finance Division
 

New Long-Term Borrowing (Capital Financing) Policies and Procedures for Improvement District Services (not for Fire Protection)

 

Circular No. 11:09
ARCS File#: 195-20

 


 
May 19, 2011
 

To: All Improvement Districts

Re: New Long-Term Borrowing (Capital Financing) Policies and Procedures for Improvement District Services (not for Fire Protection) 

This circular applies specifically to water capital projects. It does not apply to fire protection capital projects financed through the Surveyor of Taxes.

 

When an improvement district (ID) undertakes a large capital project, it often needs to finance the project with borrowing. Previously, the policy was that an ID would finance the initial construction process through a financial institution but that long-term financing would be through the Ministry of Finance (MoF).

 

There has recently been a change to the management fees for all the funds handled through the MoF. A minimum charge of $5,000 a year will be applied to each sinking fund debenture created for an ID. This new fee is large enough that it removes the financial advantage of using of the provincial borrowing system.

 

As a result, this Ministry will now support IDs using financial institutions for their long-term debt, as well as short-term. When you receive consent to borrow, you are now encouraged to work with a local financial institution to develop a debt package that meets the needs of the ID. However, if there is not a local institution able to offer financing, the Royal Bank has established a debt program suited to IDs. Please contact your Financial Officer at the Ministry for contact information.

 

Debt, via the MoF, is still available but at the increased cost of the annual fee. Bear in mind that if financing is to be obtained from a financial institution, audited financial statements and other information about the ID will be required.

 

When complete financing is arranged with a financing institution, only one borrowing bylaw is required. The Ministry has developed a modified template bylaw for this purpose and your Financial Officers can work with you through this new financing process. Financing from a financial institution will have the advantages of more flexible timing, and no sinking fund shortfall risk. This new policy will be reflected in the next issuance of the Improvement District Manual, in the next year.

 

If you have any further questions, please contact your Financial Officer.

 

 

 

 

Original signed by:

 

Talitha Soldera, CGA

Director, Local Government Finance


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