Executive Summary:

N/A

Background:

Section 407 ( 1) of the Municipal Act, “Borrowing for expenses”, states that municipalities may authorize borrowings until such time as taxes are collected or revenues are received of amounts which are considered necessary to meet the expenditures for the year whether or not they are expensed in the year. Section 407 (2) of the Municipal Act, “Limit”, further outlines the following:

“ Except with the approval of the Local Planning Appeal Tribunal, the total amount borrowed at any one time plus any outstanding amounts of principal borrowed and accrued interest shall not exceed,

(a) from January 1 to September 30 in the year, 50 per cent of the total estimated revenues of the municipality as set out in the budget adopted for the year; and

(b) from October 1 to December 31 in the year, 25 per cent of the total estimated revenues of the municipality as set out in the budget adopted for the year. ”

At the beginning of each year, or end of the current year for the following year, City Council is requested to grant authority to the City Treasurer to borrow such sums, as may be considered necessary, to meet the current expenditures of the Corporation for the year until the taxes are collected and other revenues are received. While such borrowing is not anticipated to be needed, such approval is considered good business practice and is viewed positively for purposes of the City’s credit rating. A uthorization is then supported by way of municipal by-law.

Discussion:

The current operating line of credit, as provided by Scotiabank, is set at $100 million. In addition to the benefits of having this credit line readily available for use, it also helps to improve the City ’ s financial liquidity, which was a positive factor noted in previous Standard and Poor credit rating reports. The City of Windsor ’ s current credit facilities do not incur any fees unless utilized, but gives the corporation the security that they are in place if required, satisfying good business practices. If Administration were not to pursue this agreement until borrowing is required, there could be a delay, therefore limiting our ability to respond to any situation in a timely manner.

It can be noted that despite having the credit facility available, throughout fiscal year 2020, the City has maintained a substantial positive cash flow position and therefore, has not borrowed any funds from this line of credit. In fact, given the City’s increasing reserve balances, the City has not borrowed against this credit facility in many years. However, should the need arise to utilize the line of credit, Administration is recommending that the CAO and City Clerk be provided with the authority to sign the credit facility commitment letter. Any such borrowings would be reported to City Council at the appropriate time.