City of Powell River will consider a bylaw that would allow for temporary borrowing if the city does not have sufficient money on hand to meet current lawful expenditures of the municipality.
At the March 25 city finance committee meeting, chief financial officer Adam Langenmaier said the prospective annual revenue anticipation borrowing bylaw authorizes, if the city needs it, to engage in short-term borrowing to bridge the gap between now and when the city normally receives the bulk of its taxation in July.
“In the past we have authorized these types of bylaws but we’ve never had to draw on them,” said Langenmaier. “Last year, we did have one in force and it could have been a year when there was the need to use it because of the larger delay in property tax collection, but we were able to get through with our own reserve base and we didn’t have to go to external sources of borrowing.”
Langenmaier said he likes to have the revenue anticipation borrowing bylaw in place because if something does go sideways, it’s much easier to have the bylaw there and be able to use it, instead of trying to scramble and get a bylaw in place.
“This revenue anticipation borrowing bylaw does not cost us any money to establish and we will only incur costs if we draw on the funds in the short term,” said Langenmaier. “The rate, based on the Municipal Finance Authority’s short-term borrowing rates, sits around 0.9 per cent right now.”
Councillor Cindy Elliott asked Langenmaier if he was looking for permission to put borrowing in place, and if he does not foresee or expect to use it, but it is for “just in case.” Langenmaier said that is correct.
The finance committee gave unanimous consent for the matter to go to city council.
In a report to the finance committee Langenmaier stated that the Community Charter grants municipalities the ability to access short-term borrowing based on the current year’s anticipated tax revenue to be received by the July tax deadline. He stated this short-term borrowing is similar to payroll advance, as the intention is to ensure liquidity in the months preceding the tax deadline.
Langenmaier stated that the maximum amount of borrowing allowed for revenue anticipation borrowing is deemed to be 75 per cent of all property taxes imposed for all purposes in the preceding year. The total tax levy from 2020 was $19,466,519.
The city is allowed to borrow up to 75 per cent of that amount, so City of Powell River has $14.5 million in allowable borrowing if city council passes the revenue anticipation borrowing bylaw.
Langenmaier stated that if the city does not access any borrowing under the bylaw, there are no fees, charges or interest that would be incurred.
