1. Finance 101 Thompson-Nicola Regional District tnrd.ca Borrowing City of Kamloops kamloops.ca

2. LEGISLATIVE REQUIREMENTS Municipalities:Community Charter Part 6 – Financial Management Sections 174 – 182 Regional Districts:Local Government Act Part 24 – Regional Districts Division 5 – Financial Operations Sections 818 – 826 Division 3 – Expenditures, Liabilities and Investments Note: Some of the sections under the LGA cross-reference to some of the sections under the Community Charter

3. LOAN AUTHORIZATION PROCESS “The bank turned down our loan, but approved the payments.”

4. Why Borrow?

5. Step 1: Loan Authorization Bylaw drafted Step 2: Submit bylaw to Ministry of Community, Sport and Cultural Services for review and approval by the Inspector Three (3) readings of the bylaw by Council (RD Board) Submission of Liability Servicing Limit Certificate (municipalities only – not required of RD)

6. Step 3: Elector approval of the Bylaw (if required) 1) Referendum (“assent of the electors”); 2) Petition(“approval of the electors”); or 3) Alternate Approval process (“approval of the electors”)

7. Step 4: Reconsideration and adoption of the bylaw by Council / Board... followed by minimum One Month quashing period Step 5: Apply to Ministry for Certificate of Approval Step 6: Municipal Security Issuing Resolution and Agreement – Council passes a resolution and forwards it on to the Regional District Board and the MFA

8. Step 7: Regional District Security Issuing Bylaw Three (3) readings of the bylaw by RD Board... followed by minimum ten (10) day quashing period Step 8: Submit RD bylaw to Ministry of Community, Sport and Cultural Services for review and approval by the Inspector Apply to Ministry for Certificate of Approval

9. 5 years from the date of adoption, if the local government has not done temporary borrowing or gone to long-term borrowing through a security issuing bylaw Bylaw expires Amending the bylaw does not extend its life

10. Thompson-Nicola Regional District tnrd.ca City of Kamloops kamloops.ca

11. MFA – Spring and Fall : The MFA issues long-term debt twice per year – in the spring and fall The RD has deadlines for submissions to Ministry end of February and end of August (usually)

12. MFA – Spring and Fall : The MFA returns 98.25% of the loan requested 1% is withheld from the proceeds and kept in trust in the Debt Reserve Fund (DRF) as security (returned at end of term of debt) 0.75% is withheld as a charge for processing the debt issue – part of the cost of borrowing Loan of $1,000,000 equals proceeds of $982,500

13. 10 Year Term S/F Factor: Principal: 1,000,000.00Interest Rate:3.85% 0.083290944 Principal PymntInterest PymntTotal PymntActuarialReducing Balance 1,000,000.00 Yr 1 Semi Annual19,250.00 1,000,000.00 Yr 1 Annual83,290.9419,250.00102,540.94916,709.06 Yr 2 Semi Annual19,250.00 916,709.06 Yr 2 Annual83,290.9419,250.00102,540.943,331.64830,086.47 Yr 3 Semi Annual19,250.00 830,086.47 Yr 3 Annual83,290.9419,250.00102,540.946,796.54739,998.99 Yr 4 Semi Annual19,250.00 739,998.99 Yr 4 Annual83,290.9419,250.00102,540.9410,400.04646,308.00 Yr 5 Semi Annual19,250.00 646,308.00 Yr 5 Annual83,290.9419,250.00102,540.9414,147.68548,869.38 Yr 6 Semi Annual19,250.00 548,869.38 Yr 6 Annual83,290.9419,250.00102,540.9418,045.22447,533.21 Yr 7 Semi Annual19,250.00 447,533.21 Yr 7 Annual83,290.9419,250.00102,540.9422,098.67342,143.59 Yr 8 Semi Annual19,250.00 342,143.59 Yr 8 Annual83,290.9419,250.00102,540.9426,314.26232,538.39 Yr 9 Semi Annual19,250.00 232,538.39 Yr 9 Annual83,290.9419,250.00102,540.9430,698.46118,548.98 Yr 10 Semi Annual19,250.00 118,548.98 Yr 10 Annual83,290.9419,250.00102,540.9435,258.04-0.00 TOTALS:832,909.44385,000.001,217,909.44167,090.56

14. MFA – Temporary : Can be used to fill in between spring and fall issues or for borrowings expected to last less than 5 years Funds can be accessed any time of year once appropriate approvals received Short term loans are direct obligations of the local government requesting the funding. In the case of a municipality, it does not have to seek consent of their regional district to participate in short term borrowing which is the case for long term borrowing.

15. MFA – Temporary : There are no fees to set up a short term loan Interest is calculated daily, compounded monthly and automatically collected the 2 nd business day of the following month

16. Revenue Anticipation Borrowing: Under Section 177 of the Community Charter and section 821 of the LGA, the local government may, by bylaw, borrow funds that may be necessary to meet its current lawful expenditures in anticipation of receiving revenues later that year (cash flow management) Money borrowed in this fashion must be repaid when the anticipated revenue is received.

17. Limitations on Borrowing: Under the LGA, for each municipality the Lieutenant Governor in Council sets the following: 1)limit on the aggregate liabilities; 2)limit on the annual cost to service the aggregate liabilities; and 3)The methods of establishing each of the above limits These limits may only be exceeded with approval of the inspector

18. Limitations on Borrowing: Except for borrowing under CC section 177 [revenue anticipation borrowing], a municipality must not incur a liability for which expenditures are required during the planning period for its financial plan, unless those expenditures are included for the applicable year in the financial plan Same goes for Regional Districts, but reference is to LGA section 821 [revenue anticipation borrowing].

19. Liability Serving Limit Certificate: Municipalities annual debt servicing costs cannot exceed 25 % of its revenue. Annual Debt Servicing is the interest and principle payments on the outstanding Debt. Municipalities are required to submit the certificate with their borrowing Bylaws to ensure the new debt to be acquired does not exceed the limit. Approval of the Inspector of Municipalities is required if the annual limit is exceeded

20. Liability Serving Limit Certificate: City of Kamloops annual debt servicing cost is at about 30% of the limit and represents 7.5% of the City’s revenues.

21. SOME TAKE-AWAYS : This is a very involved process that requires TIME for staff to complete properly Don’t under-estimate the amount of borrowing required during approval stage Don’t borrow more than you need – you can’t return it early Match term of borrowing to needs and/or benefits – long or short

22. tnrd.ca Thompson-Nicola Regional District Questions? City of Kamloops kamloops.ca