qathet Regional District’s (qRD) finance committee is recommending the regional board give first reading through final adoption to a security issuing bylaw for $5 million in borrowing for City of Powell River’s consolidated wastewater treatment plant.
At the June 22 finance committee meeting, manager of financial services Linda Greenan said the borrowing request was “pretty standard.”
“It’s a loan the city had enacted a few years ago for the liquid waste treatment plant and this is the third draw,” said Greenan. “This allows the city to enter into long-term borrowing. They have taken two long-term borrowing draws and this is the third.”
Electoral Area B director Mark Gisborne said he was trying to find out an answer to a question that came up at a recent convention.
“My understanding is the city borrows this money from the regional district and the regional district borrows the money from the municipal finance authority,” said Gisborne. “My understanding is this process is done because if ever, in the hypothetical, the city is unable to pay, then it’s the regional district that is ultimately liable.
“I have never heard of a municipality being unable to pay their debt. Is that something that has ever happened? Is it something we should be potentially concerned about?”
Greenan said she hadn’t done any research to see if a municipality had ever defaulted and she was not aware of any that had.
Electoral Area A director and board chair Patrick Brabazon said by his recollection, there may have been a case in the 1930s.
City director and finance committee chair George Doubt said the fact that there is the existence of the municipal finance authority minimizes the chances of that happening. He said it spreads the risk of municipal bankruptcies. They happen in the United States where municipalities issue their own bonds and he’s heard of bankruptcies there, he added.
“This process of getting approval from the regional district to approve a loan from the municipal finance authority to the city is a very secure form of lending that assures low interest rates,” said Doubt.
According to a report from Greenan, municipalities do not have the authority to borrow directly from the municipal finance authority. They must authorize their borrowing through loan authorization bylaws and regional districts borrow the money on behalf of the member municipalities.
Greenan stated that on a schedule consistent with the debt payments schedule issued by the municipal finance authority, the city will forward funds to qRD to cover the full cost of the debt payments. The revenue from the city and the associated debt payment expenditure will be included in the qRD’s five-year financial plans until the debt is repaid.
The regional board will consider the motion at its June 30 meeting.
