New $10.1M debenture will have 'no impact' on tax rates

At the end of 2020, the Town of Bradford West Gwillimbury was carrying long-term debt in the amount of $35 million – money used to build the infrastructure needed to support both residential growth and the development of the Highway 400 Employment lands.

It’s a fluid picture, as construction and financing needs continue, councillors learned on Tuesday night.

A report from the Finance Department asked council to authorize a new $10.1 million debenture, to replace a $13 million debenture that had been issued for the recently built Highway 400-Line 5 Interchange.

Director of Finance Ian Goodfellow explained that the town had initially intended to reissue the $13 million debenture, but was unable to do so because the related capital expenditures were more than 5 years old.

Instead, the town came up with a “much better plan”: borrowing internally to use the town’s own money to pay off the old debenture, in May of this year, and then issuing a new 10-year $10.106 million debenture to cover the residential growth-related portion of the interchange costs.

Not only was the municipality able to borrow at a slightly lower interest rate, of 1.97 percent compared to the 2.03 percent originally estimated, but development charges will also cover 100 percent of the cost of the borrowing since it is growth-related, Goodfellow said.

“This debenture is in keeping with what was planned” in the Development Charges Background Study, he noted, and “is going to be fully repaid” through development charges, with no impact on taxes.

Council approved the borrowing by-law for the new debenture, slightly reducing the town’s long-term debt - but only temporarily.

The municipality is looking at further borrowing this summer, totalling an additional $36.6 million.

The town has applied for debentures, to be amortized over a 20-year term, that include $12.088 million for the residential growth-related portion of water infrastructure works; $21.16 million for the residential growth-related portion of wastewater infrastructure; and $3.356 million for the non-growth share of the new Bradford Firehall.  

The growth-related borrowing will again be covered by development charges, rather than taxes. Only the firehall debt will have an impact on the tax rate.

The report to council provided some reassurances, relating to the town’s debt load. The Province has capped the Annual Repayment Limit (ARL) paid by municipalities at 25 percent of the municipality’s ‘Own Net Revenues.’

Based on that, BWG’s cap on debt servicing costs is $15.2 million per year. Even with the additional borrowing in 2021, BWG will have used only 35.52 percent of its approved ARL limit – leaving room, at current interest rates, to borrow up to another $145.5 million.

The Ontario Infrastructure and Lands Corporation (OILC) has yet to approve the 20-year debentures requested; the application will be considered by the Corporation in August. If approved, council will be asked to authorize the borrowing at that time.