New Westminster is taking steps to borrow up to $15 million in case its needs more cash to respond to the COVID-19 pandemic – but there’s no guarantee it will be able to get the cash.
A staff report states the city has previously adopted a revenue anticipation borrowing bylaw that authorized up to $3 million to be drawn from the city’s current line of credit with the bank. On April 6, council approved a revenue anticipation borrowing bylaw that allows the city to borrow up to $12 million in additional funds from the Municipal Financing Authority’s short-term borrowing program.
“In light of the recent and anticipated cash-flow impacts on the city due to the COVID-19 pandemic, it may be necessary for the city to have a temporary influx of cash that, among other things, protects the city from going into an overdraft position,” said a staff report. “The MFA has a short-term borrowing program that can provide the city with temporary relief from revenue shortfalls due to the delayed collection of cash, in addition to the existing line of credit with the bank.”
Lorraine Lyle, the city’s acting director of finance, said the city is actually able to apply for more funding than it’s seeking.
“The potential cap is much higher,” she told council. “Through my discussion with MFA … they are aware that we are putting this in to council and have recommended that we be reasonable. The lending limits for municipalities are set at a very high level, and it is not recommended that we go very close to those levels. I took 25% of our limit.”
According to the revenue anticipation borrowing bylaw approved by council on Monday, the total amount of liability council may incur is $62,954,276, which is 75% of the whole amount of the taxes levied for all purposes in 2019.
Mayor Jonathan Cote, a member of the Municipal Finance Authority’s board, said this borrowing program is not intended to be for long-term sustainable operating funds, but is for short-term needs, such as delays in collecting property taxes. He added that there’s no guarantee the City of New Westminster will be able to borrow the funds, as the MFA is concerned it may not be able to grant all the requests it’s receiving.
“I think it is important to recognize though that the MFA is concerned that they are getting a lot of these types of requests and they may not be able to grant them all,” he told council. “Just because we put in this request doesn’t mean we will necessarily have access to this funding, given the significant volume of requests. Many cities are doing very similar things as we are, as they should be, to be prepared for the challenges that we are facing.”