The Municipality of North Cowichan is anticipating borrowing up to $10 million in bridge funding.
The potential of having to borrow is due to the possibility of the province extending the property tax deadline this year from July 2 to Sept. 30 to give taxpayers in B.C. some financial leeway during the COVID-19 pandemic.
Financial director Mark Frame said in a staff report that, although North Cowichan’s fiscal year starts Jan. 1, taxes are not collected until July 2 each year.
“Between January and June, while taxes start to flow in, North Cowichan’s operations are funded from existing cash surpluses,” Frame said.
“Under normal circumstances, North Cowichan would have enough cash reserves for operating capital for the first half of the year. However, if the province extends the property tax deadline, the municipality may need to establish another source to fund the additional three months of operation without being able to draw upon property tax revenues.”
Frame said that in 2019, the general municipal tax levy was $30 million, so, under the rules of borrowing laid out in the Community Charter, the maximum that North Cowichan would be authorized to borrow would be $22.5 million.
Barring anything major, they won’t need even the $10 million but have given themselves the opportunity to revisit the issue should something arise later in the year.
He said that, as revenue-anticipation borrowing is not included in the municipal liability service limit calculation, it does not require electoral approval.
“Borrowing would not proceed until all existing cash surpluses have been exhausted, and would only be done on an as needed basis,” Frame said.
“Presently, there is approximately $25 million available in operating surpluses between general, water and sewer [reserves].”
Frame said the proposed bylaw to allow the borrowing would have no immediate impact on the municipality, and there would be no borrowing unless needed.
He said interest rates are extremely low at present and the cost of borrowing $10 million for three months would be approximately $57,500.
“Fundamentally we operate on a budget year that runs January to January and by June, we are starting to run out of cash, that’s when people start paying their taxes. If the province extends the deadline…we’re going to run out of funds before October. This will tide us over,” Mayor Al Siebring said.