Smithers Town Hall. (Trevor Hewitt photo)

Council passes bylaw to allow borrowing against anticipated revenue

Smithers will be authorized to borrow up to $8.3 million to ensure cash flow during COVID-19

For the first time 29 years, Smithers town council has passed first, second and third readings of a Revenue Anticipation Borrowing Bylaw.

In a report to council at its special meeting May 5, CAO Alan Harris explained municipalities are authorized under the Community Charter to borrow up to 75 per cent of the previous year’s property tax revenue against the current year’s anticipated revenue in order to ensure cash flow for required expenditures.

Harris noted that outstanding business utility billing balances were up 778 per cent in the first quarter of 2020 compared to 2019 (from $3,368 to $26,208) and that the B.C. government has given businesses until Oct. 1 to pay their property taxes.

Therefore, he wrote, staff recommended putting the bylaw in place “as a precautionary measure.” It authorizes the Town to borrow up to $8.3 million.

“We’re hoping not to go here, but it’s prudent to be prepared,” said Deputy Mayor Gladys Atrill. “We don’t know what things are going to look like as the year goes on in terms of revenue to the Town and we do have to be paying our bills.”

READ MORE: Town adjusts budget to reflect $800K revenue reduction due to COVID-19

To help municipalities, the Province is offering loans through the Municipal Finance Authority (MFA) at only 1.25 per cent interest. However, before the Town can take advantage of that, it has to borrow against its own reserves and surpluses, another measure the provincial government recently allowed. Municipalities have five years to pay that back at no interest.

Harris explained B.C. is requiring that because the Province wants to make sure the MFA doesn’t get overwhelmed with requests for financing.

Coun. Frank Wray was grateful for the explanation, noting it would be cheaper to borrow from the MFA rather than the Town’s own reserves because of the penalties associated with cashing in investments.

“I appreciate that there’s a reason for that, because actually even though we’re borrowing from our reserves and it’s interest-free when we pay ourselves back, essentially we’re probably going to have to be cashing in [investments] early and losing interest on that so actually, there’s a cost to us here,” he said.

Atrill elaborated.

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“Part of the further explanation that Minister Robinson added… is that some of the bigger cities are going to be in trouble a lot faster than some other communities so in order to keep everyone liquid for as long as possible, this is another example of how we’re all in this together, and the province is kind of digging in wherever it can to support whoever needs it,” she said.

Atrill praised previous councils for putting “good” finance policies in place that allowed Smithers to be in the position it is in.

Even just having surpluses is good, she said. “Other communities have none and were put in a difficult position early on.”

Coun. Lorne Benson asked for further context on why council adopted a similar bylaw in 1991.

Harris did not have an answer, but noted in other municipalities where he has worked councils have routinely adopted such bylaws annually just to be on the safe side.

Coun. Greg Brown asked if council would get updates on revenue from staff.

Harris said the plan is to report to council on residential property tax revenues—which are still due at the end of June—at their first meeting in July with a comparison to last year.

“As much as I hope that people have the ability to pay their taxes on time, I have lots of empathy for people who won’t be able to as well,” Atrill said. “I think this is a situation where we are just going to have to keep our heads on straight and our hearts in the right place as we go forward and try to figure it out. We’ve got the backup here and fortunately we do have reserves we can utilize in the short term so we’re better off than many.”

Harris also reported business utility bills for the second quarter will be issued June 30 due at the end of July noting that 60 per cent of businesses in town did not close according to Chamber of Commerce statistics.

“We’re hoping that those businesses pay on time to help the cash flow of the Town so we don’t have to pull into reserves too early,” he said.

Wray asked when the Town’s one-year investment of the Northern Capital and Planning grant the Town received last year would up for renewal. Staff replied at the end of July.

“It would be nice if we could make it until then,” he said. “That’s five million dollars-plus so that we don’t have to cash in [other investments].”

Atrill said she believed it was possible.

“Except for utility bills, we should be sort of on track until the beginning of July when we anticipate having the [residential property] taxes paid so it’s going to be pretty close for timing, but I’m speculating we’re probably going to be OK in the short term, she said.

Harris confirmed that was probably true with the caveat it depends on how many residents pay their property taxes on time.

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