The town will hold the loan and will collect the payments and interest from Collus and/or Epcor during and after the sale.
According to Marjory Leonard, treasurer for the town of Collingwood, the options were for the town to put the loan in its own name or face a repayment penalty of $1.5 to $1.8 million, which would come off the sale price of the town’s hydro utility.
The $8 million is made up of four loans for capital projects undertaken by Collus while the town was 50 per cent owner. Leonard said she didn’t know what capital projects were covered by the loans. The money was borrowed via the Ontario Infrastructure and Lands Corporation Act, however, Epcor is not an eligible borrower under that act.
Epcor has applied with the Ontario Energy Board to purchase 100 per cent of the town’s electrical utility from the town and PowerStream. Therefore, once the purchase goes through, those loans must be repaid or moved to an eligible borrower such as the town of Collingwood.
Leonard said she received advice from Infrastructure Ontario to apply for loans via the Infrastructure Ontario program for municipal capital projects. To receive those loans, the town has to borrow the money for capital projects in the works or recently completed.
According to a staff report by Leonard to town council on Monday, June 25, the town assumed the following loans:
- Loan 731 for $1.4 million over seven years. The town used the Highway 26 west paving project in this loan application.
- Loan 1201 for $850,000 over 17 years. The town used the LED streetlight conversion project in this loan application.
- Loan 732 for $646,406 over 25 years. The town used the 4th and 5th Street bridge rehabilitation projects in this loan application.
- Loan 733 for $5.3 million over 19 years. The town used the Hume Street reconstruction project in this loan application.
In total, the town will be borrowing $8,245,514.48 from Infrastructure Ontario. According to Leonard’s report, the town’s taxpayers will not be responsible for making the payments on this debt.
The town’s ability to borrow money is governed by legislation that mandates each municipality stay within a prescribed Annual Repayment Limit (ARL), which is 25 per cent of the previous year’s own-source revenues. This $8 million loan from Infrastructure Ontario will be included in the town’s debt for the purpose of the ARL. Leonard said the effect on the town’s borrowing ability will be insignificant.
“The town can still borrow up to $100 million more to be repaid over the next 20 years,” said Leonard, adding that’s in addition to the town’s existing debt.
The annual repayments on this Collus loan will be approximately $775,000. The loan will be repaid over the same terms as the original loans, which ranged from 7 to 25-year terms.
