No impact expected on Guelph’s credit rating if $ 115 million is approved, staff say

Guelph is on the verge of accepting new multi-million dollar loans.

At Tuesday afternoon’s Committee of the Whole meeting, the board unanimously approved a staff request seeking permission to go to market this year for up to $ 115 million in new loans, with those funds being directed to large capital projects that will see shovels in the ground in the near future.

Staff recommend that, if the full amount of the debenture is supported, the funds be allocated to the Baker Quarter redevelopment ($ 11.25 million), including the construction of a new central library ($ 52.2 million); the construction of South End Community Center ($ 37.55 million); and improvements to the FM Woods water treatment plant ($ 14 million).

While the loans would be taken to pay for the projects, city staff say more than half of them would be repaid through development charges and service charges.

According to city staff, the rationale for the loans now was to save long-term money for these projects, given the current low interest rates the city could afford.

Prior to the vote, Mayor Cam Guthrie noted that it was “really smart of the staff to do what they’re doing right now”.

“We dabbled, even before COVID, in these types of conversations as to whether it would be better to switch to bond at certain times, when (interest rates are) lower, so now is exactly the time. to do it, ”he said. .

As previously reported by the Mercury Tribune, city staff said that with a term of up to 20 years, the cost of taking these loans now would reduce costs in the long run. At a 2% interest rate, a $ 115 million debenture would incur an annual management fee of about $ 1.28 million, or about $ 25.5 million over a two-decade period.

At 4%, those maintenance costs would more than double to $ 2.7 million, with a total cost of $ 54 million over a 20-year period.

While the nine-figure loans would dramatically increase the city’s unpaid debts, city treasurer Tara Baker said she didn’t expect this to have a negative impact on the city’s credit rating. city.

“Assessing a credit score is complex – there are a number of different factors that go into that score,” she said in response to a question from Coun. Christine Billings.

“It’s one of those factors, so we think there is some risk, but because we remain strong on these other indicators, we don’t expect, at this point, that the rating of credit is negatively affected by this decision. “

This is not the last time that council will consider this file, which is expected to return to the city council meeting on April 26 for a ratification vote. This meeting is scheduled to start at 6:30 p.m. and will be webcast live online at guelph.ca/en direct.

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