Enabling Municipalities to Enter into Special Loan Agreements with the Canada Infrastructure Bank for Capital Needs
O. Reg. 653/05
O. Reg. 610/06
Regulation - LGIC
Bill or Act:
Municipal Act, 2001 and the City of Toronto Act, 2006
Summary of Decision:
Amendments have been made to regulations under the Municipal Act, and the City of Toronto Act, to enable Ontario municipalities to enter into special conditional loan agreements with the Canada Infrastructure Bank, for capital purposes.
The Ministry of Municipal Affairs and Housing posted the proposal to the regulatory registry on October 7, 2021. Under the proposal, Ontario municipalities would have been enabled to borrow for zero-emission buses from the Canada Infrastructure Bank. During a public consultation period, the Ministry of Municipal Affairs and Housing received feedback for the need for a broader scope for the types of capital works that may be financed through these loans. As a result, the government has made the decision to enable municipalities to borrow using special conditional loans from the Canada Infrastructure Bank for all municipal capital purposes.
The loans that may be offered are expected to have low interest rates and can help accelerate long-term infrastructure projects.
Analysis of Regulatory Impact:
The amendments are not expected to create new administrative costs for municipalities.
Municipalities that wish to borrow from the Canada Infrastructure Bank would need to pass a by-law authorizing the borrowing in accordance with the regulation. There are no significant costs expected to be associated with the passing of the by-law.
The regulatory amendments enable municipalities to enter into special loan agreements with the Canada Infrastructure Bank.
Currently, the Canada infrastructure Bank is offering loans for zero-emission buses at a low interest rate of 1 percent. At an interest rate of 1 percent, savings on $100 million of financing can be up to $13.49 million over a 15-year period, when compared to an interest rate of 2.559% for the City of Toronto (as of May 2021). Additionally, as zero-emission buses may have lower operational costs, municipalities may expect operational costs to be 35 percent lower over the lifetime of a bus, when compared to a diesel bus.
Additionally, the Canada Infrastructure Bank will help municipalities access capital required to accelerate the adoption of long-term infrastructure projects.
October 7, 2021
Summary of Proposal:
The Ministry of Municipal Affairs and Housing is proposing to amend regulations under the Municipal Act, 2001 and the City of Toronto Act, 2006. The amendments would enable Ontario municipalities to enter into special conditional loan agreements for long-term borrowing for capital purposes with the Canada Infrastructure Bank.
As background for the proposed regulation, it is anticipated that the Canada Infrastructure Bank will offer special loans to assist municipalities with the financing of Zero-Emission Buses.
The regulation would specify,
-That all or part of the principal and interest of the loan may be repaid in any year;
-That the special loan agreements must include conditions, which if satisfied, would extinguish the requirement for a borrowing municipality to repay all or part of the loan to the Canada Infrastructure Bank;
-That the loans rank concurrently and equally with other debentures and financial instruments for long-term borrowing of the municipality;
-Other rules for consistency with the rules for other municipal long-term borrowing would apply.
It is proposed that they would come into effect when the regulations are filed.
John Ballantine, Manager
Municipal Finance Policy Branch
Ministry of Municipal Affairs and Housing
777 Bay Street, 13th Floor
Toronto ON M7A 2J3
December 10, 2021