O. Reg. 289/11 regarding a growth-related debt and financial obligation limit for The Regional Municipality of York (York Region)
Ontario Regulation 289/11
Ontario Regulation 403/02
Regulation - LGIC
Bill or Act:
Municipal Act, 2001
Summary of Decision:
Ontario Regulation 403/02 (Debt and Financial Obligation Limits) under the Municipal Act, 2001, has been amended by Ontario Regulation 289/11, filed June 24, 2011.
August 15, 2011
Summary of Proposal:
Ontario Regulation 403/02:
-Municipalities use long-term debt or financial obligations to finance their capital undertakings.
-Ontario Regulation 403/02 prescribes rules for Ontario municipalities undertaking these long-term debt or financial obligations. (The City of Toronto is the only municipality that does not have a provincially prescribed debt limit.)
-The Ministry annually calculates a limit for each individual municipality, and forwards it to the municipality. That limit is often called the municipality's Annual Repayment Limit.
-The Debt and Financial Obligation Limits regulation places a limit on how much a municipality may, without first going to the Ontario Municipal Board, devote annually in principal and interest payments to long-term debt, and for payment of other long-term financial obligations.
-In summary, municipalities are limited in their long-term borrowing to 25% of certain annual revenues or receipts, less most ongoing annual long-term debt service costs (and similarly less most annual payments for other long-term financial obligations).
-The 25% figure includes most annual municipal revenues or receipts - generally those considered from the policy perspective to be municipality's own source revenues, such as property taxes, user fees and service charges, rents, etc. However, development charge receipts are not included in the 25% calculation.
-When a municipality proposes long-term borrowing (or other long-term financial obligation), the municipal treasurer first updates the ministry-provided limit, and determines if there is capacity within the municipality's Annual Repayment Limit.
-Municipalities that intend to borrow or commit for amounts above their updated Annual Repayment Limit must first seek the approval from the Ontario Municipal Board.
Ontario Regulation 289/11:
-As it does now, the Ministry would continue to calculate an Annual Repayment Limit for York Region, and provide it to that municipality.
-The amendment would, in summary, allow the Region's Treasurer to:
1) calculate a cost supplement, for the servicing of the Region's growth-related debt, and
2) use that amount to calculate a growth-related debt and financial obligation limit for the Region. The growth-related limit would be used in place of the Ministry-supplied limit.
-The cost supplement would be estimated based on 80% of the average of the Region's last 3 calendar years? development charge collections.
-The growth-related debt and financial obligation limit would only be available to York Region provided certain conditions are met. They include that:
a) York Region has a credit rating equal to or greater than "AA-" by Standard and Poor; "AA (low)" or higher by Dominion Bond Rating Service Limited; "AA-" or higher by Fitch Ratings; "Aa3" or higher by Moody's Investors Services Inc. and,
b) York Region has a long-term debt and financial obligation management plan in place that is adopted or affirmed by Council during the Region's annual budget process.
-The regulation will be revoked December 31, 2021.
Ministry of Municipal Affairs and Housing
Municipal Finance Policy Branch
777 Bay St
June 24, 2011