HomeMy WebLinkAboutFND-015-12 FINANCE Clarkwa REPORT
Meeting: GENERAL PURPOSE AND ADMINISTRATION COMMITTEE
Date: June 11, 2012 Resolution#: By-law#:
Report#: FND-015-12 File#:
Subject: SOUTH COURTICE ARENA DEBENTURE
RECOMMENDATIONS:
It is respectfully recommended that the General Purpose and Administration Committee
recommend to Council the following:
1. THAT Report FND-015-12 be received for information.
Submitted by: � Reviewed by:
Nancy aylor, SBA, CA, Franklin Wu,
Director of Chief Administrative Officer
Finance/Treasurer
NT/LG/hjl
CORPORATION OF THE MUNICIPALITY OF CLARINGTON
40 TEMPERANCE STREET, BOWMANVILLE, ONTARIO L'IC 3A6 T 905-623-3379
REPORT NO.: FND-015-12 PAGE 2
1.0 BACKGROUND
1.1 On July 12, 2002, Clarington Council approved the contract award to construct
the South Courtice Arena and authorized the Director of Finance/Treasurer to
make debenture application in the amount of $12,000,000.00 plus debenture
costs to the Region of Durham for the financing.
1.2 The South Courtice Arena capital project was growth related and the 90% growth
portion was to be funded from the Indoor Recreation Development Charges. The
$12 million debenture represents the 90% growth portion. The 10% non-
growth portion was funded by the municipality upfront.
1.3 In October 2002, the Region of Durham forwarded the debenture cheque and a
certified copy of a 10 year installment debenture in the amount of $12,000,000
($5,105,000 of which may be raised by the issue of refunding debentures in the
final year of maturity— 2012) with an amortization period of 15 years. The
debenture interest ranged from 3.25% to 5.60% over the 10 years for an average
of 4.70%.
2.0 COMMENTS
2.1 The Region of Durham will be issuing debentures this spring for its own needs
and its area municipalities including Clarington per Region's Finance and
Administration Committee report 2012-F-38 dated May 29, 2012.
2.2 The Region is issuing debentures this spring rather than waiting until fall as the
long term municipal debenture yield rates remain relatively favourable compared
to historical rates. It's anticipated that these rates may increase in the future
once the uncertainties in the domestic and international financial markets are
settled.
2.3 The new debenture term for Clarington will be 5 years and the average net yield
is not to the exceed 3.50% (and is likely to be lower than this when it goes to
market).
2.4 Clarington's South Courtice Arena debenture has a balloon payment this year in
the amount of$5,105,000.00 that may be paid off or refinanced over the next 5
years.
2.5 The Region does not require Clarington Council's approval to debenture the
balloon payment principal of $5,105,000 as the Region has Clarington Council
approval on the original debenture for the construction of the South Courtice
Arena.
2.6 It's an excellent opportunity for Clarington to refinance the balloon payment as
the current debenture interest rates are so low that Clarington will receive
substantial savings in annual reduced debt servicing costs that are funded by the
REPORT NO.: FND-015-12 PAGE 3
Indoor Recreation Development Charges Reserve Fund. This will assist in
reducing some of the pressure on this Reserve Fund.
2.7 The South Courtice Arena debenture is the only debenture that matures in 2012
that Clarington can take advantage of the low debenture interest rates.
Clarington's other debentures mature in the future and it is not feasible to
refinance.
3.0 CONCURRENCE - Not applicable
4.0 CONCLUSION
4.1 It is recommended that South Courtice Arena debenture report be received for
information. It is indicated that this will result in substantial savings in annual
reduced debt servicing costs.
CONFORMITY WITH STRATEGIC PLAN
The recommendations contained in this report conform to the general intent of the
following priorities of the Strategic Plan:
Promoting economic development
X Maintaining financial stability
Connecting Clarington
Promoting green initiatives
Investing in infrastructure
Showcasing our community
Not in conformity with Strategic Plan
Staff Contact: Nancy Taylor, B.B.A., C.A., Director of Finance/Treasurer