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Schedule A to By-law No. 2025-085
The Corporation of the Municipality of Grey Highlands
Debt Management Policy A09-F-10
Purpose
Debt financing is an essential tool for the Municipality to fund its significant
capital program. Careful consideration should be made for its use. The
purpose of the debt management policy is to establish financial guidelines
and benchmarks for the use of debt by the Municipality. This policy
establishes the objectives, reporting requirements and responsibilities for
financing of the Municipality's infrastructure needs through the use of debt.
Legislated Requirements
The Municipal Act, 2001, Ontario Regulation 403/02 defines the annual debt
and financial obligation limit for municipalities.
This Regulation provides the authority and imposes the restrictions
concerning a municipality's ability to issue debt such that the annual principal
and interest payments cannot exceed 25% of "own source" revenues.
Definitions
Annual Repayment Limit (ARL) - the maximum amount of debt servicing
costs that the Municipality can undertake. The limit represents the maximum
amount the municipality has available to commit to payments relating to debt
and financial obligations. Prior to the authorization by Council of long term
debt, the limit as contained in the Financial Information Return (FIR) must be
adjusted by the Treasurer in the prescribed manner.
Long Term Debt - any debt for which the repayment of any portion of the
principal is due beyond five years. An obligation for the payment of money.
Short Term Debt - any debt for which repayment of all the principal is due
within one to five years.
Capital Expense - Expenses incurred to acquire, build, renovate, or replace
capital assets as defined in the Tangible Capital Asset Policy and Public Sector
Accounting Board Section 3150.
Schedule A to By-law No. 2025-085
Tax Supported Debt - Debt for which annual principal and interest payments
are funded from the general tax levy
Rate Supported Debt - Debt for which annual principal and interest payments
are funded from water and/or wastewater rates
DC Supported Debt - Debt for which annual principal and interest payments
are funded from development charges collected under the Development
Charges Act
Own Source Revenue - revenue for the fiscal year that is calculated in
accordance with Ontario Regulation 403/02
Objectives
When planning for the use of debt, the following objectives should be
considered:
-
ensure long term financial sustainability
-
limit financial vulnerability
-
maintain flexibility to respond to emergency situations
-
maintain flexibility to respond to opportunities, such as leveraging grant
opportunities
-
integration of decisions with other long-term planning, financial and
management objectives of the municipality
-
ensure that the Municipality's financial practice complies with all
statutory requirements and limitations and industry best standards
-
the timing, type, and term of long-term debt will be determined with a
view of minimizing long-term costs to the extent possible
-
ensure new debt is planned at a level which will optimize borrowing
costs and does not impair the financial position of the municipality
-
debt should be structured in a way that is fair and equitable to those
who pay for and benefit from the underlying assets over time
Qualifying Criteria
New debt financing shall be limited to:
-
new infrastructure requirements
-
projects where the cost of deferring expenditures exceed debt servicing
costs
-
assets that have a useful life of 10 years or more
Schedule A to By-law No. 2025-085
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the term of Debt will be limited to the term of the useful life of the
particular asset, but not exceeding 25 years
-
the project has been approved by Council as part of the capital budget
or resolution which includes approved debt financing authority
-
projects where the capital cost cannot be funded because of limitations
to the tax supported budget. To the greatest extent possible, capital
should be funded from the tax levy subject to annual budget approval.
-
priority shall be given to capital programs that are self-supporting or
financed by a dedicated revenue stream or expenditures savings
Responsibilities
The Municipal Treasurer:
-
has overall responsibility for the capital financing program of the
Municipality and ensuring a plan is in place for all expenses
-
calculates the financial obligation limit for the Municipality in
accordance with the Municipal Act
-
reports to Council during the annual budget process and financial
reports on outstanding debt obligations including projects that are
unfunded
-
recommends alternative financing options to Council where appropriate
-
ensures that debt is properly managed and stays within the provincial
regulations for how much debt a municipality should issue by making
recommendations to Council
-
ensures that debenture funds are applied only for the purposes which
the debentures were issued
-
monitors and provides financial indicators to Council as required for
decision making
-
recommends changes to the Debt Management Policy to Council as
required
Council:
-
may not approve debt to finance current operations
-
responsible for the approval of any debt financing through the annual
budget process or resolution, and for approving of the borrowing by-law
-
responsible for approving budget funds for the repayment of debt
through the annual budgeting process