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THE CORPORATION OF THE TOWNSHIP OF SOUTH STORMONT
BY-LAW NO. 2021-O89
BEING
a by-law to adopt a Debt Management Policy.
WHEREAS
the MunicipalAct, 2001, c. 25 s. 5 (1) provides that
the powers of a municipal corporation are to be
exercised by its council;
AND WHEREAS
the Municipa/Act, 2001, c. 25 s. 5 (3) provides that
the powers of every council are to be exercised by
by-law;
AND WHEREAS
Council
deems
it
advisable
to
adopt
a
Debt
management Policy for the Township of South
Stormont.
NOW THEREFORE
Council of the Township of South Stormont enacts
as follows:
1.
That the Debt Management Policy attached hereto
as Schedule "A" and forming part of this by-law be
adopted effective November 24, 2021.
2.
That any other by-law inconsistent with this by-law
is hereby repealed.
READ AND PASSED in open Council signed and sealed this 24th day of
November, 2021.
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Mayor . 'TI/_.*'
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Clerk
TOWNSHIP OF SOUTH STORMONT
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Title:Debt Management Policy
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Schedule "A" to By-law No. 2021-089
Policy Category: Finance
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Effective Date: November 24, 2021,
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Revision Date:
Purpose
A comprehensive debt policy is the foundation of any well-managed debt program.
The Debt Management Policy sets guidelines for borrowing debt and managing
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outstanding debt. It also provides the parameters to decision makers regarding the
timing and purposes for debt type, debt process.
For the purposes of this policy, debt means debentures issued external to the
Township.
The Debt Management Policy aims to ensure that a municipality maintains a sound
debt position and that credit quality is protected.
Scope
This Debt Management Policy documents the existed rules, regulations and current
practices relating to external debt. The debt related legal authority, restrictions, and
responsibilities are summarized for the Township as below.
a. Legal authorization and limitations.
b. Debt capacity and benchmarking.
Types of debt.
Debt management practices.
P-P
Objectives
The Township must manage the long-term obligations such as Debt levels, debt
costs within available resources and This policy is established for this process.
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Debt Capacity and Benchmarking
Ability to Pay
The Capacity of the Township to borrow debt is directly related to its ability to
manage debt payments, which include both annual interest and principal
payments.
Capital Budgeting and Debt Financing Relationship
The Debt Management Policy has a direct link to the capital and operating budget
processes. It is important to recognize that a borrowing decision made in the
current year for the Capital budget affects future operating budgets by way of
principal and interest charges for long-term period.
Tax-supported, Self-funded and Self-supported Debt
o
Tax-supported debt is for capital projects that will be serviced from the tax-
supported operating budget.
o
Self-funded debt is for capital projects that the Township reserves and reserve
funds may finance provided the payback period is 5 years or less and
appropriate interest is paid on the funds used.
o
Self-supporting debt is for capital projects that will be serviced from utility
operations revenue.
Measurements
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Annual comparison of the outstanding debt per capital.
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Annual comparison of the percentage of debt interest of total revenues.
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A percentage of net debt of operating revenues.
Types of Debt
The Township's current portfolio of debt is exclusively fixed rate debt and being
borrowed from Infrastructure Ontario and other bank institutions,
Under certain market conditions, there may be some merit to consider variable
rate or floating rate debt in order to take advantage of lower short-term interest
rates.
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Debt Management Process
a.
b.
c
d
e
f.
Determine the purpose of debt.
Determination of the purpose of debt generally occurred in budget process and it
also can be processed when the need of debt appears. Department director is
responsible to initiate the purpose of debt.
Financial Analysis of debt.
The affordability, sustainability and financial flexibility analysis should be
processed and the comparison between annual debt payment (debt principal
payment and interest payment) and revenue should be processed accordingly.
Director of Finance is responsible of financial analysis.
Administrative review of debt.
Ensure the purpose of the debt will be lined with community strategic plan and it
will support long-term asset management plan. CAO is responsible of
recommendation of administrative review.
Council review and approval of debt.
Council reviews the purpose, financial analysis and administrative
recommendation of debt and approve or not approve the debt.
Debt application and financial process.
Finance department prepares the debt application and ensure related financial
process is appropriate.
Annual financial evaluation of debt.
Yearly debt financial evaluation is part of the annual year-end closing process and
the evaluation will be disclosed to related departments. Director of Finance is
responsible of debt financial evaluation.
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Review
This policy will be reviewed annually by CAO and Director of Finance. This policy
should be reviewed during each term of Council to ensure its continued
effectiveness.
Legal Authorizations and Limitations
a. Part 8 Debt and Investment, Municipal Act, 2001 Ontario
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Subject to this or any other Act, a municipality may incur a debt for municipal
purposes, whether by borrowing money or in any other way, and may issue
debentures and prescribed financial instruments and enter prescribed financial
agreements for or in relation to the debt. 2001, c.25, s. 401(1).
0
A lower-tier municipality in a regional municipality does not have the power to
issue debentures. 2001, c.25, s. 401(1).
b. Annual Repayment Limit (ARL), Ontario
Municipalities in Ontario are responsible for ensuring that they do not exceed their
ARL as set by the Province. The Director of Finance must determine if there is
capacity within the municipality's ARL to undertake the planned borrowing.
Contact
For more information on this policy, contact:
Director of Finance/Treasurer
Township of South Stormont
P.O. Box 84, 2 Mille Roches Road
Long Sault, ON
KOC 1P0
613-534-8889, Ext. 220
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