This is the exact embedded text of the captured official document.
Snapshot b3b0517738cc · verified 2026-06-10 ·
original document ·
archived snapshot ·
unofficial consolidation, the official version is held by the municipal clerk.
Mandatory Policy, Municipal Act: No
Policy Administration Team, Review Date: Apr 14th, 2023
Corporate Management Team, Review Date May 3rd, 2023
CORPORATE POLICY
Policy Title:
Debt Management Policy
Policy Category:
Financial
Control Policy No.: FC-009
Department:
Corporate
Approval Date:
Jan.21, 2019
Revision Date:
Jun.19, 2023
Author:
Kim Reger
Attachments:
Related Documents/Legislation: Ontario Municipal Act Regulation 403/02
POLICY STATEMENT:
Council for the City of Waterloo is committed to demonstrating financial leadership
and sustainability. This policy assists in formalizing a defined and transparent
process for managing debt for the property tax base and enterprises.
PURPOSE:
The purpose of this debt management policy is to ensure:
that the municipality maintains a sound financial position;
that the City's financial practices comply with statutory requirements;
long-term financial flexibility and sustainability;
that the parameters for debt issuance, the type and amount of debt and the
financial processes for managing debt are applied consistently to the tax base
and enterprise operations and
the integration with other long-term planning, financial and management
objectives of the City.
DEFINITIONS
Annual Repayment Limit (ARL) - Is the legislated limit that caps principal and interest
payments for municipalities based on net operating revenues.
Capital Expenditure - An expenditure incurred to acquire develop renovate or replace
capital assets as defined by the Public Sector Accounting Board (PSAB), section 3150.
POLICY NUMBER: FC-009
Page 2
Capital Infrastructure Reinvestment Reserve Fund (CIRRF) - The capital infrastructure
reinvestment reserve fund is the primary source of funding for expenditures associated
with the rehabilitation or replacement of all existing tax based capital infrastructure.
Capital Reserve Fund (CRF) - The capital reserve fund is the primary source of funding
for the purchase, construction, or development of new capital assets and studies.
Climate Action Reserve Fund (CARF) - The Climate Action Reserve Fund helps facilitate
projects, initiatives, and studies that support climate change mitigation and adaptation by
targeting energy and greenhouse gas (GHG) reduction in alignment with the Council
approved GHG emissions reduction targets of 50% by 2030 and 80% by 2050.
Chief Financial Officer (CFO) - Senior financial officer responsible for managing the
City's debt.
Debenture - A formal written obligation to pay specific sums on certain dates. In the case
of a municipality, debentures are typically unsecured i.e. backed by general credit rather
than by specified assets.
Debt - Any obligation for the payment of money. For Ontario municipalities, debt would
typically consist of debentures as well as either notes or cash loans from financial
institutions. Could also include internal loans from reserves or reserve funds. Debentures
issued to Infrastructure Ontario are also considered debt.
Development Charge (DC) Collections - Charges collected from new development, at
building permit issuance to help fund the cost of infrastructure required to accommodate
growth.
Enterprise - A business unit that is funded through user fees rather than tax base
revenue.
Financial Information Return (FIR) - Data collection reports providing statistical
information on municipalities, as provided by the Ministry of Municipal Affairs and
Housing (MMAH).
Infrastructure - Large-scale public systems, services, and facilities of the City that are
necessary for economic activity in the community, including water and wastewater
systems, roads, parks and buildings / facilities.
Municipal Act - The Municipal Act is the statute governing the powers, duties, internal
organization, and structure of 443/444 Ontario municipalities.
Net Debt Charges (NDC) - Net Debt Charges are calculated as existing debt charges,
less recoveries from user rates.
Non-tax Supported Debt - Debt issued for capital expenditures related to non-tax
POLICY NUMBER: FC-009
Page 3
supported operations. This debt is repaid using net revenue fund revenues, such as
enterprises or development charges.
Non-tax Supported Operations - Municipal services that are not funded through the tax
base, such as water, wastewater and stormwater rate revenues.
Tax Supported Debt - Debt issued for capital expenditures related to tax supported
operations.
Tax Supported Operations - Civic programs that are funded through property tax
revenue , such as fire services, roads maintenance, and parks.
Term Loan - A loan which is repaid in regular instalments over a set period, as laid out in
the enabling documents.
Total Capital Charges - Is the relationship between the financial support required from
the capital reserve fund, the climate action reserve fund and the capital infrastructure
reinvestment reserve fund compared to the total payments from Net Debt Charges. The
calculation used to determine Total Capital Charges is = Annual Net Debt Charges + the
annual budgeted contribution to CRF, CARF and CIRRF
SCOPE
This policy applies to all members of the City's organization including members of
Council, full, part-time and contract staff.
POLICY COMMUNICATION:
Council will receive this policy for approval. If approved, the policy will be posted on the
City's intranet. Staff will be advised of the policy via distribution to the Operational
Leadership Team and Corporate Management Team.
POLICY:
Debt Limits
1. ARL is limited to 25% of net operating revenues based on regulations established
within the Municipal Act.
2. Annual Net Debt Charges (NDC) will not exceed the annual budgeted contribution
to CRF, CARF and CIRRF as established by City policy.
Debenture Terms
1. Amortization periods of debentures will typically be 10 years.
2. Amortization periods can be extended to a longer term, up to 20 years if the
following conditions are met:
POLICY NUMBER: FC-009
Page 4
a. Underlying lifespan of the asset is greater than the extended amortization
period
b. That the additional interest expense is justified; the benefit of bringing the
asset online earlier outweighs the additional interest cost over the longer
amortization period
c. Approval of a longer debt amortization period (up to 20 years) would require
support from the Chief Financial Officer (CFO) and the program area
Commissioner, and be subject to final Council approval.
Internal Borrowing
The City may decide to borrow from itself without issuing debt through the Region, up to
a total of $10 million dollars. To facilitate internal debentures, the following process would
be followed:
Internal debt needs to be declared in the budget to be actioned.
Capital projects requiring internal debt will be categorized as 'non-routine', which
will require staff to return to Council with a report to authorize the internal debt
when required (with an associated by-law).
The by-law to be passed by Council will set out the principal, payment, interest,
the term of the loan and the specific reserve or reserve fund from which the loan
is made (CRF, CIRRF or CARF).
Debt is to be structured for the shortest period consistent with a fair allocation of
costs to current and future users.
Repayment schedule should be structured on a level or declining payment basis.
Early repayment of debt may be considered if it is financially beneficial to do so.
External Borrowing
As per the Municipal Act, 2001, S.O.,c.25 Part XIII Debt and Investment, a lower-tier
municipality in a regional municipality does not have the power to issue debentures.
2001, c. 25, s. 401 (3).
Due to this statute, the City of Waterloo does not have the authority to issue its own
debt (internal borrowing is not consider debt) and instead works through the Region of
Waterloo to secure external debt financing. To facilitate external debentures, the
following process would be followed:
External debt needs to be declared in the budget to be actioned.
On budget day the city obtains specific Council approval within the Budget Day
minutes for the debt, and the confirmation by-law of the Budget Day proceeding's
acting as the By-law for the debt.
When the city is ready to issue that debt they send the by-law and associated
project's budget to the Region to execute the debt issue. Timing of that issue
must coincide with the Region's debt issuance timing in the spring and fall.
POLICY NUMBER: FC-009
Page 5
Debt Application
Debt should be used primarily for strategic priorities including but not limited to,
infrastructure renewal projects, climate action projects and or any other strategic
initiative subject to the approval of Council.
Policy Exemptions
1. Projects included in the most recent approved Development Charges By-Law
that have anticipated debenture financing that will be recoverable through
Development Charges.
COMPLIANCE
In cases of policy violation, the City may investigate and determine appropriate
corrective action.