Local Government Borrowing & Liabilities
Municipalities and regional districts have access to different types of borrowing to address specific situations. These situations may vary depending on the type of borrowing (capital versus operational), the duration of borrowing (current-year versus short-term or long-term), and source of the borrowing (external lender versus internal funds).
Revenue Anticipation Borrowing
Because a local government's fiscal year starts in January, and it does not collect taxes until July, each local government must have a means of financing its operations between January and July. Local governments can finance operations through existing cash surplus or through a revenue anticipation borrowing bylaw.
Short-Term Capital Borrowing
Short-term capital borrowing may be used to finance small capital undertakings (for example, vehicle and equipment acquisitions or small capital upgrades) without the approval of the electors. This borrowing must be repaid within five years from the date of issue.
Long-Term Capital Borrowing
Long-term borrowing finances major capital acquisitions and construction, and is secured through a loan authorization bylaw that usually requires approval of the electors. In certain cases, long-term borrowing may also be used to provide a guarantee or loan to a third party under an agreement. A loan authorization bylaw may not be used to provide a grant to a third party. Learn more about:
Interfund borrowing is conducted between statutory reserve funds and may be used to finance short or long-term capital projects. Lending between reserve funds may only occur if both reserve funds are established for a capital purpose.
Liabilities Under Agreement
Liabilities under agreement include capital lease agreements and service contract agreements. Liabilities that extend over five years or have the option to renew must be approved by the electors.
Municipal Liability Servicing Limits
Municipalities may incur liabilities to fund services. However, the amount of liabilities a municipality may undertake is subject to the liability servicing limit.
Local Government Interest Calculations
Local governments may establish the method of interest calculation for interest which is payable on amounts owed to or by the local government, unless the method has already been set by the provincial government.